Australian Broker Call

Citi rates APO as Initiation of coverage with Neutral (3) -

Citi has initiated coverage on domestic media stocks, both outdoor and broadcasters, with the view it is better to concentrate on outdoor while staying clear of the broadcasters.

It is Citi's view that both outdoor and online are likely to further increase their market share overall. Regional radio is seen as more resilient than metro. Maiden view for APN Outdoor is Neutral.

Current Price is $4.79. Target price not assessed.

Current consensus price target is $5.29, suggesting upside of 10.4% (ex-dividends)

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.7

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates AWE as Neutral (3) -

China Energy Reserve and Chemical has returned with an all-cash bid of $0.73 a share, which represents a 34% premium to the closing price on November 29. The transaction would be subject to FIRB approval and more than 50% of shareholder votes.

Citi believes investors will need to review any offer relative to their view of value and the time/risk for management to unlock this value, but suggests the current transaction price is fair.

Neutral/High Risk rating. Target is $0.72.

Target price is $0.72 Current Price is $0.82 Difference: minus $0.1 (current price is over target).
If AWE meets the Citi target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.57, suggesting downside of -30.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Macquarie rates AWE as Neutral (3) -

Having pulled its non-binding indicative offer because of the inability to obtain due diligence, CERCG has launched an all-cash, off-market takeover bid at 73c a share.

Macquarie considers the offer fair value, believing the company still requires funding to move ahead with Waitsia stage 2. A fully de-risked Waitsia adds another $0.10 per share, in the broker's calculation.

Macquarie maintains a Neutral rating and $0.60 target.

Target price is $0.60 Current Price is $0.82 Difference: minus $0.22 (current price is over target).
If AWE meets the Macquarie target it will return approximately minus 27% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.57, suggesting downside of -30.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates AWE as No Rating (-1) -

China Energy Reserve and Chemical has announced an all-cash bid at $0.73 a share through subsidiary CERCG Australia.

The offer is subject to 12 conditions and follows an announcement previously by AWE that a non-binding indicative proposal of $0.71 cash had been withdrawn.

In response to the bid AWE has recommended shareholders take no action until the board's formal recommendation. UBS is currently restricted on rating and target.

Current Price is $0.82. Target price not assessed.

Current consensus price target is $0.57, suggesting downside of -30.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates BGA as Initiation of coverage with Neutral (3) -

UBS observes the alignment between farmgate prices paid to suppliers and commodity export prices is a key determinant of the company's dairy margins.

A more rational pricing environment is expected post the acquisition of Murray Goulburn by Saputo. The broker expects this to support a less volatile earnings profile and improved margin profile for Bega/Tatura.

UBS initiates coverage with a Neutral rating and $8.30 target. The broker believes the company is well-positioned both strategically and financially to grow its earnings base.

Target price is $8.30 Current Price is $7.79 Difference: $0.51
If BGA meets the UBS target it will return approximately 7% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Ord Minnett rates CHC as Accumulate (2) -

Ord Minnett has conducted and analysis of assets under management and lifts forecasts for earnings per share by 1.5-2.0%.The broker considers the stock cheap, expecting it to outperform.

Ord Minnett retains an Accumulate rating and raises the target to $6.85 from $6.65.

Target price is $6.85 Current Price is $6.39 Difference: $0.46
If CHC meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $5.93, suggesting downside of -7.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates HT1 as Initiating of coverage with Neutral (3) -

Citi has initiated coverage on domestic media stocks, both outdoor and broadcasters, with the view it is better to concentrate on outdoor while staying clear of the broadcasters.

It is Citi's view that both outdoor and online are likely to further increase their market share overall. Regional radio is seen as more resilient than metro. Maiden view for HT&E is Neutral.

Current Price is $1.93. Target price not assessed.

Current consensus price target is $2.70, suggesting upside of 39.9% (ex-dividends)

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.8

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates IAG as Neutral (3) -

Factoring in the new 12.5% quota share, a share buyback in the first half of FY19 and reduction in catastrophe reinsurance expenses, Citi lifts forecasts for earnings per share in FY18 and FY19 by 5% in 2% respectively.

The broker still considers the stock expensive. Neutral maintained. Target is raised to $7.00 from $6.30.

Target price is $7.00 Current Price is $7.16 Difference: minus $0.16 (current price is over target).
If IAG meets the Citi target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.77, suggesting downside of -7.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Credit Suisse rates IAG as Outperform (1) -

Credit Suisse observes there are a lot of moving parts in the company at the moment and, if all goes to plan, this could provide significant upside.

The latest reinsurance quota deal is expected to be neutral to earnings, although the broker acknowledges the deal releases further capital for the company and the likelihood of further buybacks.

Outperform retained. Target is raised to $7.50 from $7.00.

Target price is $7.50 Current Price is $7.16 Difference: $0.34
If IAG meets the Credit Suisse target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $6.77, suggesting downside of -7.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Deutsche Bank rates IAG as Hold (3) -

The company has increased its quota share program by a further 12.5% through a five-year deal with three reinsurers. Quota share now covers 32.5% of the total book.

Deutsche Bank observes the group is increasingly looking like a blend of traditional insurance business and a broking business. The broker adjusts its valuation to reflect the fact that nearly one third of the business now runs with no balance sheet risk.

Hold rating. Target is raised to $6.95 from $6.00.

Target price is $6.95 Current Price is $7.16 Difference: minus $0.21 (current price is over target).
If IAG meets the Deutsche Bank target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.77, suggesting downside of -7.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Macquarie rates IAG as Neutral (3) -

The company has announced three further quota share deals and Macquarie expects the earnings impact to be broadly neutral ahead of capital management.

Despite favourable near-term earnings trends the broker envisages challenges for the industry in the longer term and considers the stock fully valued. Neutral rating maintained. Target is raised to $5.95 from $5.90.

Target price is $5.95 Current Price is $7.16 Difference: minus $1.21 (current price is over target).
If IAG meets the Macquarie target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.77, suggesting downside of -7.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates IAG as Overweight (1) -

The company has announced a further quota share deal with Swiss Re, Munich Re and Hannover Re. This, along with the original Berkshire Hathaway deal, lifts the account for quota share to 32.5%.

Morgan Stanley considers the deal broadly neutral prior to capital management.

Overweight rating retained. Industry view In-Line. Price target $6.80.

Target price is $6.80 Current Price is $7.16 Difference: minus $0.36 (current price is over target).
If IAG meets the Morgan Stanley target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.77, suggesting downside of -7.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgans rates IAG as Hold (3) -

The company has announced a new quota share agreement covering 12.5% of its consolidated business. Morgans considers this a good deal as it reduces risks and preserves potential earnings upside.

Capital released should also allow a $300m buyback, maybe by the end of FY18, in the broker's view.

The impact of the quota share deal is largely neutral at the earnings per share level, Morgans suggests. Hold rating maintained. Target is raised to $6.51 from $6.01.

Target price is $6.51 Current Price is $7.16 Difference: minus $0.65 (current price is over target).
If IAG meets the Morgans target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.77, suggesting downside of -7.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Ord Minnett rates IAG as Hold (3) -

The company has entered into quota share agreements for a combined 12.5% of consolidated business. While this appears a good deal for Insurance Australia Group, Ord Minnett remains perplexed about the rationale for the reinsurers.

The broker makes additional upgrades beyond the reinsurance deal, increasingly confident that the cost savings and cycle changes will benefit the company. Hold rating retained. Target rises to $6.65 from $6.43.

Target price is $6.65 Current Price is $7.16 Difference: minus $0.51 (current price is over target).
If IAG meets the Ord Minnett target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.77, suggesting downside of -7.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates IAG as Neutral (3) -

The new quota share arrangement has been well flagged and UBS believes it should not be a surprise to the market. Should surplus capital be applied to buybacks the broker concludes this would be around 1% accretive to earnings per share.

With 32.5% of the book now under quota share arrangement, UBS estimates the pro forma capital mix, post capital management, will shift to 52% tangible equity, 28% debt and 20% quota share reinsurance.

Neutral rating and $6.80 target maintained.

Target price is $6.80 Current Price is $7.16 Difference: minus $0.36 (current price is over target).
If IAG meets the UBS target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.77, suggesting downside of -7.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates IGO as Upgrade to Buy from Sell (1) -

Citi analysts have implemented a double step upgrade, to Buy from Sell, on a combination of supportive in-house view on base metals in 2018 and the company update which has Nova ramping up to full production and a mill expansion adding further value.

The analysts also mention the recent share price weakness. Price target lifts to $4.50 from $4.20. Citi sees further value accretion from ongoing mining efficiencies.

DPS estimates have been significantly upgraded to 11c per annum for the three years ahead.

Target price is $4.50 Current Price is $4.13 Difference: $0.37
If IGO meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $4.09, suggesting downside of -0.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.2

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Deutsche Bank rates IGO as Hold (3) -

The company has announced the Tropicana joint venture has committed to the Long Island mining strategy, extending mine life to 2027. Mill throughput will also lift by around 10%.

Deutsche Bank increases FY18-20 forecasts for earnings per share by 1-3%. Hold. Target is $3.70.

Target price is $3.70 Current Price is $4.13 Difference: minus $0.43 (current price is over target).
If IGO meets the Deutsche Bank target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.09, suggesting downside of -0.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.2

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates IVC as Downgrade to Sell from Neutral (5) -

UBS finds it hard to ignore the stock's 1-year forward PE of 30.9x, which represents a 70% premium against the Small Industrials index. This is well above the 7-year historical premium of 59%.

While the trend of high PE stocks as a key contributor to index strength has eased over the year, the broker notes that Invocare's share price has only fallen -3% since its all-time highs.

Rating is downgraded to Sell from Neutral. Target is raised to $16.10 from $14.70.

Target price is $16.10 Current Price is $16.99 Difference: minus $0.89 (current price is over target).
If IVC meets the UBS target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $14.24, suggesting downside of -16.2% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates MTS as Upgrade to Neutral from Sell (3) -

UBS is now increasingly confident in the company's ability to maintain its operating earnings in food & grocery despite the structural headwinds.

Moreover, the broker has been surprised by the ability to bank cost reductions to date without the need to reinvest in price any further.

With a strong balance sheet and cash generation the broker envisages scope for capital management of up to $150m.

Rating is upgraded to Neutral from Sell. Target is raised to $3.10 from $1.90.

Target price is $3.10 Current Price is $3.17 Difference: minus $0.07 (current price is over target).
If MTS meets the UBS target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.99, suggesting downside of -5.6% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates NEC as Initiation of coverage with Sell (5) -

Citi has initiated coverage on domestic media stocks, both outdoor and broadcasters, with the view it is better to concentrate on outdoor while staying clear of the broadcasters.

It is Citi's view that both outdoor and online are likely to further increase their market share overall. Regional radio is seen as more resilient than metro. Maiden view for Nine Entertainment is Sell.

Current Price is $1.59. Target price not assessed.

Current consensus price target is $1.46, suggesting downside of -8.2% (ex-dividends)

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates OML as Initiation of coverage with Buy (1) -

Citi has initiated coverage on domestic media stocks, both outdoor and broadcasters, with the view it is better to concentrate on outdoor while staying clear of the broadcasters.

It is Citi's view that both outdoor and online are likely to further increase their market share overall. Regional radio is seen as more resilient than metro. Maiden view for oOh!media is Buy.

This is the sole Buy recommendation for the sector.

Current Price is $4.43. Target price not assessed.

Current consensus price target is $4.90, suggesting upside of 10.6% (ex-dividends)

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.9

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates PTM as Underweight (5) -

Morgan Stanley estimates around $130m of inflows in November and the international fund continues to perform strongly.

The broker considers the valuation full given the uncertain recovery in sustained inflows.

Underweight rating and $4.40 price target. Industry view In-Line.

Target price is $4.40 Current Price is $7.29 Difference: minus $2.89 (current price is over target).
If PTM meets the Morgan Stanley target it will return approximately minus 40% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.12, suggesting downside of -29.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.8

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates RCR as Buy (1) -

Citi envisages upside risk from the infrastructure pipeline and a positive outlook for resources construction work. First half margins are expected to be constrained by ongoing investment but leverage should come through in the second half.

The broker considers recent share price weakness an enhanced buying opportunity. Buy rating maintained. Target falls to $4.75 from $5.02.

Target price is $4.75 Current Price is $4.04 Difference: $0.71
If RCR meets the Citi target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $4.85, suggesting upside of 20.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Macquarie rates S32 as Neutral (3) -

The company's bauxite resources suggest the mineral base is secure for the foreseeable future, while maximum throughput at Worsley appears to have been reached.

Hence, Macquarie suggests productivity is now likely to come through the improving cost base rather than incremental tonnage.

The broker expects most of the company's core commodity prices will decline from current levels but there is material upside to the base case at spot prices, particularly from alumina. Neutral rating and $3.20 target maintained.

Target price is $3.20 Current Price is $3.25 Difference: minus $0.05 (current price is over target).
If S32 meets the Macquarie target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.25, suggesting downside of -0.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Credit Suisse rates SM1 as Underperform (5) -

Credit Suisse observes momentum is strong on the back of key customer sales growth. There is strong earnings leverage to the remaining base if the volume growth is maintained.

In addition to the strong earnings momentum the broker notes investors are attracted to the company's growth ambitions, with the company reiterating its commitment to R&D, packaging innovations and a second manufacturing site.

Target is NZ$5.98. Underperform maintained.

Current Price is $6.20. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in July.

Forecast for FY18:

Forecast for FY19:

This company reports in NZD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: -0.7

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates SWM as Initiation of coverage with Sell (5) -

Citi has initiated coverage on domestic media stocks, both outdoor and broadcasters, with the view it is better to concentrate on outdoor while staying clear of the broadcasters.

It is Citi's view that both outdoor and online are likely to further increase their market share overall. Regional radio is seen as more resilient than metro. Maiden view for Seven West Media is Sell.

Current Price is $0.62. Target price not assessed.

Current consensus price target is $0.73, suggesting upside of 18.4% (ex-dividends)

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.5

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates SXL as Initiation of coverage with Sell (5) -

Citi has initiated coverage on domestic media stocks, both outdoor and broadcasters, with the view it is better to concentrate on outdoor while staying clear of the broadcasters.

It is Citi's view that both outdoor and online are likely to further increase their market share overall. Regional radio is seen as more resilient than metro. Maiden view for Southern Cross Media is Sell.

Current Price is $1.23. Target price not assessed.

Current consensus price target is $1.29, suggesting upside of 4.9% (ex-dividends)

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.2

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Ord Minnett rates TPM as Lighten (4) -

Fixed wireless broadband is technically feasible but Ord Minnett believes it will take very optimistic assumptions for this to wholly support the run-up in the share price.

While upgrading FY19 operating earnings estimates to account for the progressive mobile expenditure, the broker remains significantly below consensus.

Lighten retained. Target is $4.90.

Target price is $4.90 Current Price is $6.39 Difference: minus $1.49 (current price is over target).
If TPM meets the Ord Minnett target it will return approximately minus 23% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.74, suggesting downside of -10.2% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.1

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources