Australian Broker Call

Citi rates BBN as Downgrade to Sell from Neutral (5) -

One would be inclined to think the pending closure and retreat from Australian soil by competitor Babies R Us (see also Toys R Us) would be a positive development longer term, but Citi analysts point out in the short term this could translate into competitive product being dumped upon Australian consumers at give-away prices.

On that basis, Citi has now decided to downgrade to Sell from Neutral. Target drops to $1.20 from $1.50. On Citi's analysis, there is significant overlap between Baby Bunting stores and stores operated by the failing competitor. Forecasts have been lowered.

Target price is $1.20 Current Price is $1.36 Difference: minus $0.16 (current price is over target).
If BBN 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 $1.65, suggesting upside of 21.0% (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

Credit Suisse rates BSL as Outperform (1) -

US steel tariff exemptions have now been broadened to include the European Union, Argentina, Brazil and South Korea along with the initial exemptions for Australia, Canada and Mexico. Credit Suisse notes a reduced steel trade barrier will allow greater flows of steel to the US.

This will reduce the current extreme US steel price premium relative to the same steel being priced in Asia. The broker suggests US steel import orders may quickly accelerate to exploit the current arbitrage. This could mean the US steel price and scrap spread decline quickly.

In this environment, which is rapidly evolving, the broker finds it hard to project second half earnings for BlueScope and does not envisage revised guidance will be likely until mid-May.

Outperform. Target is $16.90.

Target price is $16.90 Current Price is $14.55 Difference: $2.35
If BSL meets the Credit Suisse target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $18.04, suggesting upside of 24.0% (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

Morgan Stanley rates CGF as Underweight (5) -

The company has tapped the booming Australian dollar carry trade in Japan but Morgan Stanley suggests flows from Japan could be pressured should the AUD/USD yield trends continue. For the first time in 18 years the US 10-year yield is at a premium to the Australian.

The broker recognises there are a number of potential offsets, including new AUD annuity products, options to increase the quota share and the potential for the company to reinsure other MS&AD products such as its US dollar annuities.

Underweight rating. Target is $11.00. Industry view: In-line.

Target price is $11.00 Current Price is $11.61 Difference: minus $0.61 (current price is over target).
If CGF meets the Morgan Stanley target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $12.30, suggesting upside of 5.9% (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

Citi rates GXY as Buy (1) -

Galaxy Resources' FY financials are being labeled in-line by Citi analysts, though if we are really picky they mostly slightly missed what the analysts had penciled in. But hey, a little bit of slack is probably warranted for a junior producer of one of the world's most coveted materials.

No changes to either Buy rating or $4.60 price target. The company is currently working on a feasibility study on James Bay in Canada as well as looking for a funding partner to develop its Sal de Vida brine project in Argentina, the analysts remind investors.

Citi sees a long lead time for both projects (beyond 2020) and suggests the share price will bounce and retreat as news on both projects becomes public, alongside prospects for the price of lithium.

Target price is $4.60 Current Price is $3.14 Difference: $1.46
If GXY meets the Citi target it will return approximately 46% (excluding dividends, fees and charges).

Current consensus price target is $3.65, suggesting upside of 16.2% (ex-dividends)

The company's fiscal year ends in December.

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 GXY as Equal-weight (3) -

The update on Mount Cattlin resources and reserves is -5-9% lower than Morgan Stanley's estimates, on a lithium dioxide basis. An update is awaited on the latest infill drilling for further resource development.

Equal-weight. Target is $3.05. Industry View: Attractive.

Target price is $3.05 Current Price is $3.14 Difference: minus $0.09 (current price is over target).
If GXY 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 $3.65, suggesting upside of 16.2% (ex-dividends)

The company's fiscal year ends in December.

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

Morgans rates HIG as Add (1) -

2017 net profit was US$37.4m after reversing an impairment of -US$42.9m on the Ramu nickel cobalt project. The carrying value of the project has been lifted to US$110m, reflecting the operating performance, cash generation and strength in nickel and cobalt prices.

Given the current dispute over development of the Frieda River copper-gold project Morgans significantly downgrades valuation of the company's 20% equity.

While Ramu is operating, considerable risk is attached to development decisions for the company's other assets. Add rating maintained. Target is reduced to $0.21 from $0.22.

Target price is $0.21 Current Price is $0.09 Difference: $0.12
If HIG meets the Morgans target it will return approximately 133% (excluding dividends, fees and charges).

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: 1.0

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

Credit Suisse rates IAG as Neutral (3) -

The company has priced $350m in subordinated debt and, for a company where large capital returns are considered likely, Credit Suisse finds this hard to fathom.

Perhaps, the broker suggests, as Insurance Australia Group is at the bottom of its 30-40% debt target ratio and there is $900m in debt maturing in FY19, it may be getting ahead of the curve.

Still, the benefits of capital management are now considered less attractive. Neutral. Target is $7.50.

Target price is $7.50 Current Price is $7.57 Difference: minus $0.07 (current price is over target).
If IAG meets the Credit Suisse target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.42, suggesting downside of -2.0% (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

Credit Suisse rates JHG as Neutral (3) -

The latest industry data suggests to Credit Suisse that the company experienced a weak start to FY18 and there is downside risk to forecasts if flows do not improve shortly.

Following a de-rating in recent months the stock appears cheap but, considering the weak flows, the broker considers the valuation fair. Neutral rating and $47 target maintained.

Target price is $47.00 Current Price is $42.10 Difference: $4.9
If JHG meets the Credit Suisse target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $54.24, suggesting upside of 28.8% (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: 0.5

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

Ord Minnett rates QBE as Accumulate (2) -

Ord Minnett makes minor changes to 2018 earnings forecasts to better reflect the likely treatment of the sale of the Latin American business, as an asset available for sale rather than a going concern.

The broker expects some improvement in underlying margins because of a turn in the cycle and a belief there is some conservatism in the reserves of recent years.

Accumulate rating. Target is cut to $10.70 from $10.85.

Target price is $10.70 Current Price is $9.70 Difference: $1
If QBE meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $10.89, suggesting upside of 12.3% (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

UBS rates SGM as Sell (5) -

Reports that China may respond to the proposed US tariffs on aluminium, by imposing a 25% tariff on recycled aluminium, is not expected to dislodge scrap imports. However, UBS suggests, while China has not indicated tariffs on US copper scrap, this could be a more significant risk.

In FY17, 20% of the company's revenues were from the sale of non-ferrous scrap metals into China, comprising aluminium, copper and other base metals. The company does not report what proportion of these sales is aluminium, or how much originates from the US.

Sims is the largest listed exporter of scrap materials from the US. Should tariffs on US aluminium scrap be put in place these flows may reduce substantially and UBS would expect the company to divert sales to elsewhere in Asia.

Sell rating and $13.70 target.

Target price is $13.70 Current Price is $14.55 Difference: minus $0.85 (current price is over target).
If SGM 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 $16.24, suggesting upside of 11.6% (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

Citi rates SGP as Neutral (3) -

Recent management changes have ignited speculation Stockland might be looking into selling some assets and Citi analysts are already looking forward to the May 10 Investor Day. No changes at this stage.

Target price is $4.38 Current Price is $3.97 Difference: $0.41
If SGP meets the Citi target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $4.59, suggesting upside of 15.7% (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

Citi rates SGR as Buy (1) -

Star Entertainment Group had reported largely in-line in mid-February but Citi analysts have now made several updates and amendments to their modeling, none of which have made a large impact.

$6.75 price target and Buy recommendation have been left untouched.

Target price is $6.75 Current Price is $5.31 Difference: $1.44
If SGR meets the Citi target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $6.22, suggesting upside of 17.1% (ex-dividends)

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.9

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

Deutsche Bank rates TCL as Buy (1) -

The latest announced toll road acquisition takes Transurban into Canada, for the first time ever. Deutsche Bank points out Montreal is facing significant and growing congestion.

While the immediate accretion from this ownership deal is small, longer term opportunities from Canada's most congested city, with its population familiar with PPPs, should be obvious, and looks like the underlying message the analysts are pointing towards.

No changes made to either $13.25 price target or Buy rating.

Target price is $13.25 Current Price is $11.10 Difference: $2.15
If TCL meets the Deutsche Bank target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $13.06, suggesting upside of 17.6% (ex-dividends)

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 TCL as Outperform (1) -

The company will acquire the A25 toll road and bridge in Montreal at an acquisition multiple of around 26x for a 24-year concession.

Macquarie notes this is an incremental acquisition with an attractive tolling profile and rapid earnings growth is expected in coming years. More importantly, the acquisition is in a new city and creates a new growth front.

Outperform rating and $12.44 target.

Target price is $12.44 Current Price is $11.10 Difference: $1.34
If TCL meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $13.06, suggesting upside of 17.6% (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

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

The company will acquire the A25 toll road and bridge in Montreal on an enterprise value/EBITDA multiple of 26x. Morgan Stanley considers the transaction strategically consistent and a positive for Transurban.

The broker does not consider the multiple cheap but certainly within reasonable bounds, in view of the traffic maturity.

Equal-weight rating and Cautious industry view retained. Target is $13.

Target price is $13.00 Current Price is $11.10 Difference: $1.9
If TCL meets the Morgan Stanley target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $13.06, suggesting upside of 17.6% (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

Morgans rates TCL as Add (1) -

Morgans considers the acquisition of the A25 toll road and bridge in Montreal mildly accretive. The company believes Montreal is attractive as it is a heavily urbanised and congested region and there are opportunities for customer upgrades and network enhancement.

Morgans considers the price full, given there is only 24 years remaining for the concession and revenues are being shared with the government.

Add rating maintained. Target reduced to $12.50 from $12.54.

Target price is $12.50 Current Price is $11.10 Difference: $1.4
If TCL meets the Morgans target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $13.06, suggesting upside of 17.6% (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 TCL as Buy (1) -

The company will acquire the A25 toll road concession in Montreal. The acquisition highlights Transurban's breadth of growth opportunities, Ord Minnett suggests. The purchase price will be funded from existing balance-sheet capacity.

The concession has a remaining life of 24 years and includes a 7.2km toll road and bridge. The broker suggests margin expansion will be critical and operating improvements and upgrades to the network should expand the earnings margin to a forecast 75% by FY30 from the current 68%.

Buy rating. Target is raised to $14.50 from $14.35.

Target price is $14.50 Current Price is $11.10 Difference: $3.4
If TCL meets the Ord Minnett target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $13.06, suggesting upside of 17.6% (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

UBS rates TCL as Buy (1) -

The company will acquire the A25 toll road and bridge in Montreal. UBS considers the acquisition immaterial in terms of the company's equity value but significant in that it represents an investment outside of its existing Metropolitan networks.

The broker observes the company has been successful in a contested process without any obvious cost of funding advantage or asset adjacency. This suggests a more constructive view of the eventual revenue upside.

Buy rating maintained. Target is $13.35.

Target price is $13.35 Current Price is $11.10 Difference: $2.25
If TCL meets the UBS target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $13.06, suggesting upside of 17.6% (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

Morgan Stanley rates TWE as Overweight (1) -

The Chinese government is proposing tariffs across a number of products including a 15% tariff on wine from the US. Morgan Stanley believes the potential impact on Treasury Wine is small but it could slow future growth of US wine to China.

The company's price points are high and demand is relatively inelastic so the broker suggests the impact should be negligible. The company has indicated that it sells 20% of US wine sales to China by value.

The broker retains an Overweight rating and $18 target. Industry view: Cautious.

Target price is $18.00 Current Price is $17.16 Difference: $0.84
If TWE meets the Morgan Stanley target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $16.51, 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

Ord Minnett rates WEB as Buy (1) -

The company has become aware of an error in its first half depreciation & amortisation costs, where items were included inadvertently. As a result Ord Minnett reduces estimates for D&A to $23.5m from $28.0m for FY18, and to $27.9m from $33.1m in FY19.

The net effect is that earnings estimates have been upgraded by 10% for FY18 and 8% for FY19. A Buy rating is maintained. Target rises to $14.00 from $13.96.

Target price is $14.00 Current Price is $11.25 Difference: $2.75
If WEB meets the Ord Minnett target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $13.11, suggesting upside of 16.5% (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 WHC as Equal-weight (3) -

The company will acquire Rio Tinto's ((RIO)) 75% interest in the Winchester South coking coal project for US$200m.

Given the project is undeveloped and without a feasibility study, Morgan Stanley notes the capital required for construction is unknown. The broker expects infrastructure-related expenditure will be nominal because of the proximity to both the Goonyella rail system and the electricity grid.

Equal-weight and $5.05 target retained. Industry view: Attractive.

Target price is $5.05 Current Price is $4.29 Difference: $0.76
If WHC meets the Morgan Stanley target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $4.51, suggesting upside of 5.0% (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