Australian Broker Call

Macquarie rates AGL as Outperform (1) -

The industry is asking for an emissions intensity scheme to be re-considered.  While this is uncertain with the current  federal government,  opposition policy is likely to be supportive. Thus, Macquarie believes a valuation of the company must consider this scenario.

The broker sums up the current environment as a perfect situation for AGL, with rising electricity prices and favourable renewable dynamics. At the same time, capital intensity is low. Macquarie retains an Outperform rating. Target rises to $25.81 from $25.63.

Target price is $25.81 Current Price is $25.47 Difference: $0.34
If AGL meets the Macquarie target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $25.41, suggesting downside of -0.2% (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

Deutsche Bank rates AMC as Buy (1) -

The outlook for packaging sector earnings remains subdued and Deutsche Bank believes the strong earnings growth forecasts for the major packagers will be driven by recent acquisitions and efficiency gains.

Valuations remain attractive and the broker prefers Amcor and Pact ((PGH)), with Orora ((ORA)) trading at fair value. Deutsche Bank estimates the dividend yield in FY17 to be 4.0% and the free cash-flow yield in FY18 to be 6.0%.

Buy rating retained. Target unchanged at $17.35.

Target price is $17.35 Current Price is $14.35 Difference: $3
If AMC meets the Deutsche Bank target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $15.53, suggesting upside of 7.2% (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: 0.3

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

Credit Suisse rates ARB as Neutral (3) -

The broker has spent more time going over ARB's earnings result from last month and decided that while the numbers were "decent", they failed to bridge the gap to the market's valuation. The broker had been willing to back strong sales and the company's track record but this wasn't enough.

The broker has thus cut its target to $15.45 from $17.80. The stock has come off somewhat, hence Neutral retained.

Target price is $15.45 Current Price is $14.70 Difference: $0.75
If ARB meets the Credit Suisse target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $15.58, suggesting upside of 7.7% (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

UBS rates BWP as Downgrade to Sell from Neutral (5) -

UBS believes a shortening lease expiry profile will continue to be a headwind for the stock. The broker downgrades to Sell from Neutral on valuation grounds, as other names with lower risk profiles appear more attractive.

Five assets have already been vacated, with a further seven to be vacated as Bunnings re-locates to more favourable locations that have been left vacant by the demise of Masters.

Assuming Bunnings vacates one in five leases on expiry and 12 months downtime, the broker estimates the hit to earnings will be -1%, -2.2% and -2.2% in FY18, FY19 and FY20 respectively. Target is reduced to $2.66 from $2.91.

Target price is $2.66 Current Price is $2.83 Difference: minus $0.17 (current price is over target).
If BWP meets the UBS target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.73, suggesting downside of -0.6% (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

Credit Suisse rates BXB as Underperform (5) -

Brambles' management appears to be in somewhat of a shambles. The head of North American pallets was shown the door last week, following on from the departures of the head of global pallets and the former CEO. This after the new CEO restructured management less than a month ago, the broker notes.

The departures are likely evidence of a further deterioration in the business, the broker suggests. Underperform and $8.50 target retained.

Target price is $8.50 Current Price is $9.22 Difference: minus $0.72 (current price is over target).
If BXB meets the Credit Suisse target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $9.93, suggesting upside of 9.7% (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: 0.0

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

Morgan Stanley rates CHC as Upgrade to Overweight from Underweight (1) -

Morgan Stanley believes the divergence between office and retail asset classes will widen as returns in office continue to improve and retail returns deteriorate.  The broker also has a preference for active over passive A-REITs.

With a new analyst, the broker observes it has been too bearish on the growth outlook and the de-rating risk to Charter Hall. Despite the strong run in the stock,  it is expected to deliver superior growth in free funds from operations and net tangible assets in the medium term.

Rating is upgraded to Overweight from Underweight. Target is raised to $5.65 from $4.45. Industry view is Cautious.

Target price is $5.65 Current Price is $5.32 Difference: $0.33
If CHC meets the Morgan Stanley target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $5.36, suggesting downside of -1.2% (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

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

The company hosted a site visit in Europe and Morgan Stanley notes outsized growth, driven by one-off events, has been highlighted for FY17.

 The broker believes the issues will create as much as a -7% headwind for FY18 net profit, but also drive FY17 earnings towards the top end of 18-20% growth guidance.

Plasma collection remains a key competitive advantage for CSL, the broker observes. Equal-weight rating, In-Line industry view and $112 target retained.

Target price is $112.00 Current Price is $125.91 Difference: minus $13.91 (current price is over target).
If CSL meets the Morgan Stanley target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $124.39, suggesting upside of 0.1% (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 GOZ as Downgrade to Sell from Neutral (5) -

UBS suspects the acquisition-led growth is coming to an end. Strong income growth was achieved through debt-funded capital expenditure in the first half.

Further de-leveraging is now expected, in addition to the underwritten distribution re-investment  plan as management focuses on reducing gearing.  UBS downgrades to Sell from Neutral on valuation grounds.

While anticipating the company will successfully de-leverage,  the broker retains a preference for other low-geared  passive A-REITs trading at a discount to valuation.  Target is reduced to $2.90 from $3.07.

Target price is $2.90 Current Price is $3.14 Difference: minus $0.24 (current price is over target).
If GOZ meets the UBS target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.5

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

Morgan Stanley rates GPT as Upgrade to Overweight from Underweight (1) -

Morgan Stanley believes the divergence between office and retail asset classes will widen as returns in office continue to improve and retail returns deteriorate. The broker also has a preference for active over passive A-REITs.

With a new analyst, The broker notes GPT should experience an acceleration in growth profile as development and funds management earnings rise.

Rating is upgraded to Overweight from Underweight. Target is raised to $5.00 from $4.70. Industry view is Cautious.

Target price is $5.00 Current Price is $4.80 Difference: $0.2
If GPT meets the Morgan Stanley target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $5.13, suggesting upside of 6.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.3

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

Morgan Stanley rates IOF as Downgrade to Underweight from Overweight (5) -

Morgan Stanley believes the divergence between office and retail asset classes will widen as returns in office continue to improve and retail returns deteriorate.  The broker also has a preference for active over passive A-REITs.

With a new analyst, the broker believes the stock continues to be underpinned by the Cromwell ((CMW)) takeover play, and considers it increasingly fully valued.

Rating is downgraded to Underweight from Overweight. Target is raised to $4.45 from $4.30. Industry view is Cautious.

Target price is $4.45 Current Price is $4.65 Difference: minus $0.2 (current price is over target).
If IOF meets the Morgan Stanley target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.48, suggesting downside of -2.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.5

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

UBS rates JHX as Buy (1) -

UBS believes FY17 has been characterised by a disappointing performance in manufacturing and a decline in throughput across the network caught the company short of supply. Ultimately, this cost the business around $25m.

The broker believes  the current external environment is supporting EBIT at the top end of management's 20-25% target. This would have increased to 25.2%, assuming a more normal supply situation.

The broker retains a Buy rating and $22.50 target. UBS believes moderating inefficiencies will provide a path to 25% margins in FY18.

Target price is $22.50 Current Price is $20.50 Difference: $2
If JHX meets the UBS target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $21.12, suggesting upside of 3.3% (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 MGR as Upgrade to Overweight from Underweight (1) -

Morgan Stanley believes the divergence between office and retail asset classes will widen as returns in office continue to improve and retail returns deteriorate. The broker also has a preference for active over passive A-REITs.

With a new analyst, the broker notes Mirvac has shown it's less reliant on a growing residential cycle whilst its property trust is considered one of the best in the sector.

Rating is upgraded to Overweight from Underweight. Target is raised to $2.25 from $1.95. Industry view is Cautious.

Target price is $2.25 Current Price is $2.13 Difference: $0.12
If MGR meets the Morgan Stanley target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $2.29, suggesting upside of 6.4% (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 QUB as Add (1) -

Morgans  believes the increase in DP World's levy bodes well for Patrick, but caution is warranted given the cost increases that may follow.

Qube appears to have two options, either follow DP World's lead or hold levies constant, with the view of taking market share. The broker believes the former is more likely.

Morgans continues to like the stock for its medium to long-term growth prospects. Add rating retained. Target rises to $2.65 from $2.61.

FY18-20 earnings estimates are lifted by 4-7%, as a levy increase is factored in and partly offset by higher costs.

Target price is $2.65 Current Price is $2.47 Difference: $0.18
If QUB meets the Morgans target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $2.61, suggesting upside of 8.2% (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

Citi rates SGM as Buy (1) -

On Citi's observation, global scrap export trends from the US continue to improve. The analysts observe the latest data update from the US Census Bureau revealed positive y-y growth for the first time in 54 months, underpinning the positive trend.

Being a net exporter of scrap in its largest market, which is the USA, this should bode well for Sims Metal's outlook, state the analysts. Citi reiterates the Buy rating with a target price of $14.10 (unchanged).

Target price is $14.10 Current Price is $12.56 Difference: $1.54
If SGM meets the Citi target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $12.84, suggesting upside of 5.0% (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

Morgan Stanley rates SGP as Downgrade to Underweight from Overweight (5) -

Morgan Stanley believes the divergence between office and retail asset classes will widen as returns in office continue to improve and retail returns deteriorate.  The broker also has a preference for active over passive A-REITs.

With a new analyst, the broker observes the company's residential business remains relatively defensive although concerns are mounting about a slowing in the property trust.

Rating is downgraded to Underweight from Overweight. Target is raised to $4.50 from $4.45. Industry view is Cautious.

Target price is $4.50 Current Price is $4.61 Difference: minus $0.11 (current price is over target).
If SGP meets the Morgan Stanley target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.79, suggesting upside of 5.8% (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

Ord Minnett rates TPM as Hold (3) -

The company has made it clear that mobile is the future and has bought some spectrum. TPG is expected to participate in the upcoming 700 MHz re-auction.

This has led some to believe the company could build a fourth mobile network, although Ord Minnett believes the costs of an organic network build up would be prohibitive and provide only uncertain returns. The broker believes the company would be better served if it were to partner with, or acquire, an existing operator.

The broker believes the acquisition of iiNet provides the company with the necessary scale and cash flow to consider a potential transaction with Vodafone Australia. Hold rating and $6.65 target maintained.

Target price is $6.65 Current Price is $6.37 Difference: $0.28
If TPM meets the Ord Minnett target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $8.82, suggesting upside of 39.5% (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

Citi rates TWE as Sell (5) -

It is Citi's view the latest investor briefing by the company has provided clearer insights into the growth path forward. The analysts do not think consensus expectations are moving higher on the basis of this briefing.

Citi analysts applaud the launch of a French wine brand, and acknowledge the potential upside, but they also see risk because of a lack of brand heritage in French produce.

Citi analysts continue to have a problem with the shares' valuation. They suggest the PE ratio is high leaving no room for mistakes. Sell rating retained, as well as the $10.50 price target.

Target price is $10.50 Current Price is $12.59 Difference: minus $2.09 (current price is over target).
If TWE meets the Citi target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.83, suggesting downside of -3.9% (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

UBS rates VCX as Downgrade to Neutral from Buy (3) -

UBS believes, in an uncertain and evolving retail environment, a buy rating predicated on a discount to valuation can no longer be justified.

The stock is well positioned to drive returns from various assets but the broker would like to witness improved performances across the entire portfolio.

As a result the rating is downgraded to Neutral from Buy.  Target falls to $3.05 from $3.25. Earnings are expected to remain under pressure in 2017.

Target price is $3.05 Current Price is $2.80 Difference: $0.25
If VCX meets the UBS target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $3.06, suggesting upside of 12.2% (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

Deutsche Bank rates WBC as Buy (1) -

Despite the concerns about banks, with Deutsche Bank observing there are now fewer "buys" and more "holds" or "sells", there remains much to like and, historically, this has been positive for share price performance.

While it is true earnings growth is a lot lower than the historical average, this is considered the case for most of the market. Basel is expected to be watered down and earnings forecasts for the banks tend to be more reliable, in the broker's view.

Deutsche Bank is overweight banks and Westpac remains the top pick as it is well placed on the capital front and has better growth prospects than its peers. The broker retains a Buy rating. Target  is $35.90.

Target price is $35.90 Current Price is $35.13 Difference: $0.77
If WBC meets the Deutsche Bank target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $32.93, suggesting downside of -6.0% (ex-dividends)

The company's fiscal year ends in September.

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

Morgan Stanley rates WFD as Downgrade to Underweight from Overweight (5) -

Morgan Stanley believes the divergence between office and retail asset classes will widen as returns in office continue to improve and retail returns deteriorate.  The broker also has a preference for active over passive A-REITs.

With a new analyst, the broker believes a re-rating from the stock's elevated multiple is unlikely until there is evidence of a strategy that will drive superior growth in free funds from operations and net tangible assets.

Rating is downgraded to Underweight from Overweight. Target is reduced to $8.90 from $10.10. Industry view is Cautious.

Target price is $8.90 Current Price is $8.53 Difference: $0.37
If WFD meets the Morgan Stanley target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $9.58, suggesting upside of 13.8% (ex-dividends)

The company's fiscal year ends in December.

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