Australian Broker Call

Macquarie rates AWE as Downgrade to Underperform from Neutral (5) -

Macquarie has reduced its oil and gas price forecasts with tighter balances in 2017 anticipated to cause a return to market surpluses in 2018 and 2019.

AWE Ltd is the sole stock to receive a downgrade in Australia on the back of the move. Rating reduced to Underperform from Neutral. Target drops to 55c from 60c supported by some hefty reductions to forecasts.

Target price is $0.55 Current Price is $0.59 Difference: minus $0.04 (current price is over target).
If AWE meets the Macquarie target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.62, suggesting upside of 6.6% (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

Morgans rates BKY as Add (1) -

The company has made more land purchases and acquired  long lead crushing and processing equipment for the Salamanca uranium project.

Berkeley has signed a binding offtake agreement with Inter-alloys Trading, a European trading company, to sell 2.0m pounds of uranium over five years at US$43.78/lb.

As development milestones are reached, Morgans would look to unwind the discounts to valuation for financing, construction, commissioning and ramp-up risk. Add retained. Target falls to $1.29 from $1.31.

Target price is $1.29 Current Price is $1.06 Difference: $0.235
If BKY meets the Morgans target it will return approximately 22% (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 BOQ as Downgrade to Equal-weight from Overweight (3) -

Despite being the preferred regional bank, with sound credit quality, strong capital and dividend yield, Morgan Stanley downgrades to Equal-weight from Overweight. Home loan growth is shrinking and deposit margins are still under pressure, the broker observes.

The broker now forecasts cash earnings per share to fall -3% in FY17. The combination of downgrades to earnings per share and reduced likelihood of a bull case outcome reduces the broker's price target to $11 from $12.

Target price is $11.00 Current Price is $11.62 Difference: minus $0.62 (current price is over target).
If BOQ 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 $11.43, suggesting downside of -1.4% (ex-dividends)

The company's fiscal year ends in August.

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

Morgans rates CZZ as Add (1) -

Capilano's first half results were 'messy' in the brokers view, due to a move to net pricing which reduced its rebates, and thus overall revenues when compared to the prior corresponding period.

There was a $1.3m extra cost associated with its new health honey, Beeotic, but the company is pleased with the initial market acceptance of the product.

Morgans expects the second half to be stronger, however, FY17 forecasts have been downgraded by -12.7%, and FY18 & FY19 by -18.9% and -21.5% respectively, to reflect lower sales and increased investment across the business.

 Add rating retained and price target reduced to $18.95 from $23.50.

Target price is $18.95 Current Price is $15.77 Difference: $3.18
If CZZ meets the Morgans target it will return approximately 20% (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

Credit Suisse rates GNC as Downgrade to Neutral from Outperform (3) -

Credit Suisse has updated forecasts to reflect Graincorp's divestment of Allied Mills. The broker believes there is little point in owning a downstream flour mill business within an increasingly competitive domestic grain market and sees no downside to the divestment.

Rather, a sound financial return has resulted allowing for greater balance sheet flexibility. Target rises to $9.87 from $9.58. The stock has nevertheless had a solid run on increasingly positive crop reports, and as such Credit Suisse pulls back to Neutral. 

Target price is $9.87 Current Price is $9.37 Difference: $0.5
If GNC meets the Credit Suisse target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $9.91, suggesting upside of 6.7% (ex-dividends)

The company's fiscal year ends in September.

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

Credit Suisse rates GPT as Neutral (3) -

The broker expects greater focus than usual on GPT's guidance at its upcoming result given an enhanced strategic focus that the broker suspects will favour the long term value over short term growth. An increased payout ratio is also anticipated given capex has been elevated and should reduce.

The broker sees value emerging in GPT given recent underperformance relative to peers but retains Neutral and a $5.21 target.

Target price is $5.21 Current Price is $4.68 Difference: $0.53
If GPT meets the Credit Suisse target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $5.01, suggesting upside of 7.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: -0.2

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

Macquarie rates IAG as Neutral (3) -

Macquarie reviews the company's 10% aspirational growth target for earnings per share and updates its revenue outlook following industry feedback.

The broker suspects this target will not be delivered and, while acknowledging  the company could deliver positive surprise on premiums, believes relative value remains with Suncorp ((SUN)).

Neutral retained. Target falls to $5.80 from $5.90.

Target price is $5.80 Current Price is $5.84 Difference: minus $0.04 (current price is over target).
If IAG meets the Macquarie target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.87, suggesting upside of 0.6% (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

Credit Suisse rates IGO as Upgrade to Outperform from Neutral (1) -

In the swings and roundabouts of global nickel export bans, the Philippines has shut down various mines for environmental reasons including 16 nickel mines to be closed and two to be suspended, given six months to improve. The move means Credit Suisse has restored its assumption of the nickel market reaching supply-demand balance by December.

The broker had already assumed such a balance before Indonesia lifted its exports bans, so the Philippines has provided the offset. The result is an increase in Credit Suisse's target for Independence to $4.40 from $4.00. Given the stock had been sold down heavily on the prior Indonesian news, the broker upgrades to Outperform.

Target price is $4.40 Current Price is $3.86 Difference: $0.54
If IGO meets the Credit Suisse target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $4.14, suggesting upside of 5.2% (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

Citi rates JHX as Neutral (3) -

The company's results fell short of Citi's expectations on the back of weaker-than-expected margins in North America. The broker also notes unfavourable plant performance and higher start-up costs.

With FY17 adjusted net profit guidance tightened to US$245-255m from US$250-270m and capital expenditure set to materially increase over FY17-19, the broker expects the business to be a  "work-in-progress" for more than just a few quarters.

Citi retains a Neutral rating and reduces the target to $19.90 from $20.30.

Target price is $19.90 Current Price is $19.94 Difference: minus $0.04 (current price is over target).
If JHX meets the Citi target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $21.12, suggesting upside of 7.5% (ex-dividends)

The company's fiscal year ends in March.

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: 0.6

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

Credit Suisse rates JHX as Outperform (1) -

James Hardie's third quarter result disappointed the broker. Forecasts have been trimmed to reflect a deeper trough in manufacturing inefficiencies, and higher corporate and safety program costs. 

However the broker sees manufacturing issues bottoming out in the fourth quarter and with a 3% price rise set for April, sees improvement ahead in FY18. Outperform retained. Target falls to $21.60 from $21.70.

Target price is $21.60 Current Price is $19.94 Difference: $1.66
If JHX meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $21.12, suggesting upside of 7.5% (ex-dividends)

The company's fiscal year ends in March.

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: 0.6

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

Deutsche Bank rates JHX as Buy (1) -

December quarter profit was below Deutsche Bank's expectations largely because of higher production costs in the US fibre cement business.

Management has indicated price increases of 3% are likely to affect average prices in FY18, ahead of  broker's expectations of 2%. Deutsche Bank also believes the negative -4.7% margin impact related to production costs will not be present in FY18.

Buy rating retained. Target falls to $22.35 from $22.89.

Target price is $22.35 Current Price is $19.94 Difference: $2.41
If JHX meets the Deutsche Bank target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $21.12, suggesting upside of 7.5% (ex-dividends)

The company's fiscal year ends in March.

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: 0.6

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

Macquarie rates JHX as Outperform (1) -

December quarter results were weaker than Macquarie expected, because of poor gross profit margins. Top-line growth is supported by cyclical factors and the company's solid execution of its initiatives on gaining market share, the broker observes.

While increased capital expenditure affects free cash flow, the broker believes it is in line with the company's longer term growth strategy and solid returns are expected on these investments over time.

Outperform maintained. Target slips to $22.25 from $22.50.

Target price is $22.25 Current Price is $19.94 Difference: $2.31
If JHX meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $21.12, suggesting upside of 7.5% (ex-dividends)

The company's fiscal year ends in March.

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: 0.6

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

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

Morgan Stanley believes FY17 is likely to witness a decline in earnings for the North American fibre cement division.

Whilst  there are some costs in the December quarter that are one-off in nature, the broker believes at this point of the cycle this is surprising and there are risks to earnings in FY18.

Equal-weight rating retained. Target is $20.60. In-Line industry view.

Target price is $20.60 Current Price is $19.94 Difference: $0.66
If JHX meets the Morgan Stanley target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $21.12, suggesting upside of 7.5% (ex-dividends)

The company's fiscal year ends in March.

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: 0.6

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

Ord Minnett rates JHX as Hold (3) -

The December quarter result was disappointing  to Ord Minnett, with higher expenses and manufacturing inefficiencies weighing on margin performance.

Management now expects underlying net profit to be US$245-255m. The broker notes at the mid point, this represents a -3.8% downgrade to the prior range.

Ord Minnett maintains a Hold rating  and reduces the target to $18.65 from $19.50.

Target price is $18.65 Current Price is $19.94 Difference: minus $1.29 (current price is over target).
If JHX meets the Ord Minnett target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $21.12, suggesting upside of 7.5% (ex-dividends)

The company's fiscal year ends in March.

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: 0.6

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

UBS rates JHX as Buy (1) -

The company delivered a -10% fall in underlying EBIT through the December quarter. This was on the back of a weaker result in North American fibre cement.

UBS reduces FY17 profit estimates by -7% to reflect poor plant performance and higher costs. The broker continues to envisage a solid backdrop for earnings momentum in FY18, providing valuation support at current levels, but acknowledges, given the market's expectations, there is little room for poor execution.

Buy rating retained. Target falls to $22.50 from $23.00.

Target price is $22.50 Current Price is $19.94 Difference: $2.56
If JHX meets the UBS target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $21.12, suggesting upside of 7.5% (ex-dividends)

The company's fiscal year ends in March.

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: 0.6

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

Macquarie rates ORG as No Rating (-1) -

Macquarie revises oil price assumptions, which are now much closer to the prevailing forward curve. This has led to a drag on  broader expectations because of the companies APLNG leverage.

FY18 and FY19 earnings are revised down by -8% and -5% respectively. FY17 estimates are raised by 1%.

Macquarie is restricted on rating and target at this stage.

Current Price is $7.03. Target price not assessed.

Current consensus price target is $7.06, suggesting downside of -0.6% (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

Morgans rates RWC as Hold (3) -

Updates to FX forecast have resulted in Morgans' estimates for FY17 EBITDA falling -2% to $117m.

The broker expects 16% EBITDA growth in the first half, driven by further penetration of SharkBite products in North America.

Hold retained. Target falls to $3.10 from $3.15.

Target price is $3.10 Current Price is $2.76 Difference: $0.34
If RWC meets the Morgans target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $3.13, suggesting upside of 13.6% (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

Ord Minnett rates TLS as Re-initiate coverage with Accumulate (2) -

Ord Minnett resumes coverage on the telecommunications sector noting that structural changes are presenting opportunities.

The broker believes tailwinds from mobile migration and increased data usage will drive growth at Telstra, although there will be headwinds in the form of NBN margin pressures.

The NBN is expected to reduce EBITDA by -$2-3bn annually. The broker believes the downside is already priced in and the high dividend yield and modest valuation should provide support.

The broker initiates with an Accumulate rating and $5.45 target.

Target price is $5.45 Current Price is $5.08 Difference: $0.37
If TLS meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $5.02, suggesting downside of -1.8% (ex-dividends)

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 TPM as Re-initiate coverage with Hold (3) -

Ord Minnett resumes coverage on the telecommunications sector noting that structural changes are presenting opportunities.

TPG is one of the most cost efficient operators in the industry but NBN migration is expected to compress margins.  Meanwhile, its mobile ambitions in Australia and Singapore are also uncertain.

Ord Minnett is inclined stay on the sidelines until there is more clarity in the business and re-initiates with a Hold rating and $6.65 target.

Target price is $6.65 Current Price is $6.20 Difference: $0.45
If TPM meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $8.82, suggesting upside of 43.6% (ex-dividends)

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

Macquarie rates TRY as Outperform (1) -

December quarter production was affected by a slip in the pit wall.  Despite the limited access to high-grade ore, gold production was 30% stronger than Macquarie was expecting. Cash costs were in line.

A rapid resolution of the ground issues provide some comfort on the immediate production outlook. The broker retains an Outperform rating and raises the target to $0.25 from $0.20.

Target price is $0.25 Current Price is $0.19 Difference: $0.06
If TRY meets the Macquarie target it will return approximately 32% (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

Credit Suisse rates VAH as Neutral (3) -

Virgin cited subdued domestic conditions as the reason for its weak Dec Q result. The broker believes weakness stems from lower corporate demand following the new fare structure implementation, which removed many corporate benefits, and does not believe the market is as subdued as Virgin suggests.

Target falls to 20c from 23c, Neutral retained.

Target price is $0.20 Current Price is $0.21 Difference: minus $0.005 (current price is over target).
If VAH meets the Credit Suisse target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.22, suggesting upside of 8.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.6

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

Ord Minnett rates VAH as Lighten (4) -

The December quarter should have been the company's strongest trading quarter but Ord Minnett, instead, is alarmed at the -37% dive in pre-tax profit versus a year ago.

The composition of the earnings decline was not disclosed but, given the company's commentary around trading conditions, the broker suspects it relates primarily to domestic market weakness.

Lighten retained. Target is $0.20.

Target price is $0.20 Current Price is $0.21 Difference: minus $0.005 (current price is over target).
If VAH meets the Ord Minnett target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.22, suggesting upside of 8.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.6

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

UBS rates VAH as Sell (5) -

The December trading update revealed a weaker-than-expected finish to the year. UBS notes a continued deterioration in profitability and trading conditions appear more challenging than previously thought.

The broker observes the negative swing in profit comes despite a lower fuel bill, lower ex-fuel unit costs and a 1% percentage point rise in load.

Sell rating retained. Target target falls to $0.18 from $0.19.

Target price is $0.18 Current Price is $0.21 Difference: minus $0.025 (current price is over target).
If VAH meets the UBS target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.22, suggesting upside of 8.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.6

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

Credit Suisse rates VOC as Outperform (1) -

Vocus has indicated that FY17 earnings will be skewed to the second half. The broker has trimmed FY forecasts as a result of the skew.

The broker suggests guidance needs to be at least reiterated at the upcoming result release in order to restore investor confidence following recent issues.

Target falls to $5.70 from $6.00. Outperform retained.

Target price is $5.70 Current Price is $4.05 Difference: $1.65
If VOC meets the Credit Suisse target it will return approximately 41% (excluding dividends, fees and charges).

Current consensus price target is $5.82, suggesting upside of 43.4% (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 VOC as Initiation of coverage with Buy (1) -

Ord Minnett resumes coverage on the telecommunications sector noting that structural changes are presenting opportunities.

The broker believes Vocus is in the best position to benefit from acceleration in broadband adoption over the next few years without the margin pressure associated with the NBN.

Ord Minnett initiates coverage with a Buy rating and $5.25 target.

Target price is $5.25 Current Price is $4.05 Difference: $1.2
If VOC meets the Ord Minnett target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $5.82, suggesting upside of 43.4% (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