Australian Broker Call

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

The ACCC has delayed the final decision on the intermodal asset sale to May 24 and has advised of concerns that the proposed sale of the Queensland assets, and closure of the remaining Queensland intermodal business, could substantially lessen competition.

Morgan Stanley anticipates little share price reaction to the continued uncertainty and believes the possibility of the sale progressing with an undertaking is likely.

Equal-weight and $4.88 target retained. Industry view: Cautious.

Target price is $4.88 Current Price is $4.39 Difference: $0.49
If AZJ meets the Morgan Stanley target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $4.68, suggesting upside of 6.6% (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

Ord Minnett rates BXB as Buy (1) -

Post the 2018 investor briefing Ord Minnett continues to believe Brambles is a fundamentally good company, but suggests investors may be unable to separate out the short-term cyclical pressures from the long-term structural ones. The stock remains the broker's preference in the transport sector.

Favourable second-half seasonal factors and company initiatives should mean CHEP America's second-half operating margins improve on the first half, Ord Minnett asserts.

The broker maintains a Buy rating and $12.25 target.

Target price is $12.25 Current Price is $9.55 Difference: $2.7
If BXB meets the Ord Minnett target it will return approximately 28% (excluding dividends, fees and charges).

Current consensus price target is $10.31, suggesting upside of 7.9% (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: 0.3

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

UBS rates BXB as Buy (1) -

The company's investor briefing in London supported upside to forecasts, UBS observes. The broker remains concerned about cost inflation, although there is a clear plan to offset the impact on a 2-3 year timeline.

The main positives were the enunciation of penetration opportunities in each market and the large potential from investment in digital.

Buy rating and $11.40 target retained.

Target price is $11.40 Current Price is $9.55 Difference: $1.85
If BXB meets the UBS target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $10.31, suggesting upside of 7.9% (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: 0.3

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

UBS rates EVN as Buy (1) -

UBS believes the market is rewarding the company for its strategy in upgrading the portfolio through lengthening average mine life and lowering average costs.

Finding more assets to fit the strategy is now increasingly difficult, the broker observes, although the company could seek out an early-stage exploration asset as this is the area of the portfolio that is lacking. While the stock is earning its premium valuation, UBS notes it remains at a discount to peers.

Buy and $3.16 target maintained.

Target price is $3.16 Current Price is $2.92 Difference: $0.24
If EVN meets the UBS target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $2.81, suggesting downside of -3.8% (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 NCM as Buy (1) -

The northern tailings dam at Cadia East has been issued a prohibition notice, although Citi observes the problem appears fixable and Cadia should resume its full operations in FY19.

Management does not expect seismicity or operating requirements to hamper expansion. The broker envisages the recent sell-off is a buying opportunity. Target is reduced to $24.00 from $27.10. A Buy rating is maintained.

Target price is $24.00 Current Price is $19.87 Difference: $4.13
If NCM meets the Citi target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $20.44, suggesting upside of 2.8% (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: -0.2

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

Credit Suisse rates NCM as Underperform (5) -

The company has fronted investors regarding the tailings dam wall failure at Cadia East although Credit Suisse notes there was little new information.

Management has indicated it will provide updated guidance when the investigation has defined the extent of the failure.

Credit Suisse makes a material reduction to FY18 estimates. Underperform and $18.50 target maintained.

Target price is $18.50 Current Price is $19.87 Difference: minus $1.37 (current price is over target).
If NCM meets the Credit Suisse target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $20.44, suggesting upside of 2.8% (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: -0.2

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

Macquarie rates NCM as Underperform (5) -

The company has provided no timing on the recovery of production at Cadia after the failure in the tailings dam wall, stating this depends on the regulators and experts. Material continues to flow into the smaller southern tailings storage where it is being contained.

Macquarie assumes a 6-week production hiatus. The company does not expect to meet full-year production guidance. Macquarie expects the value ascribed to Cadia to continue being discounted until some certainty on the outlook is established.

Underperform rating and $19 target maintained.

Target price is $19.00 Current Price is $19.87 Difference: minus $0.87 (current price is over target).
If NCM meets the Macquarie target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $20.44, suggesting upside of 2.8% (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: -0.2

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

Citi rates OSH as Sell (5) -

Oil Search plans to present its expansion concept to the PNG government in coming days. Citi believes the company is demonstrating its focus on maximising value from current assets and is one of the few that has not destroyed value through exploration.

Production assets continue to run well and the broker envisages upside from Alaska. Nevertheless, the stock appears expensive on Citi's US$55/bbl long-term oil deck. Sell rating maintained. Target is reduced to $6.58 from $6.61.

Target price is $6.58 Current Price is $7.09 Difference: minus $0.51 (current price is over target).
If OSH meets the Citi target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.16, suggesting upside of 15.0% (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: 0.3

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

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

Credit Suisse has increased copper price assumptions, raising the 2018 estimate to US$3.09/lb and the first half 2019 estimate to US$2.60/lb. Despite increased earnings and valuation the broker still considers OZ Minerals expensive.

Rating is downgraded to Underperform from Neutral. Target is raised to $8.55 from $8.25.

Target price is $8.55 Current Price is $9.43 Difference: minus $0.88 (current price is over target).
If OZL 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 $9.77, suggesting upside of 3.6% (ex-dividends)

The company's fiscal year ends in December.

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

Credit Suisse rates RIO as Outperform (1) -

Credit Suisse has increased its price expectations for aluminium, up 7-22% for the period to 2021. Copper forecasts for 2018 have also been upgraded by 17%. Metallurgical coal estimates are up 12% for 2018.

The broker believes coal and aluminium sales will further contribute to the case for large capital management from Rio Tinto in August and the recent pull-back in the share price only provides a more compelling entry point.

Outperform rating retained. Target is $82.

Target price is $82.00 Current Price is $76.06 Difference: $5.94
If RIO meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $82.66, suggesting upside of 8.7% (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

Credit Suisse rates S32 as Upgrade to Neutral from Underperform (3) -

Credit Suisse has increased its price expectations for aluminium, up 7-22% for the period to 2021. Copper forecasts for 2018 have also been upgraded by 17%. Metallurgical coal estimates are up 12% for 2018.

Given the pull back in the shares since January, South32's valuation appears more compelling and the broker upgrades to Neutral from Underperform. Target is steady at $3.30. Operating performance and corporate activity could also likely be key near-term value drivers.

Target price is $3.30 Current Price is $3.20 Difference: $0.1
If S32 meets the Credit Suisse target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $3.29, suggesting upside of 2.8% (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: -0.4

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

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

Credit Suisse has increased copper price assumptions, raising the 2018 estimate to US$3.09/lb and the first half 2019 estimate to US$2.60/lb. Despite increased earnings and valuation the broker still considers Sandfire Resources expensive.

Rating is downgraded to Underperform from Neutral. Target is raised to $6.10 from $5.60.

Target price is $6.10 Current Price is $8.16 Difference: minus $2.06 (current price is over target).
If SFR meets the Credit Suisse target it will return approximately minus 25% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.98, suggesting downside of -14.4% (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 TPM as Sell (5) -

Citi believes the main catalyst for the stock is progress on the two mobile networks. At the first half result on March 20 the broker anticipates an update on the progress of construction and launch plans for Australian mobile.

Citi expects management will reaffirm FY18 EBITDA guidance of $800-815m. Sell rating and $5.20 target maintained.

Target price is $5.20 Current Price is $5.94 Difference: minus $0.74 (current price is over target).
If TPM meets the Citi target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.74, suggesting downside of -3.4% (ex-dividends)

The company's fiscal year ends in July.

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 WES as Underweight (5) -

Morgan Stanley has visited UK home improvement stores, noting that retail standards are well below Australia in terms of product ranges, service and store lay-out and the Homebase performance has deteriorated significantly.

While the 15 Bunnings stores appeared to be trading substantially better than the 234 Homebase stores, and could become viable in time, the broker believes the slow turnaround will prove too costly for Wesfarmers and suggests the company could announce its exit at the June strategy briefing.

Underweight rating retained. Industry view is Cautious. Target is $40.

Target price is $40.00 Current Price is $41.20 Difference: minus $1.2 (current price is over target).
If WES meets the Morgan Stanley target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $41.85, suggesting upside of 1.6% (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 WES as Hold (3) -

Wesfarmers intends to de-merge its Coles business, looking to re-weight the allocation of capital to higher growth businesses. If approved, the de-merger is expected to be completed in FY19. Shareholders are expected to receive shares in Coles proportional to their existing Wesfarmers holdings. The company also proposes to keep a minority interests of up to 20% following the de-merger.

Ord Minnett notes Coles accounts for around 60% of the company's capital employed and 34% of divisional earnings as of December 30, 2017. The company has also announced that Steven Cain will succeed John Durkan as the next managing director of Coles.

Hold rating and $40 target maintained.

Target price is $40.00 Current Price is $41.20 Difference: minus $1.2 (current price is over target).
If WES meets the Ord Minnett target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $41.85, suggesting upside of 1.6% (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