Australian Broker Call

Deutsche Bank rates AZJ as Upgrade to Hold from Sell (3) -

The investor briefing confirmed FY18 guidance and noted the various challenges facing the business in FY19 as well as highlighting further opportunities for efficiencies.

Deutsche Bank upgrades fourth quarter coal volumes and adjusts longer-term expectations based on the latest Wood McKenzie production forecasts. Rating is upgraded to Hold from Sell and the target to $4.25 from $4.10.

Disputes with the QCA and miners are still to play out but are well known and largely factored in, in the broker's view.

Target price is $4.25 Current Price is $4.29 Difference: minus $0.04 (current price is over target).
If AZJ meets the Deutsche Bank target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.42, suggesting upside of 3.1% (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

Macquarie rates AZJ as Outperform (1) -

The company's investor briefing signalled higher contract costs in FY19 and above-rail earnings falling by around -$50m. Macquarie notes the pace of cost reductions declines to around -$70m over the next two years ex productivity.

The company has re-set base earnings and the immediate share price reaction is reflecting this outcome, the broker observes.

Macquarie highlights that the core value of below-rail is unchanged. Management has set expectations low and the bias is to the upside in the near term. Hence, the broker maintains an Outperform rating and reduces the target to $4.70 from $4.84.

Target price is $4.70 Current Price is $4.29 Difference: $0.41
If AZJ meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $4.42, suggesting upside of 3.1% (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 AZJ as Underweight (5) -

The company anticipates above-rail coal volumes will increase by around 2% for the foreseeable future, in line with Morgan Stanley's estimates. The broker's main concerns are that one-off additional costs will offset the volume uplift.

Underweight. Target is $4.00. Industry view: Cautious.

Target price is $4.00 Current Price is $4.29 Difference: minus $0.29 (current price is over target).
If AZJ meets the Morgan Stanley target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.42, suggesting upside of 3.1% (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

Ord Minnett rates AZJ as Sell (5) -

The company has confirmed FY18 guidance, including above-rail coal volumes of 210-220mt and capital expenditure of $485-495m.

Ord Minnett notes the company's challenges in FY19 include a likely unfavourable outcome on UT5 and the potential closure of Queensland Intermodal if it is unable to be sold.

Given the headwinds, the broker considers the probability of further underperformance is high and retains a Sell rating. $4 target maintained.

Target price is $4.00 Current Price is $4.29 Difference: minus $0.29 (current price is over target).
If AZJ 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 $4.42, suggesting upside of 3.1% (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

Citi rates BHP as Buy (1) -

BHP and Vale, in conjunction with Samarco, have reached an agreement to settle the Brazilian civil claim. The agreement also establishes a process to renegotiate programs under the framework agreement and progress to settlement.

Citi currently includes a US$800m liability for Samarco remediation in its BHP estimates and suggests, while there remains the risk that the liability increases once the suspended civil claim is settled, the two years allowed for, in order to progress remediation works and increase stakeholder participation in the process, should limit a potential increase.

Buy rating and $33 target maintained.

Target price is $33.00 Current Price is $33.23 Difference: minus $0.23 (current price is over target).
If BHP meets the Citi target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $34.35, suggesting upside of 3.4% (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: 0.8

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

Macquarie rates BHP as Outperform (1) -

Macquarie notes improving productivity is the main focus for management. The completion of the sale of the shale assets appears on track for 2018.

The broker suggests, after meeting with management, that a shift from the current operating model is unlikely and the current asset portfolio is considered about right. Outperform retained and target is $38.00.

Target price is $38.00 Current Price is $33.23 Difference: $4.77
If BHP meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $34.35, suggesting upside of 3.4% (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: 0.8

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

Ord Minnett rates BHP as Accumulate (2) -

After the CEO's roundtable discussion Ord Minnett notes Nickel West may no longer be seen as a non-core asset.

The asset has scope to supply battery grade products and the CEO would not commit to putting it up for sale again until the company has finished further studies on how the electric vehicle outlook could affect demand for its products.

The CEO also believes product premiums in iron ore and metallurgical coal are here to stay. Accumulate rating and $38 target.

Target price is $38.00 Current Price is $33.23 Difference: $4.77
If BHP meets the Ord Minnett target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $34.35, suggesting upside of 3.4% (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: 0.8

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

UBS rates BHP as Buy (1) -

The CEO has reiterated plans to maximise value & cash, not volume. UBS notes targets of a 20% return on capital employed by FY22 and up to a 40% uplift in value on top of the 30% uplift to date remain intact.

The CEO believes, post the shale exit, the company will have the ideal portfolio. UBS maintains a Buy rating and target of $36.

Target price is $36.00 Current Price is $33.23 Difference: $2.77
If BHP meets the UBS target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $34.35, suggesting upside of 3.4% (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: 0.8

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

Citi rates BOQ as Neutral (3) -

Citi revises estimates following the mortgage re-pricing across the back book loan portfolio. Forecasts for net interest margin are revised up by six basis points, offsetting the higher funding costs from elevated BBSW rates.

FY18 estimates are revised up by 1%. Neutral rating and $11 target maintained.

Target price is $11.00 Current Price is $10.27 Difference: $0.73
If BOQ meets the Citi target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $10.67, suggesting upside of 3.9% (ex-dividends)

The company's fiscal year ends in August.

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

Ord Minnett rates CAJ as Buy (1) -

The company has acquired nine clinics, six based in WA, and now operates across three states Victoria, Tasmania and Western Australia. Ord Minnett expects the acquisitions to be around 6.5% accretive in FY19 and FY20.

Nevertheless, some cost is expected to be added to the business as management seeks to support the region and employs a CFO in coming months. Buy rating maintained. Target rises to $0.34 from $0.32.

Target price is $0.34 Current Price is $0.32 Difference: $0.02
If CAJ meets the Ord Minnett target it will return approximately 6% (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 CIM as Outperform (1) -

The company will report its first half net profit on July 19 and Macquarie forecasts $352m, up 9%. Macro conditions remain strong while the broker believes the challenges for the company will lie in navigating the cost pressures in the industry, particularly in Sydney and Melbourne which are infrastructure hot spots.

Outperform maintained, as the share price is seen lagging the traditional earnings correlation, trading at a market multiple despite above-market growth prospects. Target is reduced to $50.65 from $51.41.

Target price is $50.65 Current Price is $41.29 Difference: $9.36
If CIM meets the Macquarie target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $43.81, suggesting upside of 6.1% (ex-dividends)

The company's fiscal year ends in December.

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

Morgans rates CKF as Add (1) -

FY18 results were slightly below expectations as the KFC Australian business was affected by persistent weakness in WA. Morgans notes same store sales growth has subsequently rebounded and is up 3% in the year to date.

The broker reduces FY19-21 forecasts to reflect lower assumed margins in KFC Australia. Strong growth is still expected in FY19, up 19%, by virtue of recent acquisitions and the organic roll out.

Add rating. Target raised to $5.97 from $5.90.

Target price is $5.97 Current Price is $5.80 Difference: $0.17
If CKF meets the Morgans target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $6.19, suggesting upside of 6.7% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 1.0

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

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

Morgan Stanley increases its earnings forecasts to reflect FX assumption updates. The launch of N7 provides confidence for the broker in the duration of developed market growth.

Equal-weight rating, In-Line industry view. Target is raised to $184 from $173.

Target price is $184.00 Current Price is $199.44 Difference: minus $15.44 (current price is over target).
If COH meets the Morgan Stanley target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $169.08, suggesting downside of -15.2% (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

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

Morgan Stanley increases estimates by around 1% and updates FX assumptions. Forecasts for immunoglobulin and Idelvion are increased and expectations for Seqirus to encapsulate an increasingly favourable product mix are also heightened.

Equal-weight rating maintained as the stock is trading at a rich valuation and the positive scenarios being priced in are yet to emerge, in the broker's view. In-Line industry view. Target is raised to $175 from $166.

Target price is $175.00 Current Price is $195.00 Difference: minus $20 (current price is over target).
If CSL meets the Morgan Stanley target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $190.25, suggesting downside of -2.4% (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: 0.6

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

Deutsche Bank rates CSR as Upgrade to Hold from Sell (3) -

At the AGM, management has provided additional guidance for net profit of $176-204m. Recent strength in building approvals is expected to support volumes in FY19.

Deutsche Bank notes the performance of Viridian continues to improve, albeit from a small base. The broker upgrades to Hold from Sell on valuation. Target is raised to $4.88 from $4.68.

Target price is $4.88 Current Price is $4.61 Difference: $0.27
If CSR meets the Deutsche Bank target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $5.20, suggesting upside of 12.7% (ex-dividends)

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.0

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

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

The company has upgraded FY18 guidance for EBITDA to $48.5m from $45-47m amid higher settlements. Morgans observes Ingenia has made good progress in the sale of non-core assets, which enhances its ability to organically fund the extensive development pipeline.

Rating is downgraded to Hold from Add as latent valuation upside has been realised over the past week. Target is raised to $3.28 from $3.06.

Target price is $3.28 Current Price is $3.11 Difference: $0.17
If INA meets the Morgans target it will return approximately 5% (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

Morgan Stanley rates MVF as Overweight (1) -

IVF market activity in the year to date has trended below Morgan Stanley's long-run expectations of 3-4% growth. Given the prevailing trends the broker believes it unlikely a material rebound will be forthcoming for the remainder of FY18.

Earnings estimates are reduced by -3.5%. Overweight rating retained. Target is reduced to $1.90 from $2.00. In-Line industry view.

Target price is $1.90 Current Price is $1.11 Difference: $0.79
If MVF meets the Morgan Stanley target it will return approximately 71% (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

Citi rates NCM as Buy (1) -

Citi updates estimates to allow for the new contract of work agreement with Indonesia, where the company will incur a higher tax rate for the Gosowong gold mine.

The new agreement also requires the company to divest at least 26% of its 75% holding to Indonesian parties within two years, taking local ownership to 51%.

Citi also takes the opportunity to incorporate the recent US$155m pre-tax insurance pay-out relating to the 2017 earthquake at Cadia. This lifts the target to $26.00 from $25.80. Buy rating maintained.

Target price is $26.00 Current Price is $21.49 Difference: $4.51
If NCM meets the Citi target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $21.14, suggesting downside of -1.6% (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: -0.1

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

Deutsche Bank rates NHF as Upgrade to Buy from Hold (1) -

Deutsche Bank upgrades to Buy from Hold on weaker claims trends, given recent commentary from Ramsay Health Care ((RHC)). Target is reduced to $6.55 from $6.80.

Ramsay has stated there is weaker growth in procedural work and inpatient admissions in its Australian operations, which the broker observes is consistent with broader industry data that suggests private health claims growth has slowed to 3.0% in the year to March.

Target price is $6.55 Current Price is $5.50 Difference: $1.05
If NHF meets the Deutsche Bank target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $6.02, suggesting upside of 9.5% (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 PGH as Buy (1) -

Deutsche Bank reduces FY18 earnings estimates by -4% on higher raw material costs. Buy rating and $6.60 target maintained.

The broker remains of the view that the company is well-positioned to return to growth through the second half because of the ramp up of the Woolworths ((WOW)) crate washing and pooling contract, Asian acquisitions and a more stable top line going forward.

Target price is $6.60 Current Price is $5.23 Difference: $1.37
If PGH meets the Deutsche Bank target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $5.69, suggesting upside of 8.7% (ex-dividends)

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

Deutsche Bank rates QBE as Upgrade to Hold from Sell (3) -

Deutsche Bank upgrades QBE to Hold from Sell following a period of weakness. The broker's concerns over the operating complexity and the underwhelming returns remain intact.

Since the downgrade in August last year the company has exited its Latin American assets, replaced its CEO and CFO and remains in the process of simplifying its operations, the broker notes. Target is $10.

Target price is $10.00 Current Price is $9.55 Difference: $0.45
If QBE meets the Deutsche Bank target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $11.00, suggesting upside of 15.2% (ex-dividends)

The company's fiscal year ends in December.

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: 0.4

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

Credit Suisse rates RIO as Outperform (1) -

Credit Suisse believes Rio Tinto is the clean way to play the steel cycle, as it offers exposure through its iron ore assets and the asset sales in coal have largely been completed.

The business is arguably better placed for growth opportunities, if and when they present and the broker also notes that the company has the strongest track record of capital returns among its peers.

Outperform and target raised to $89 from $82.

Target price is $89.00 Current Price is $82.08 Difference: $6.92
If RIO meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $88.94, suggesting upside of 8.4% (ex-dividends)

The company's fiscal year ends in December.

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: 0.8

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

Morgan Stanley rates SGR as Overweight (1) -

Morgan Stanley believes the slump in the share price is overdone. Disruption concerns regarding the refurbishment of the Sovereign Room have been the main driver of the sell-off, the broker suggests.

Morgan Stanley assesses value in the Far East/Chow Tai Fook deal, envisaging this will align all parties to enable a stronger financial performance. The broker also believes the company is well-placed to generate accretive returns on its Queen's Wharf project.

Overweight and $6.00 target retained. Industry view: Cautious.

Target price is $6.00 Current Price is $4.90 Difference: $1.1
If SGR meets the Morgan Stanley target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $6.07, suggesting upside of 23.8% (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

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

The company has confirmed a binding scheme implementation deed with CDH Investments at $33.60 cash per share. Morgan Stanley expects the market to re-base around that level given the likelihood of a deal.

Equal-weight rating, In-Line industry view retained. Target is raised to $33.60 from $28.00 (Varian's original offer price).

Target price is $33.60 Current Price is $31.47 Difference: $2.13
If SRX meets the Morgan Stanley target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $29.87, suggesting downside of -5.1% (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

Deutsche Bank rates SUN as Downgrade to Hold from Buy (3) -

The stock has recently traded above Deutsche Bank's fundamental valuation and, despite the short-term upside from the potential sale of life assets, the rating is downgraded to Hold from Buy. Target is $14.50.

Target price is $14.50 Current Price is $14.64 Difference: minus $0.14 (current price is over target).
If SUN meets the Deutsche Bank target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $14.28, suggesting downside of -2.5% (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 VRT as Overweight (1) -

IVF market activity in the year to date has trended below Morgan Stanley's long-run expectations of 3-4% growth. Given the prevailing trends the broker believes it unlikely a material rebound will be forthcoming for the remainder of FY18.

Earnings estimates are reduced by 6%.Overweight rating. Target is reduced to $7.70 from $8.00. Industry view is In-Line.

Target price is $7.70 Current Price is $5.60 Difference: $2.1
If VRT meets the Morgan Stanley target it will return approximately 38% (excluding dividends, fees and charges).

Current consensus price target is $6.22, suggesting upside of 11.1% (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 VVR as Buy (1) -

The company has entered into two institutional term loans totalling $60m. The agreements are with an Australian based International fund manager and an Australian industry superannuation fund, with terms of eight and 10 years respectively.

Deutsche Bank maintains a Buy rating and $2.55 target.

Target price is $2.55 Current Price is $2.22 Difference: $0.33
If VVR meets the Deutsche Bank target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $2.44, suggesting upside of 10.1% (ex-dividends)

The company's fiscal year ends in December.

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