Australian Broker Call

Credit Suisse rates APA as Downgrade to Underperform from Neutral (5) -

Credit Suisse believes the Council Of Australian Governments' meeting in December is looming as a negative catalyst. The group is considering replacing the coverage test that determines whether pipelines qualify for full regulation.

Credit Suisse believes it is now probable that COAG adopts ACCC findings and lowers the threshold for full regulation of APA's pipelines, calculating the company is over-earning the theoretical regulated revenue level by 1.8 times.

The broker downgrades to Underperform from Neutral. Target falls to $7.95 from $9.15.

Target price is $7.95 Current Price is $8.75 Difference: minus $0.8 (current price is over target).
If APA meets the Credit Suisse target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $9.45, suggesting upside of 13.3% (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

Credit Suisse rates AQG as Outperform (1) -

The pre-feasibility study for Gediktepe, a 50:50 joint venture with Lidya Mining, has indicated a 2.5 year pay-back, which suggests to Credit Suisse the low capital, three-year oxide cap heap leach star operation will fund the 10-year copper-zinc sulphide flotation project.

The fact the project transitions to a dominant base metals operation from year four is largely irrelevant, in the broker's view, in the context of its apparent contribution.

Credit Suisse retains Outperform rating and raises the target to $5.45 from $4.85.

Target price is $5.45 Current Price is $3.51 Difference: $1.94
If AQG meets the Credit Suisse target it will return approximately 55% (excluding dividends, fees and charges).

Current consensus price target is $4.32, suggesting upside of 17.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

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

UBS rates AQG as Buy (1) -

The pre-feasibility for the Gediktepe project in western Turkey has been delivered. Alacer Gold has a 50% interest in the project which is expected to be mined in a similar way to Alacer's Copler mine.

UBS is yet to model the project but the pre-feasibility suggests a 47% internal rate of return and net present value of US$475m at a 5% discount rate.

UBS would not be surprised if the current 50:50 partnership with Lidya Mining is changed as the project is material for Lidya and relatively minor for Alacer. The broker maintains a Buy rating and $5.20 target.

Target price is $5.20 Current Price is $3.51 Difference: $1.69
If AQG meets the UBS target it will return approximately 48% (excluding dividends, fees and charges).

Current consensus price target is $4.32, suggesting upside of 17.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

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 BLD as Neutral (3) -

No new guidance guidance was issued at the US investor briefing but the company was optimistic about the longer-term opportunity in its US brick JV and the fly ash contribution. 

Credit Suisse observes Boral is looking to diversify from its highly cyclical US new home construction market and by increasing its footprint across the renovations and non-residential construction market a more stable earnings profile can be achieved.

Neutral rating and $7.00 target retained.

Target price is $7.00 Current Price is $6.24 Difference: $0.76
If BLD meets the Credit Suisse target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $6.72, suggesting upside of 7.2% (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

Deutsche Bank rates BLD as Buy (1) -

Deutsche Bank observes management is committed to growing its US business through further acquisitions and is intent on lowering US fixed costs and reducing the overall focus on single family housing starts.

Deutsche Bank believes the strategy is sensible. The broker also considers the expectations for break-even EBIT on the US bricks joint venture is conservative and currently factors in US$3m in EBIT in FY17 compared with the FY16 EBIT loss of US$6m.

Deutsche Bank retains a Buy and $7.25 target.

Target price is $7.25 Current Price is $6.24 Difference: $1.01
If BLD meets the Deutsche Bank target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $6.72, suggesting upside of 7.2% (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 BLD as Neutral (3) -

After a visit to the company's US business Macquarie observes Boral is pushing the fly ash opportunity and is investing heavily in R&D. Boral is also intent on driving efficiencies overall, in the context of improving market conditions.

Macquarie believes the move to form a brick joint venture in the US is a good strategic development and the potential in lightweight building products is becoming more obvious.

Neutral rating and $6.60 target retained.

Target price is $6.60 Current Price is $6.24 Difference: $0.36
If BLD meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $6.72, suggesting upside of 7.2% (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

Ord Minnett rates BLD as Hold (3) -

After the US investor briefing Ord Minnett notes fly ash business is surprisingly strong, with management indicating it contributes a high level of earnings to the division.

The company is continuing to target fly ash growth through organic means, geographic expansion and new products. The US brick joint venture's synergy targets have been reiterated and management noted it could exit the brick business once the JV is fully integrated and synergies realised.

Ord Minnett maintains a Hold rating and $6.50 target.

Target price is $6.50 Current Price is $6.24 Difference: $0.26
If BLD meets the Ord Minnett target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $6.72, suggesting upside of 7.2% (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 CBA as Upgrade to Neutral from Underperform (3) -

Macquarie upgrades to Neutral from Underperform, given the stock's recent de-rating and the fact the bank has greater cost management flexibility compared with peers.

The broker continues to envisage and acknowledge risks around the bank's overweight exposure to Western Australia and further return-on-equity convergence with peers. Yet, at current levels, the stock offers a 6% dividend yield. Target is raised to $76.50 from $75.50.

Target price is $76.50 Current Price is $70.16 Difference: $6.34
If CBA meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $76.83, suggesting upside of 8.6% (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

Macquarie rates CYB as Neutral (3) -

The bank's update has revised medium term targets, tempering revenue growth forecasts and suggesting a greater focus on costs.

Macquarie remains a fan of the stock and considers it offers one of the best restructuring opportunities in European banking. The broker likes the new targets but accepts there are risks in areas such as the pension deficit and the sustainability of the hedge contribution.

Neutral rating and $4.66 target retained.

Target price is $4.66 Current Price is $4.39 Difference: $0.27
If CYB meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $4.34, suggesting downside of -1.0% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: -0.3

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

Morgans rates CYB as Hold (3) -

The earnings outlook from the time of the IPO has now been downgraded, Morgans observes. Cost cutting will not be enough on its own to achieve double digit returns on equity and, as the broker suspected, the target is now reliant upon accreditation for the mortgage portfolio.

Morgans allows for AIRB accreditation to be achieved in the second half of FY18, with the average mortgage risk weight reduced to 20%. Special dividends are allowed for in calculations over the second half of FY18 and in FY19.

The target is raised to $4.17 from $3.75. Hold rating is maintained.

Target price is $4.17 Current Price is $4.39 Difference: minus $0.22 (current price is over target).
If CYB meets the Morgans target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.34, suggesting downside of -1.0% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: -0.3

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

Deutsche Bank rates GNC as Buy (1) -

Forecast winter crop production in FY17 has been revised up 8%. The mid point of forecasts now represents a 22% increase on the prior period and a return to above-average crop volumes.

Nevertheless, Deutsche Bank expects the share price performance will be constrained in the near term by the perceived overhang of ADM's stake. Buy rating retained. Target slips to $8.90 from $9.00.

Target price is $8.90 Current Price is $8.13 Difference: $0.77
If GNC meets the Deutsche Bank target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $8.92, suggesting upside of 10.7% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.6

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

Ord Minnett rates MPL as Accumulate (2) -

Medibank Private's CEO has made changes to the leadership, with the main change being that of the chief financial officer who has left the company. Ord Minnett finds the decision to dispense with Paul Koppelman a little worrying, as he was an architect of the operating margin rising to 8.3% in 2016.

The broker is concerned about an excessive prioritising of growth over margin but accepts there was always a risk that a new CEO would re-base expectations and seek to address weaknesses in the previous administration. Ord Minnett awaits the strategy briefing later in the year.

Accumulate rating and $3.00 target remains in place.

Target price is $3.00 Current Price is $2.56 Difference: $0.44
If MPL meets the Ord Minnett target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $2.78, suggesting upside of 9.9% (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

Morgan Stanley rates TRS as Upgrade to Overweight from Equal-weight (1) -

The stock has fallen 32% since the FY16 result, which was in line with Morgan Stanley's estimates but below the market's "lofty" expectations.

The broker believes the turnaround in the business is continuing and, despite tough comparables in the first quarter, considers the stock a buying opportunity.

The stock has been oversold, in the broker's view, and margin improvement and sustainable revenue growth are forecast over the next two to three years.

Hence, rating is upgraded to Overweight from Equal-Weight. Target is $12.80. Industry view is In-Line.

Target price is $12.80 Current Price is $10.08 Difference: $2.72
If TRS meets the Morgan Stanley target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $13.30, suggesting upside of 26.1% (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

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

The portfolio of 425 service station sites offers an attractive 2016 annualised distribution yield around 5.3%, Morgans observes. Potential catalysts include accretive acquisitions and inclusion in the index.

The portfolio is secured by income from leases with terms of 10-18 years, with fixed rental increases of 3% per annum.

Risks relate to higher interest rates and, longer term, to tenant default or disruptions to petrol-based retailing. Morgans initiates coverage on the stock with an Add rating and $2.56 target. 

Target price is $2.56 Current Price is $2.43 Difference: $0.13
If VVR meets the Morgans target it will return approximately 5% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 1.0

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

Citi rates WES as Sell (5) -

Coal prices continue to surprise to the upside and Citi analysts observe for the first time in years it appears the risk in consensus estimates for Wesfarmers is to the upside, thanks to coal.

The analysts estimate present upside potential is circa 10% for FY17. However, it is sustainability that remains in question and with underlying growth more like 6% and valuation stretched, Citi retains a Sell rating. Target remains $38.50.

Target price is $38.50 Current Price is $42.64 Difference: minus $4.14 (current price is over target).
If WES meets the Citi target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $41.88, suggesting downside of -1.7% (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