Australian Broker Call

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

Credit Suisse chooses to look through a period of heightened policy risk and suggests the market structure is largely unchanged and, if anything, the position of AGL in the medium to longer term is entrenched.

A -20-25% underperformance versus the electricity futures highlights the rewards for bearing the risk, the broker adds.

Credit Suisse increases net profit estimates by 6.5% for FY20 and raises the target to $27.00 from $23.25. Rating is upgraded to Outperform from Neutral.

Target price is $27.00 Current Price is $22.85 Difference: $4.15
If AGL meets the Credit Suisse target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $27.10, suggesting upside of 14.9% (ex-dividends)

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

Deutsche Bank rates AGL as Buy (1) -

FY18 net profit guidance has been re-affirmed at $940m-$1.04bn.

Deutsche Bank continues to believe FY18 will mark the first year the company delivers earnings growth of over 25% from the more than 100% rise in the Victorian wholesale electricity forward curve. This reflects the lagged exposure to rising wholesale electricity prices.

The company has outlined potential options to mitigate the impact of the plant closure of the Liddell power station in 2022 and will present final plans to the government by the end of the year.

Buy rating. Target is $28.60.

Target price is $28.60 Current Price is $22.85 Difference: $5.75
If AGL meets the Deutsche Bank target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $27.10, suggesting upside of 14.9% (ex-dividends)

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

Macquarie rates AGL as Neutral (3) -

The company has reiterated FY18 guidance for underlying profit of $940m to $1.04bn.

AGL has also stated it would be challenging to sell Liddell to a third party and has subsequently outlined the proposed plan to replace output and meet the government's concern about a 1000MW shortfall post 2022. This is expected to be presented to the government by the end of the year.

Macquarie considers the reiteration of guidance a positive but suggests the upcoming report may have some negative risk. While the earnings profile is attractive, the broker suggests the line the company is taking directs it into the middle of a political storm.

Neutral retained. Target is $25.40.

Target price is $25.40 Current Price is $22.85 Difference: $2.55
If AGL meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $27.10, suggesting upside of 14.9% (ex-dividends)

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

Ord Minnett rates AGL as Accumulate (2) -

The AGM has signalled to Ord Minnett that extending Liddell beyond 2022 is unlikely to occur, with management highlighting the costs associated with reliably extending life and the issues associated with selling the asset.

AGL has flagged additional generation capacity to offset the closure. Accumulate retained. Target is $28.85.

This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.

Target price is $28.85 Current Price is $22.85 Difference: $6
If AGL meets the Ord Minnett target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $27.10, suggesting upside of 14.9% (ex-dividends)

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

Deutsche Bank rates ALL as Buy (1) -

Deutsche Bank expects three-year compound growth in earnings per share of 26%, a higher proportion of recurring revenue, and continued market share gains in the North American, Australian and digital markets.

The broker forecasts earnings per share to increase by 44% for FY17 (to be reported in November), well ahead of the company's guidance range of 20-30%. The broker retains a Buy rating and reduces the target to $27.50 from $28.50.

Target price is $27.50 Current Price is $20.23 Difference: $7.27
If ALL meets the Deutsche Bank target it will return approximately 36% (excluding dividends, fees and charges).

Current consensus price target is $24.56, suggesting upside of 19.7% (ex-dividends)

The company's fiscal year ends in September.

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

UBS rates CQR as Neutral (3) -

UBS reduces valuation by -8%. The broker has reviewed income on an asset by asset basis and finds there is no sign of a broad-based improvement outside of mining-exposed assets, Dick Smith vacancies and the recycling into higher quality assets.

The broker assumes $113m in asset sales in FY18. Areas of upside include selling freestanding supermarket assets on tight yields, while areas of downside include further retailer administrations.

Neutral retained. Target is reduced to $4.15 from $4.50.

Target price is $4.15 Current Price is $3.95 Difference: $0.2
If CQR meets the UBS target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $4.09, suggesting upside of 3.4% (ex-dividends)

The company's fiscal year ends in June.

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

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

Credit Suisse observes the stock has traded down to a -8% discount to stated net tangible assets amid soft FY18 guidance and perceptions of the stock overhang from the Cromwell ((CMW)) holding.

The broker considers the current book values are unsustainable yet acknowledges the strength of recent transactions in key office markets suggests there are plenty of direct real estate investors with far more bullish views.

The broker considers it reasonable that a portfolio with this scale and quality may come onto the radar of a purchaser that is more willing than the Cromwell consortium to adopt hostile tactics.

Rating is upgraded to Outperform from Neutral. Target is raised to $4.67 from $4.53.

Target price is $4.67 Current Price is $4.47 Difference: $0.2
If IOF meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $4.81, suggesting upside of 6.9% (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

Morgans rates MRG as Upgrade to Add from Hold (1) -

Following the completion of a $12.1m capital raising Morgans reduces forecasts for earnings per share in FY18, FY19 and FY20 by -31.7%, -38.3% and -33.5% respectively.

Assuming normal seasonal conditions the broker forecasts strong earnings growth from the maturity profile of the vines amid synergies from food business.

The company failed to deliver on prospectus forecasts which affected credibility and the broker recognises it will take time to rebuild investor confidence.

Yet value exists, given a -39% discount to net tangible assets and a low FY18 price/earnings ratio of 8.5x. Morgans upgrades to Add from Hold. Target is raised to $0.43 from $0.42.

Target price is $0.43 Current Price is $0.34 Difference: $0.095
If MRG meets the Morgans target it will return approximately 28% (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

Citi rates MYR as Buy (1) -

Premier Investments ((PMV)) has requested the Myer shareholder register, intending to write to shareholders ahead of the AGM in November.

This may signal the first steps to an acquisition but Citi considers it more likely to reflect frustration with the strategic investment to date and the need to drive change at Myer.

The broker also considers the request may be about petitioning investors to support changes to the management and board.

Citi retains a By/High Risk rating for Myer, based on the view that the takeover risk has been under-priced and that the department store chain will survive this challenging retail environment. Target is $0.95.

Target price is $0.95 Current Price is $0.78 Difference: $0.175
If MYR meets the Citi target it will return approximately 23% (excluding dividends, fees and charges).

Current consensus price target is $0.73, suggesting downside of -5.4% (ex-dividends)

The company's fiscal year ends in July.

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

Morgans rates OTW as Add (1) -

Morgans reviews the accounts, taking the opportunity to make a few minor technical adjustments to forecasts. The net result is cash net profit forecasts are upgraded by 17%. The changes do not influence valuation although the debtors have been lowered, which affects an increase to the target.

The company remains confident it will achieve its stated organic growth targets in FY18 and continue to deliver sustainable profit growth.

The broker retains an Add rating and raises the target to $2.43 from $2.39.

Target price is $2.43 Current Price is $2.01 Difference: $0.42
If OTW meets the Morgans target it will return approximately 21% (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

Ord Minnett rates SGP as Accumulate (2) -

Ord Minnett considers the stock at an interesting stage, having delivered consistently strong earnings growth that has been driven by a residential rebound.

The broker believes the stock is cheap, as it offers a sector-leading 7.0% free cash flow yield. Yet, the market appears to be penalising Stockland for a portfolio composition that comprises middle-tier retail and broad-acre residential segments. The main challenges are that the retail portfolio is underperforming and residential conditions appear to have peaked.

Ord Minnett continues to expect 5.2% growth in funds from operations in FY18 and FY19. Accumulate rating retained. Target is reduced to $5.00 from $5.10.

This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.

Target price is $5.00 Current Price is $4.27 Difference: $0.73
If SGP meets the Ord Minnett target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $4.71, suggesting upside of 10.9% (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