Australian Broker Call

Credit Suisse rates AAD as Outperform (1) -

The company will sell its bowling division to Quadrant Private Equity for around $160m. This represents a further simplification of the investment proposition and, Credit Suisse believes, gets rid of a low-growth, capital-intensive business, allowing the company to focus on rebuilding the Dreamworld brand and turning around Main Event.

The broker notes ongoing positive activity at Main Event, although operating earnings margins are still below expectations.

Outperform retained. Target is reduced to $2.10 from $2.15.

Target price is $2.10 Current Price is $2.00 Difference: $0.1
If AAD meets the Credit Suisse target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $1.81, suggesting downside of -9.3% (ex-dividends)

The company's fiscal year ends in June.

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

Deutsche Bank rates AAD as Hold (3) -

The company has sold its bowling & entertainment division for $160m. The sale should leave the company in a net cash position.

Deutsche Bank considers this a positive outcome, given a strong sales price, and a continuing strategy of divestments allowing the company to focus on its core theme park and Main Event businesses.

Deutsche Bank maintains a Hold rating and $2.05 target.

Target price is $2.05 Current Price is $2.00 Difference: $0.05
If AAD meets the Deutsche Bank target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $1.81, suggesting downside of -9.3% (ex-dividends)

The company's fiscal year ends in June.

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

UBS rates AAD as Sell (5) -

The company has divested its bowling & entertainment division to Quadrant Private Equity for $160m. The asset sale will allow the company to deploy capital into other divisions which are either higher returning and/or are in a turnaround state, UBS suggests.

The broker removes this division from forecasts and reduces the tax rate on US earnings to 21%. As a result forecasts for earnings per share are increased by 9% from FY19 onwards.

Given the risk to the margin turnaround at Main Event, the broker maintains a Sell rating. Target is raised to $1.85 from $1.45.

Target price is $1.85 Current Price is $2.00 Difference: minus $0.15 (current price is over target).
If AAD meets the UBS target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.81, suggesting downside of -9.3% (ex-dividends)

The company's fiscal year ends in June.

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

Morgan Stanley rates ALL as Equal-weight (3) -

The proposed US tax reforms would mean the US federal corporate tax rate is reduced to 21% from 35%. Morgan Stanley estimates Aristocrat Leisure's blended tax rate would reduce to 26% from 32% and deliver 9% accretion to earnings per share across FY19-20.

The company is highly exposed to the US through both slots and digital gaming, with 65% of its operations derived from the US, based on the broker's FY19 estimates. Nevertheless, Morgan Stanley points out the tax benefit will also help the company's competitors in that market.

Equal-weight rating. $25 target. Industry view is Cautious.

Target price is $25.00 Current Price is $23.96 Difference: $1.04
If ALL meets the Morgan Stanley target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $25.40, suggesting upside of 6.0% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.6

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

Macquarie rates BVS as Outperform (1) -

The company has signed a long-term contract with ASB, an NZ financial services provider and subsidiary of Commonwealth Bank ((CBA)).

The company will implement the Sonata platform to support the integrated KiwiSaver and managed funds business. Macquarie notes this follows the signing of South African client Discovery in early November.

Macquarie considers the valuation undemanding and retains an Outperform rating. Target is $1.91.

Target price is $1.91 Current Price is $1.76 Difference: $0.15
If BVS meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

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 EHL as Reinstate Coverage with Outperform (1) -

Macquarie believes the recent recapitalisation and acquisitions have been transformative, supporting the heavy equipment rental capability. The average age of the fleet has fallen by around -20% and strategic workshops have been acquired in key mining locations.

The company is positioned to benefit from the increased demand for mining fleet. Macquarie envisages material upside should utilisation and/or margins increase ahead of forecasts.

The broker reinstates coverage with an Outperform rating and $0.30 target.

Target price is $0.30 Current Price is $0.25 Difference: $0.05
If EHL meets the Macquarie target it will return approximately 20% (excluding dividends, fees and charges).

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

Deutsche Bank rates GPT as Hold (3) -

The company has announced a second half distribution of 12.3c per security, equivalent to a 2017 distribution of 24.6c.

This is in line with guidance but below Deutsche Bank's estimates. The broker believes the disparity relates to the company adopting a lower-than-expected pay-out ratio.

Deutsche Bank maintains a Hold rating and $5 target.

Target price is $5.00 Current Price is $5.26 Difference: minus $0.26 (current price is over target).
If GPT meets the Deutsche Bank target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.30, suggesting upside of 0.8% (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

Ord Minnett rates HLO as Buy (1) -

The company has announced plans to acquire Magellan Travel Group for $32.5m. Ord Minnett estimates this will increase the scale of the business as Magellan generates annual transaction value of around $900m.

The acquisition provides the opportunity for improved over-riders with airlines and commissions with suppliers.

Buy retained. Target is raised to $5.51 from $5.12.

Target price is $5.51 Current Price is $5.00 Difference: $0.51
If HLO meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $4.90, suggesting downside of -1.9% (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 MGR as Hold (3) -

The company has sold a 50% interest in Kawana Shoppingworld, Queensland. The price is $186m at a capitalisation rate of 5.5%.

Deutsche Bank expects the sale to be slightly dilutive to earnings and FY18 net operating profit is expected to fall by $700,000.

Hold rating retained. Target is $2.34.

Target price is $2.34 Current Price is $2.40 Difference: minus $0.06 (current price is over target).
If MGR 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 $2.40, suggesting upside of 0.0% (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

Credit Suisse rates MPL as Upgrade to Neutral from Underperform (3) -

Recent industry data has demonstrated a pullback in claims inflation. The idea that gross margin has peaked and there will be minimal earnings growth in coming years has weakened, Credit Suisse suggests.

The broker upgrades to Neutral from Underperform. With mid-single digit earnings growth expected in FY18 and upside risk to consensus views, the broker considers the current valuation largely justified. Target is raised to $3.35 from $2.80.

Target price is $3.35 Current Price is $3.29 Difference: $0.06
If MPL meets the Credit Suisse target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $2.93, suggesting downside of -10.8% (ex-dividends)

The company's fiscal year ends in June.

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

Morgans rates MX1 as Initiation of coverage with Add (1) -

Micro-X has developed ultra-lightweight x-ray imaging equipment with medical and security applications. It is partnered with a major US distributor, Carestream, which is involved in the mobile medical x-ray market.

Morgans observes the market opportunities across the medical, defence and security markets are quite significant. A successful launch at the Radiology Society Network conference in November highlighted the commercial orders that are expected early in 2018 through the Carestream distribution network.

Morgans estimates an addressable market of US$240m. The broker initiates coverage with an $0.88 target and Add rating.

Target price is $0.88 Current Price is $0.38 Difference: $0.5
If MX1 meets the Morgans target it will return approximately 132% (excluding dividends, fees and charges).

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

Citi rates ORI as Sell (5) -

The company has announced the acquisition of GroundProbe for $205m, a small addition that could help boost its technology offering. Citi considers the acquisition strategically sensible, providing minor accretion to earnings.

The deal does not alter the current oversupply in the ammonium nitrate explosives market, which the broker believes continues to exert downside risk on FY18 earnings forecasts.

Target is $17. Sell maintained.

Target price is $17.00 Current Price is $18.07 Difference: minus $1.07 (current price is over target).
If ORI meets the Citi target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $18.37, suggesting upside of 1.7% (ex-dividends)

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

Credit Suisse rates ORI as Neutral (3) -

Orica has an agreement to purchase GroundProbe, a provider of radar and laser-based monitoring solutions to the mining industry. The transaction is expected to be accretive to earnings in the first full year of ownership and will be funded from existing debt facilities.

At this stage Credit Suisse does not include the acquisition in forecasts because of limited disclosure around the financial details.

The broker retains a Neutral rating and $18.19 target.

Target price is $18.19 Current Price is $18.07 Difference: $0.12
If ORI meets the Credit Suisse target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $18.37, suggesting upside of 1.7% (ex-dividends)

The company's fiscal year ends in September.

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

Deutsche Bank rates ORI as Hold (3) -

Deutsche Bank considers the acquisition of GroundProbe for $205m to be a minor positive and modestly accretive to earnings.

The company will integrate the monitoring systems technology with its existing business in BlastIQ and Nitro Consult.

Hold retained. Target is $19.40.

Target price is $19.40 Current Price is $18.07 Difference: $1.33
If ORI meets the Deutsche Bank target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $18.37, suggesting upside of 1.7% (ex-dividends)

The company's fiscal year ends in September.

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

Citi rates PLS as Downgrade to Sell from Neutral (5) -

Citi believes most of the positive catalysts have been factored into the current share price and there is now potential for downside associated with the construction & commissioning delays that are prevalent in the mining industry.

The company has announced a definitive mine gate sales agreement with Atlas Iron ((AGO)) to supply a minimum of 1mt of ore from Pilgangoora.

The broker notes the agreement provides an opportunity to monetise and fund part of the Pilgangoora capital expenditure requirements.

Citi downgrades to Sell/High Risk from a Neutral/High Risk rating. Target is raised to $1.05 from $0.95.

Target price is $1.05 Current Price is $1.15 Difference: minus $0.1 (current price is over target).
If PLS meets the Citi target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

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

Macquarie rates PLS as Downgrade to Neutral from Outperform (3) -

The company has an agreement with Atlas Iron ((AGO)) to supply DSO from Pilgangoora. This will provide some early cash flow while the commissioning of stage 1 is underway, Macquarie observes.

The additional investment in the plant is in line with the company's strategy to target supply of high quality product over the longer term. Macquarie expects a shortage of raw materials for the battery market will continue.

Nevertheless, the stock has rallied hard amidst recent positive news and the broker downgrades to Neutral from Outperform. Target is raised $1.15 from $1.10.

Target price is $1.15 Current Price is $1.15 Difference: $0
If PLS meets the Macquarie target it will return approximately 0% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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

Credit Suisse rates SM1 as Underperform (5) -

The company will invest NZ$125m in an advanced liquid dairy packaging facility, aimed at delivering a wider liquid blending and packaging solution. Credit Suisse observes the investment is consistent with the company's ongoing strategic diversification.

The announcement partially satisfies several issues which have been flagged, but the broker asserts the contract private-label processing will not be capable of delivering the sort of returns the company targets, particularly as this only partly accounts for the volumes that the new investment is capable of producing.

Target is NZ$5.98. Underperform maintained.

Current Price is $6.57. 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

Credit Suisse rates SVW as Initiation of coverage with Outperform (1) -

Credit Suisse believes the stock provides the highest quality exposure to the asset maintenance/replacement cycle that is underway in the resources sector.

The broker argues that a premium to the Small Industrials and listed dealer peers is justified, given a belief that FY18 represents the early stages of a cycle which is driven by an overdue need to replenish assets.

Seven now presents the most leveraged play on the east coast as the infrastructure boom ramps up. The broker initiates coverage with an Outperform rating and $14.85 target.

Target price is $14.85 Current Price is $14.95 Difference: minus $0.1 (current price is over target).
If SVW meets the Credit Suisse target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

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

Ord Minnett rates WFD as Hold (3) -

Since Unibail-Rodamco made its offer for Westfield, the implied price has fallen 3.3% as the Unibail-Rodamco share price has fallen 3% and the Australian dollar has been stronger against the euro and US dollar.

Ord Minnett points out that this shows the complexity of the offer, as it is affected by multiple currencies and the bidder's share price.

The broker considers the offer solid, but not a "knock-out" offer and suggests Simon Property Group is the main candidate that could potentially lodge a competing bid, as it has a strong balance sheet and the ability to pay more cash.

Hold rating and $10.60 target.

Target price is $10.60 Current Price is $9.35 Difference: $1.25
If WFD meets the Ord Minnett target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $9.64, suggesting upside of 3.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

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

Market Sentiment: 0.4

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

Credit Suisse rates WPL as Underperform (5) -

Credit Suisse marks to market the rest of 2017, with December quarter oil prices at US$61.30/bbl. For 2018 the broker raises forecasts to US$60/bbl from US$53/bbl and has a second half bias to this number.

The upgrades mean 2017 forecasts for earnings per share increase by 6% and 2018 by 29%. Underperform rating. Target is raised to $26.80 from $26.20.

Target price is $26.80 Current Price is $32.49 Difference: minus $5.69 (current price is over target).
If WPL meets the Credit Suisse target it will return approximately minus 18% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $30.52, suggesting downside of -6.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

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

Market Sentiment: -0.1

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