Australian Broker Call

Macquarie rates AGL as Upgrade to Neutral from Underperform (3) -

The recent fall in AGL's share price, following underlying electricity forward pricing, has taken the stock back to meet Macquarie's valuation. Hence the broker has upgraded to Neutral.

Macquarie notes a lack of wind has impacted on AGL's renewable generation and forced the company to source higher priced gas energy. While this will drag on earnings, the offset is better pricing outcomes from electricity generation on normalised volumes.

Target rises to $24.50 from $24.30.

Target price is $24.50 Current Price is $24.95 Difference: minus $0.45 (current price is over target).
If AGL 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 $27.26, suggesting upside of 7.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.2

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

Citi rates AMP as Neutral (3) -

Marking to market has triggered some minor downward revisions to estimates, but more importantly, perhaps, might be Citi's comment there appears to be some value in the AMP stock price, though the analysts are not particularly confident this will crystallise any time soon.

The analysts continue to see significant headwinds, and subdued investor sentiment. Hence why the rating remains Neutral. Target price unchanged at $5.60.

Target price is $5.60 Current Price is $5.15 Difference: $0.45
If AMP meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $5.63, suggesting upside of 8.4% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.4

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

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

Fresh upon the announcement of the $28.5m acquisition of the Camperdown cannery, the company received news from Chinese authorities the Camperdown license had been suspended. The cockroach theory remains in full force.

Citi analysts state it appears Bellamy's cannot catch a break these days. They see alternatives and options for management, but in the short term the mood is expected to turn sour. Downgrade to Sell from Neutral. Target falls to $5.63 from $5.75.

Other challenges that yet need to be dealt with include escalating organic supply costs, excess inventory and reliance on the daigou, state the analysts. They observe the share price has rallied 64% since late March. Small adjustments have been made to forecasts.

Target price is $5.63 Current Price is $6.74 Difference: minus $1.11 (current price is over target).
If BAL meets the Citi target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.12, suggesting downside of -24.1% (ex-dividends)

The company's fiscal year ends in June.

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

Credit Suisse rates BHP as Neutral (3) -

Credit Suisse US has developed an algorithm called SAM that values US onshore shale acreage. SAM suggests BHP's Permian and Haynesville undeveloped acreages are of the most value. It then comes down to what oil price assumption one plugs in.

SAM suggests US$7bn in onshore valuation on current multiples to US$21bn blue sky. The local broker is sticking to US$5bn for now. Neutral and $26.50 target retained.

Target price is $26.50 Current Price is $24.59 Difference: $1.91
If BHP meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $27.52, suggesting upside of 12.4% (ex-dividends)

The company's fiscal year ends in June.

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: 0.8

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

UBS rates BXB as Buy (1) -

UBS analysts have redone their numbers, also in response to management's restructure of reporting divisions and added disclosure. The end result is -5% for underlying EPS estimates due to corporate costs and anticipated delay to recovery in the US pallets business.

The analysts highlight the delay is a timing issue rather than any change in view on the longer-term potential of the US pallets business. Buy rating retained. Price target loses 20c to $11.30.

Target price is $11.30 Current Price is $9.53 Difference: $1.77
If BXB meets the UBS target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $10.53, suggesting upside of 9.6% (ex-dividends)

The company's fiscal year ends in June.

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

Morgans rates CIP as Add (1) -

Centuria has announced $65m in new acquisitions and a small divestment. The acquisition will be funded by a $35m placement and debt, and thereafter debt will be reduced by a share purchase plan.

The REIT offers a pure exposure to Oz industrial property, the broker notes. Cash flows are supported by stable rents and the yield is attractive, paid quarterly. Target rises to $2.58 from $2.55 and Add retained.

Target price is $2.58 Current Price is $2.52 Difference: $0.06
If CIP meets the Morgans target it will return approximately 2% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 1.0

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

Ord Minnett rates FLT as Upgrade to Buy from Hold (1) -

Ord Minnett has changed its Flight Centre analyst, resulting in an upgrade to Buy and a target price increase to $48.17 from $31.06.

Flight Centre has benefitted from the growth in outbound travel over the last ten years but suffered more recently from falling international air fares, the new analyst notes.

Fares are now stabilising and a management review should lead to cost reductions. An improved earnings outlook drives the upgrade, with the company now expecting a result towards the top end of the guidance range.

Target price is $48.17 Current Price is $43.52 Difference: $4.65
If FLT meets the Ord Minnett target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $38.16, suggesting downside of -14.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.4

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

Citi rates IAG as Sell (5) -

Marking to market has only resulted in minor adjustments to estimates. Citi analysts state their view remains unchanged and that is the share price is too high. Hence Sell rating remains in place. Target unchanged at $6.30.

Target price is $6.30 Current Price is $6.87 Difference: minus $0.57 (current price is over target).
If IAG meets the Citi target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.57, suggesting downside of -4.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

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

Credit Suisse rates MFG as Neutral (3) -

Magellan's June Q performance fees were weaker than the broker had expected and funds under management slightly softer, albeit still up 21% year on year. The broker believes a forward multiple of 19x is justifiable given a double-digit earnings growth outlook.

But there's little room left for new institutional clients in the Global Fund and retail funds are growing slowly, suggesting limited upside from here in the broker's view. Neutral and $27 target retained.

Target price is $27.00 Current Price is $27.07 Difference: minus $0.07 (current price is over target).
If MFG meets the Credit Suisse target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $27.13, suggesting downside of -0.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.2

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

Macquarie rates MGX as Outperform (1) -

The higher than expected insurance settlement relating to Koolan Island has lifted Mt Gibson's net cash position to over $500m, the broker notes.

The development of Koolan remains the major focus for the company and the broker has priced this into its numbers, calculating a 20% internal rate of return on Macquarie's iron ore price forecast.

Spot will give you 55%. Outperform retained, target rises to 47c from 40c. 

Target price is $0.47 Current Price is $0.37 Difference: $0.105
If MGX meets the Macquarie target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $0.41, suggesting upside of 14.8% (ex-dividends)

The company's fiscal year ends in June.

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

Macquarie rates MHJ as Outperform (1) -

Michael Hill has posted its best quarter of the financial year, improving sales on a refocused approach to promotional activity around Mother's Day, the broker notes. Otherwise, underwhelming numbers from Emma & Roe and the US will weigh on the FY17 result.

This appears more cyclical than structural and the broker is drawn to a number of appealing growth opportunities for the company. The broker also believes the impact on Michael Hill from Amazon will be muted. Outperform and $1.64 target retained.

Target price is $1.64 Current Price is $1.17 Difference: $0.475
If MHJ meets the Macquarie target it will return approximately 41% (excluding dividends, fees and charges).

Current consensus price target is $1.48, suggesting upside of 28.7% (ex-dividends)

The company's fiscal year ends in June.

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

Morgans rates MHJ as Downgrade to Hold from Add (3) -

Michael Hill's FY17 sales grew 6% thanks to an improvement in the June quarter, led by A&NZ and Canada. The US and Emma & Roe continue to provide a meaningful earnings drag, Morgans notes.

Because of material losses in these businesses, the broker needs to see a change in management strategy before it can recommend the stock to investors. As the stock is trading in line with the sector average PE, Morgans pulls back to Hold. Target falls to $1.32 from $1.53.

Target price is $1.32 Current Price is $1.17 Difference: $0.155
If MHJ meets the Morgans target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $1.48, suggesting upside of 28.7% (ex-dividends)

The company's fiscal year ends in June.

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

Deutsche Bank rates MIN as Buy (1) -

Analysts at Deutsche Bank report monthly export statistics from Port Hedland indicate the company has shipped 315kt of lithium direct shipping ore (DSO) from Wodgina in June. They believe a further 114kt left port on 1 July.

Mineral Resources is now the world's largest producer of lithium, point out the analysts. They suggest earnings from both operations at Wodgina and Mt Marion can compensate for weak iron ore product discounts.

In addition, the analysts suggest selling down 50% of the Wodgina project to an off-take partner at a price above Net Present Value (NPV) should act as a positive catalyst for the share price. Minor adjustments made to forecasts.

Buy rating retained. Target $12 (unchanged).

Target price is $12.00 Current Price is $11.23 Difference: $0.77
If MIN meets the Deutsche Bank target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $13.27, suggesting upside of 15.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 1.0

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

Citi rates MPL as Neutral (3) -

Marking to market has pushed up Citi's FY17 EPS estimate by 1%, but nothing to change the broker's view (Neutral) or valuation/price target ($2.65).

Citi analysts see no hurry for investors to get on board as their view remains attempts to fix brand issues are likely to take time to have a meaningful impact on numbers, even if they prove successful (which is far from guaranteed).

Target price is $2.65 Current Price is $2.83 Difference: minus $0.18 (current price is over target).
If MPL 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 $2.68, suggesting downside of -6.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.4

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

Citi rates MQG as Sell (5) -

Citi analysts have conducted what they describe as a "deep dive" into what exactly are the key drivers underneath Macquarie's growth numbers, and whether these are sustainable. The short answer seems to be that investors should expect less, which potentially opens up the possibility of a de-rating for the shares.

It is Citi's assessment that one pivotal contributor to group growth has been Macquarie Infrastructure and Real Assets (MIRA), a leading global alternative asset manager. But this part of the business is now facing headwinds as interest rates and bond yields are on the rise and performance fees have become less likely.

The analysts note many of the investments in two maturing unlisted funds (MEIF II, MIP I) have underperformed or defaulted. The No.1 concern for infrastructure managers right now, suggest the analysts, is that current high valuations may reverse after a long period of growth. Sell rating retained. Target $72.

Citi's forecasts are implying two years of downward pressure on core earnings per share, and on dividends.

Target price is $72.00 Current Price is $88.05 Difference: minus $16.05 (current price is over target).
If MQG meets the Citi target it will return approximately minus 18% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $88.29, suggesting upside of 0.2% (ex-dividends)

The company's fiscal year ends in March.

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 NHF as Sell (5) -

Citi analysts have updated their modeling following mark-to-market, a reassessing of the likely impact of increased hospital utilisation and an anticipated rebound in ancillary claims plus some other minor changes.

Minor adjustments have resulted. Despite the analysts anticipating FY17 will be slightly better than management's guidance, significant growth for FY18 is seen as unlikely. Combine this with the observation the share price already is above Citi's valuation and it's not difficult to see why the Sell rating remains in place.

Target remains unchanged at $4.95.

Target price is $4.95 Current Price is $5.80 Difference: minus $0.85 (current price is over target).
If NHF meets the Citi target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.30, suggesting downside of -8.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.1

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

Citi rates NUF as Neutral (3) -

On Citi's observation, growing drought fears in the USA have helped commodity prices stage a strong rally recently. The analysts believe Nufarm's business improvement program will ensure earnings growth over coming years but, looking at where the share price trades, they suggest expectations may have run too far, too soon.

While trimming expectations, Citi analysts state the share price seems fairly valued. Despite drought concerns, the analysts believe fundamentals for wheat, soy, corn, to name a few, remain weak.

Neutral rating retained. Target price lifts to $9.31 from $8.95.

Target price is $9.31 Current Price is $9.10 Difference: $0.21
If NUF meets the Citi target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $9.64, suggesting upside of 6.5% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.1

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

Credit Suisse rates OGC as Outperform (1) -

A site visit to Waihi indicated to the broker the operation is benefitting from the transformation to Oceana culture, which is delivering lower costs.

Drill results are increasing confidence in the project. Outperform and $4.35 target retained.

Target price is $4.35 Current Price is $3.72 Difference: $0.63
If OGC meets the Credit Suisse target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $4.73, suggesting upside of 25.5% (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: 0.5

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

Macquarie rates PNL as Outperform (1) -

The completion of a placement in June means Paringa's Poplar Grove project is now fully funded, the broker notes, and on track for first coal production in July next year.

The broker remains attracted to Paringa's development profile, fixed-pricing offtake agreement and secured project financing. The broker also believes that in Paringa's market, which involves barging coal down the Ohio and Green Rivers to nearby utilities, coal-fired power can compete with gas-fired.

Outperform retained, target rises to 80c from 65c.

Target price is $0.80 Current Price is $0.45 Difference: $0.35
If PNL meets the Macquarie target it will return approximately 78% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 1.0

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

Macquarie rates QBE as Outperform (1) -

The broker's analysis suggests the negative pricing cycle in the US has now rolled through and the back book and prices should be contributing positively to margins as early as the first half FY17.

Throw in a positive performance in the crop portfolio and an exit from Comm Auto and the outlook for US performance is positive, the broker believes. The drag from Ogden sees the target drop to $13.50 from $13.80. Outperform retained.

Target price is $13.50 Current Price is $11.95 Difference: $1.55
If QBE meets the Macquarie target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $12.75, suggesting upside of 4.3% (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: 0.3

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

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

ResApp Health is a digital company with innovative technology for the diagnosis of a number of respiratory conditions. The system is scalable and cost effective, the broker notes, requiring only a smart phone.

ResApp is looking to form partnerships with major "telehealth" companies which will provide for revenue generation in FY18, the broker forecasts. A major US respiratory study offers a near term catalyst.

The broker initiates coverage with an Add rating and 48c target.

Target price is $0.48 Current Price is $0.30 Difference: $0.18
If RAP meets the Morgans target it will return approximately 60% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 1.0

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

Morgan Stanley rates SRX as Overweight (1) -

Though risk remains for a negative surprise regarding dose sales in FY18, Morgan Stanley analysts believe a return "over time" to double-digit growth is realistic. They believe the business model remains viable and new management is making all the right noises.

Updated forecasts anticipate a return to double-digit dose sales from FY19 onwards.

Lowering of the cost base and of amortisation should allow for significant expansion in FY18 EBIT (earnings before interest & taxes), on their calculations. Overweight. In-Line sector view retained. Target is $17.30 (from $17.90).

Target price is $17.30 Current Price is $16.50 Difference: $0.8
If SRX meets the Morgan Stanley target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $22.10, suggesting upside of 32.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 1.0

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

UBS rates TGR as Buy (1) -

It is UBS's assessment the risk for being forced to harvest fish early in Macquarie Harbour -a potential double-digit impact event- has receded, though it is not completely off the table just yet. Costs are rising nevertheless.

Higher costs in combination with higher forecast exports have left the analysts with a reduction to EPS estimates of -6% and -4% respectively for FY18 and FY19. Long term estimates have fallen by -2%.

Near-term regulatory risk remains, the analysts acknowledge, but should domestic wholesale salmon pricing hold steady, UBS expects Tassal to deliver 12% FY18-21 EPS CAGR. This commands a Buy rating, while the price target drops to $5 from $5.15.

Target price is $5.00 Current Price is $3.68 Difference: $1.32
If TGR meets the UBS target it will return approximately 36% (excluding dividends, fees and charges).

Current consensus price target is $4.80, suggesting upside of 27.2% (ex-dividends)

The company's fiscal year ends in June.

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

Ord Minnett rates TLS as Buy (1) -

A media report has suggested Telstra is looking at possibly securitising its 30-year recurring NBN payments. The broker estimates the company could receive $13-18bn in proceeds for which the most likely and prudent use would be to buy back shares, providing up to 7% shareholder accretion.

It depends, however, whether the securities could be taken off the balance sheet, as otherwise they would simply equate to debt, the broker notes. The broker expects more information at the upcoming FY17 result. Buy and $5.00 target retained.

Target price is $5.00 Current Price is $4.32 Difference: $0.68
If TLS meets the Ord Minnett target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $4.41, suggesting upside of 1.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.1

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