Australian Broker Call

Morgan Stanley rates AMC as Upgrade to Equal-weight from Underweight (3) -

The company has faced a number of cyclical pressures in the past 12-18 months but Morgan Stanley believes there are early signs this is easing. The broker believes the company is now better equipped to deal with cost inflation.

Despite a growth profile that is consistent with the industrials, ex-financials, the stock is trading at an -18% discount. Morgan Stanley upgrades to Equal-weight from Underweight. Target is raised to $14.80 from $14.40. Cautious industry view.

Target price is $14.80 Current Price is $14.18 Difference: $0.62
If AMC meets the Morgan Stanley target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $15.51, suggesting upside of 9.4% (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

Morgans rates APO as Hold (3) -

Digital outdoor advertising continues to grow at high double-digit rates while static billboard revenues are declining gradually, Morgans observes.

The broker upgrades profit forecasts and expects the company to resume earnings growth from FY19. As the stock trades close to the revised valuation the broker maintains a Hold rating. Target is raised $4.86 from $4.44.

Target price is $4.86 Current Price is $4.93 Difference: minus $0.07 (current price is over target).
If APO meets the Morgans target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.09, suggesting upside of 3.3% (ex-dividends)

The company's fiscal year ends in December.

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 BHP as Outperform (1) -

Macquarie considers the company's oil business enough of a differentiator to command a premium over some of its mining peers.

In examining whether a spin-off can unlock more value, the broker believes the case is unclear and heavily dependent on what multiple the company's oil business should trade - the E&P peer group or the integrated oils. Scenarios are skewed slightly towards positive.

The disposal of the shale business, meanwhile, is considered a positive catalyst that is likely to crystallise over the course of 2018. Macquarie reiterates a Buy rating and $35.70 target.

Target price is $35.70 Current Price is $28.55 Difference: $7.15
If BHP meets the Macquarie target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $32.80, suggesting upside of 14.9% (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: 0.6

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

Morgan Stanley rates BXB as Re-instate Coverage with Underweight (5) -

Morgan Stanley re-initiates coverage with an Underweight rating and $9 target. The broker believes the company faces significant cost escalation in its key markets. While strategies are there to shield profitability, the broker suggests that operating leverage is unlikely to eventuate until after FY20.

The broker forecasts 3-5% growth in earnings per share in FY18/19 against market growth estimates of 6-9%. The broker believes valuations are yet to fully adjust to the medium-term growth profile. Industry view is Cautious.

Target price is $9.00 Current Price is $9.86 Difference: minus $0.86 (current price is over target).
If BXB meets the Morgan Stanley target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $10.33, suggesting upside of 4.8% (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: 0.3

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

Morgans rates ELD as Hold (3) -

The company will acquire Titan Ag and Kerr & Co as well as divest its Indonesian feedlot and processing assets. The latter is in line with its intentions to reinvest the proceeds into higher returning businesses.

The company will pay $35m for Titan, an Australian based producer and supplier of crop protection. The acquisition price for Kerr & Co, a privately owned livestock business, was not disclosed.

Morgans observes the turnaround in the company over the last few years has been extraordinary and the acquisitions provide further support for forecasts. The broker maintains a Hold rating and raises the target to $7.50 from $6.00.

Target price is $7.50 Current Price is $8.03 Difference: minus $0.53 (current price is over target).
If ELD meets the Morgans target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in September.

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 FMG as Upgrade to Accumulate from Hold (2) -

Ord Minnett believes the share price is back in value territory now that the benchmark iron ore price, with which the stock is most correlated, has fallen around -20% over a month.

While there remain concerns about persistently high discounts for low-grade iron ore the absolute price of US$40/t still provides the company with an operating earnings margin of nearly 40%.

Ord Minnett upgrades to Accumulate from Hold. The target is lowered to $5.00 from $5.60 to reflect wider discounts for lower-grade ore.

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

Current consensus price target is $5.14, suggesting upside of 20.5% (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

Macquarie rates KLA as Initiation of coverage with Outperform (1) -

Macquarie initiates coverage of Kirkland Lake Gold's Australian listing with an Outperform rating and $25 target. The company is labeled a high-grade gold producer with a strong growth pipeline across its Canadian and Australian operations.

The broker believes the options in the portfolio could mean a 900,000 ozs per annum production rate by 2023, making this a significant addition to the ASX peer group.

Target price is $25.00 Current Price is $21.50 Difference: $3.5
If KLA meets the Macquarie target it will return approximately 16% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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

Macquarie rates MIN as Outperform (1) -

The company has launched an all-scrip bid for Atlas Iron ((AGO)) at a 59% premium, which values the stock on Macquarie's calculations at $290m

The two companies have entered into a binding scheme implementation deed which will mean Atlas Iron shareholders receive one Mineral Resources share for every 571 AGO shares held.

The broker believes this bid demonstrates Mineral Resources' commitment to its Pilbara infrastructure strategy. Atlas Iron's Utah Point capacity also presents near term operating options for lithium DSO and iron ore shipments. Macquarie maintains an Outperform rating and $23 target.

Target price is $23.00 Current Price is $16.25 Difference: $6.75
If MIN meets the Macquarie target it will return approximately 42% (excluding dividends, fees and charges).

Current consensus price target is $21.13, suggesting upside of 30.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.6

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

Morgan Stanley rates MIN as Overweight (1) -

Mineral Resources has a scheme agreement for an all-scrip takeover of Atlas Iron ((AGO)) that Morgan Stanley believes will have potential for strategic and operating benefits, including the Utah Point capacity.

Atlas Iron's iron ore assets are in proximity to the planned BOSS rail track, which implies these assets could benefit from the cost savings the company has previously flagged for its iron ore assets.

Target is $22.50. Overweight retained. Industry view: Attractive.

Target price is $22.50 Current Price is $16.25 Difference: $6.25
If MIN meets the Morgan Stanley target it will return approximately 38% (excluding dividends, fees and charges).

Current consensus price target is $21.13, suggesting upside of 30.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.6

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

Macquarie rates MQA as Outperform (1) -

The board has announced the internalisation of management. The name will change to Atlas Arteria. Macquarie will continue to manage it until May 2019. The performance fee will be terminated in July 2018.

While the broker considers internalisation is good, the path chosen highlights a need to resolve the APR ownership structure. Macquarie believes the obstacles for corporate activity are being removed/reduced and this should ensure the core value can be realised.

Outperform rating and $6.47 target maintained.

Target price is $6.47 Current Price is $6.09 Difference: $0.38
If MQA meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $6.61, suggesting upside of 8.5% (ex-dividends)

The company's fiscal year ends in December.

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

Morgan Stanley rates MQA as Overweight (1) -

The company has advised that an internalisation proposal will be put to security holders at its AGM on May 15 2018. Macquarie will remain as manager for another 12 months. The company will be renamed Atlas Arteria ((ALX)).

Morgan Stanley believes the proposed transition will be manageable and estimates savings in management fees of around $15m per annum.

Overweight. Target is $6.26. Industry view: Cautious.

Target price is $6.26 Current Price is $6.09 Difference: $0.17
If MQA meets the Morgan Stanley target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $6.61, suggesting upside of 8.5% (ex-dividends)

The company's fiscal year ends in December.

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

Morgans rates MQA as Add (1) -

Terms have been agreed for the internalisation of management, by May 2019. Costs are less than Morgans expected, with no obvious requirement for a capital raising.

This process now clarified, the broker suggests fundamental factors should drive the share price higher. However, Morgans is also cautious regarding the capital requirements for the final exit of MEIF2 from the APRR and the potential MAF2 internalisation.

The broker maintains an Add rating and raises the target to $6.81 from $6.72.

Target price is $6.81 Current Price is $6.09 Difference: $0.72
If MQA meets the Morgans target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $6.61, suggesting upside of 8.5% (ex-dividends)

The company's fiscal year ends in December.

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

UBS rates MQA as Buy (1) -

UBS suggests the agreed terms for internalising management, effective May 2019, are a positive first step. The agreement will result in a net $8m per annum cost saving.

The main benefit will come from improved investor sentiment towards Macquarie Atlas, given the removal of conflict and governance concerns and linking future performance fees to cash flow rather than the share price, the broker notes.

The broker maintains a Buy rating and raises the target to $7.10 from $6.65.

Target price is $7.10 Current Price is $6.09 Difference: $1.01
If MQA meets the UBS target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $6.61, suggesting upside of 8.5% (ex-dividends)

The company's fiscal year ends in December.

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 NWS as Neutral (Re-initiation of coverage) (3) -

The FNArena archive shows Citi was carrying a Buy recommendation for News Corp in mid-August last year. After that, the broker had gone missing only to return today with a Neutral rating alongside a target price of $21.85. The latter compares with $20.60 in August last year.

Interestingly, Citi has high expectations for Realtor.com in the US, which is an important pillar under its projection of 25% EPS CAGR for the next three years. But the analysts also note News Corp's valuation is well above the long term average.

On this basis they prefer to seek direct exposure to digital real estate, through REA Group ((REA)). 

Target price is $21.85 Current Price is $20.54 Difference: $1.31
If NWS meets the Citi target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $21.38, suggesting upside of 4.1% (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

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

The company has improved disclosure, revealing monthly net flows in addition to overall funds under management. Outflows of -$150m occurred in March, as a large mandate fell by -$234m, while other channels delivered $84m in positive flows.

Morgan Stanley suspects this is the first month with outflows since June 2017, while the full impact of the former CEO's transition to a full-time director role is not yet clear. Performance in the key international fund continues to be strong on a one-year view, the broker notes.

Target is $7.00. Equal-weight maintained. Industry view is In-Line.

Target price is $7.00 Current Price is $5.74 Difference: $1.26
If PTM meets the Morgan Stanley target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $6.31, suggesting upside of 10.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.8

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

Ord Minnett rates SIQ as Upgrade to Buy from Accumulate (1) -

Ord Minnett likes the outlook for the stock, with a combination of organic and acquired growth. The broker is attracted to the business model as it takes no residual vehicle risk, which results in strong cash conversion.

On the back of a pullback in the share price the broker upgrades to Buy from Accumulate and raises the target to $11.55 from $11.40. Acquisitions from 2017 are poised to deliver an additional $15m in EBITDA in 2018, based on the broker's estimates.

Target price is $11.55 Current Price is $10.83 Difference: $0.72
If SIQ meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $11.75, suggesting upside of 8.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.8

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

Macquarie rates TWE as Neutral (3) -

Macquarie believes the company will continue to align its business towards the structurally opportunistic US region. The broker assesses the merits of acquiring Ste Michelle, calculating this would be 9% accretive to earnings.

While stock is not priced for disappointment the increasing likelihood of another accretive acquisition provides support, in the broker's opinion. No acquisitions are yet incorporated into forecasts and Macquarie maintains a Neutral rating and $15.83 target.

Target price is $15.83 Current Price is $17.76 Difference: minus $1.93 (current price is over target).
If TWE meets the Macquarie target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $16.58, suggesting downside of -6.6% (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

Credit Suisse rates WES as Outperform (1) -

Credit Suisse analysis suggests Wesfarmers would emerge from a de-merger of Coles well funded and with adequate growth, albeit narrowly focused on Bunnings.

Near term, the company's growth outlook is expected to be dominated by Bunnings Australasia. The broker believes an exit from Bunnings UK and Ireland is likely. Outperform rating and $44.98 target maintained.

Target price is $44.98 Current Price is $41.96 Difference: $3.02
If WES meets the Credit Suisse target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $43.06, suggesting upside of 2.6% (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

Citi rates WTC as Upgrade to Neutral from Sell (3) -

Citi had earlier downgraded to Sell as the share price had rallied well ahead of intrinsic valuation. Now that the share price has fallen back to earth, the analysts have upgraded to Neutral. Target price $9.51 (up from $9.02).

The analysts remain of the view the company's medium term outlook remains positive due to robust industry as well as company specific drivers. Equally interesting, WiseTech will organise its first ever Investor Day on 4th May.

Target price is $9.51 Current Price is $10.06 Difference: minus $0.55 (current price is over target).
If WTC meets the Citi target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $10.75, suggesting upside of 6.9% (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