Australian Broker Call

UBS rates ALU as Upgrade to Neutral from Sell (3) -

The company's share price has declined 12% since the beginning of September. At the AGM management reiterated guidance for US$100m in revenue in FY17 rising to US$200m in FY20. UBS believes these targets are achievable.

The broker believes current valuation levels appropriately reflect the fundamentals and upgrades its rating to Neutral from Sell. Target of $9.05 is unchanged.

Target price is $9.05 Current Price is $8.56 Difference: $0.49
If ALU meets the UBS target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $8.95, suggesting upside of 3.7% (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

Ord Minnett rates APE as Hold (3) -

The trading update signalled 2016 underlying profit before tax should be $135-140m, up on the $121m reported a year ago but below Ord Minnett estimates.

The broker observes the stock has de-rated significantly over the past three months amid concerns over the regulatory review into commissions paid to dealerships.

The broker considers it too early to predict the outcomes from the review and how the industry structure will adjust to any changes. Ord Minnett retains a Hold rating and reduces the target to $10.00 from $11.38.

Target price is $10.00 Current Price is $9.37 Difference: $0.63
If APE meets the Ord Minnett target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $10.90, suggesting upside of 16.0% (ex-dividends)

The company's fiscal year ends in December.

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

Morgan Stanley rates BLD as Underweight (5) -

The acquisition of Headwaters is a significant shift for the company. Morgan Stanley envisages potential for synergistic upside but the large multiple and risks require the retention of an Underweight rating.

The broker is concerned about the fly ash outlook and the sustainability of building product margins.

The broker continues to expect earnings risks in the Australian business in FY17. In-line industry view. The broker lowers the target to $5.58 from $6.07.

Target price is $5.58 Current Price is $6.15 Difference: minus $0.57 (current price is over target).
If BLD 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 $6.18, suggesting upside of 21.7% (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

Credit Suisse rates CTX as Outperform (1) -

Credit Suisse believes Caltex is a business where solid growth can be achieved without large-scale mergers and/or acquisitions. On this basis the stock is considered highly under leveraged.

The broker is amazed at how punitive Standard & Poor's is towards Caltex, relative to the oil price-exposed Australian corporates. The broker considers the stock cheap and an Outperform rating and $40 target are maintained.

Target price is $40.00 Current Price is $30.42 Difference: $9.58
If CTX meets the Credit Suisse target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $35.17, suggesting upside of 13.8% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.5

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

Citi rates DOW as Neutral (3) -

Citi analysts have kept their Neutral rating, but upped the price target to $5.55 from $4.30, which still leaves the share price higher. The company has closed the Victoria's $2bn HCMT rail project contract with major impact in FY18 and FY19.

Estimates have been lifted. Downer is also in the running for the Sydney growth trains contract and the analysts note an announcement is expected over the next few weeks.Their view is Downer is well placed to win the tender.

Target price is $5.55 Current Price is $5.62 Difference: minus $0.07 (current price is over target).
If DOW meets the Citi 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 downside of -11.7% (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

Morgan Stanley rates ILU as Overweight (1) -

Morgan Stanley expects weakness in zircon sales to persist while the buoyancy in the titanium dioxide market has opened an opportunity for value investors.

There are also aspects to the Sierra Rutile deal that the broker identifies as positive. Sierra Rutile would allow Iluka to gain a dominant share in the very high-grade pigment market, which could mean improved prices if plant utilisation rates continue to improve.

Overweight rating and Attractive industry view retained. Target is reduced to $7.25 from $7.80.

Target price is $7.25 Current Price is $6.51 Difference: $0.74
If ILU meets the Morgan Stanley target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $6.53, suggesting upside of 1.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.1

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

Macquarie rates MQA as Outperform (1) -

Macquarie notes a similar business  to APRR, HIT, a toll road network north of Paris, is being divested of a 15% interest. The broker considers this a potential valuation proxy.

The broker does not believe private pricing for infrastructure assets has moved materially with the bond rally and pricing of Greenway through the auction process, and the implied pricing of APRR via this HIT divestment, providing an independent proxy to value.

At this stage, Macquarie calculates investors are getting Greenway for free.The broker retains a Outperform rating and $5.90 target.

Target price is $5.90 Current Price is $4.51 Difference: $1.39
If MQA meets the Macquarie target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $5.62, suggesting upside of 22.8% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.7

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

Citi rates MTS as Neutral (3) -

Metcash is scheduled to release interim financials on 28 November 2016. Citi analysts are anticipating core EPS of 8.6c, down 8% on the pcp. The three key business units are expected to report -0.6% EBIT growth.

All in all, it is Citi's view the stabilisation of the major supermarket chains is resulting in an intensifying competitive environment in Food and Grocery. The analysts suggest this is weighing on earnings. Neutral.

Target price is $2.30 Current Price is $1.94 Difference: $0.365
If MTS meets the Citi target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $2.17, suggesting upside of 10.5% (ex-dividends)

The company's fiscal year ends in April.

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

UBS rates NXT as Buy (1) -

UBS considers concerns around new supply coming into Australia are overdone, noting the company's share price is down by 27% since the end of September.

UBS calculates current operational data centres suggest an underlying FY17 enterprise value/EBITDA of 14.3, with underlying three-year compound EBITDA growth of 25%.

On the broker's analysis these multiples represent a discount of 12% to international peers, despite offering double digit forecast EBITDA growth over the next three years. A Buy rating is retained. Target is $4.75.

Target price is $4.75 Current Price is $3.14 Difference: $1.61
If NXT meets the UBS target it will return approximately 51% (excluding dividends, fees and charges).

Current consensus price target is $4.71, suggesting upside of 45.7% (ex-dividends)

The company's fiscal year ends in June.

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

Ord Minnett rates PPH as Buy (1) -

In the context of the company's stellar growth, Ord Minnett considers the first half result highlights the business is on track and executing strongly.

Revenue of $12m and an EBITDA loss of $10.1m were slightly below the broker's expectations.

The company will acquire the church application business of Bluebridge Financial for up to US$3.1m. The broker considers this a good transaction which provides a payments platform and an engagement application which will deliver several benefits at an attractive price.

Ord Minnett retains a Buy rating and raises the target to $2.74 from $2.60.

Target price is $2.74 Current Price is $1.70 Difference: $1.04
If PPH meets the Ord Minnett target it will return approximately 61% (excluding dividends, fees and charges).

The company's fiscal year ends in March.

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

Deutsche Bank rates PRG as Buy (1) -

First half results go some way to easing Deutsche Bank's concerns following the downgrade in September, highlighting a stabilising of the key workforce business. The broker is comforted by the strong outlook for free cash flow.

The broker believes there is strong value on offer at current multiples and maintains a Buy rating. The company has reiterated FY17 EBITDA guidance of $100m and has noted a reasonable pipeline of opportunities exist. Target is $2.10.

Target price is $2.10 Current Price is $1.74 Difference: $0.36
If PRG meets the Deutsche Bank target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $1.98, suggesting upside of 11.3% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.9

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

Macquarie rates PRG as Outperform (1) -

First half results were in line with Macquarie's expectations. Prior FY17 guidance for EBITDA of $100m was reiterated.

While weakness in the labour hire business is disappointing, the broker considers the valuation undemanding and debt is reducing as expected. Outperform retained. Target slips to $2.00 from $2.01.

Target price is $2.00 Current Price is $1.74 Difference: $0.26
If PRG meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $1.98, suggesting upside of 11.3% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.9

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

Ord Minnett rates PRG as Accumulate (2) -

First half results were slightly below Ord Minnett's forecasts. Management has retained FY17  operating earnings guidance at around $100m, which suggests a meaningful uplift will be required in the second half.

The broker observes the stock price remains depressed and gearing is the biggest hurdle to a re-rating. Accumulate rating and $1.80 target retained.

Target price is $1.80 Current Price is $1.74 Difference: $0.06
If PRG meets the Ord Minnett target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $1.98, suggesting upside of 11.3% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.9

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

UBS rates PRG as Buy (1) -

First half earnings and underlying profit were in line with expectations. A 3.5c fully franked dividend was declared.

With the integration of Skilled largely completed, and marine earnings ring-fenced, UBS observes significant opportunities for the staffing and maintenance divisions. The broker believes earnings have troughed and this should translate into improving returns going forward.

UBS maintains a Buy rating. Target is reduced to $2.00 from $2.25.

Target price is $2.00 Current Price is $1.74 Difference: $0.26
If PRG meets the UBS target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $1.98, suggesting upside of 11.3% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.9

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

Morgans rates RHP as Downgrade to Hold from Add (3) -

The company's AGM update has shown good revenue trajectory in the first quarter. Underlying guidance has been reiterated but a number of one-offs now mean reported EBITDA guidance has been downgraded to $4m from $5m.

Morgans downgrades its forecasts in line guidance and believes management will need to achieve this revised guidance for investor confidence to be restored. The broker downgrades to Hold from Add. Target is reduced to $0.86 from $1.11.

Target price is $0.86 Current Price is $0.86 Difference: $0
If RHP meets the Morgans target it will return approximately 0% (excluding dividends, fees and charges).

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 SGP as Upgrade to Buy from Neutral (1) -

UBS believes Stockland can grow its residential earnings despite market volumes declining in FY17/18.

This is considered likely, given the company's increasing market share, which is driven by more capital being employed and more active projects, as well as diversity and product mix.

The broker upgrades to Buy from Neutral, given the material movements in the market and a 18% decline from its peak. Target is reduced to $4.64 from $4.84.

Target price is $4.64 Current Price is $4.24 Difference: $0.4
If SGP meets the UBS target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $4.75, suggesting upside of 11.2% (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

Macquarie rates TCL as Outperform (1) -

The Queensland government has approved the Logan enhancement project. Total project cost is $512m ($320m TCL share) and financial close is expected in December.

As a whole, Macquarie observes the transaction is not significant but the main element for Transurban is that it has negotiated another road, which will mean its truck multiplier is increased beyond three times.

Within the context of a toll road, this creates a low-risk source of value that can fund the development which improves the feeder network or toll road, the broker notes.

For a low risk asset, Macquarie believes Transurban is undervalued. Outperform reiterated.Target is $12.40.

Target price is $12.40 Current Price is $10.33 Difference: $2.07
If TCL meets the Macquarie target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $11.92, suggesting upside of 13.9% (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

UBS rates WEB as Buy (1) -

The company has confirmed FY17  EBITDA guidance  of $60m. Bookings growth continues to outperform the market. UBS notes longer term targets are still in place in business-to-consumer and business-to-business.

Buy and $10.72 target retained.

Target price is $10.72 Current Price is $10.48 Difference: $0.24
If WEB meets the UBS target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $10.57, suggesting downside of -0.3% (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