Australian Broker Call

Citi rates AAD as Sell (5) -

Main Event continues to underpin sales and margin expectations but Citi suspects the rolling out of centres will be slower. FY17 guidance also implies bowling is underperforming.

The broker believes execution needs to be addressed at Main Event, as strategic initiatives announced at the first half results have not led to a material improvement in financial performance.

The broker needs to witness a more sustained improvement in execution before becoming more positive. Sell rating retained. Target falls to $1.25 from $1.40.

Target price is $1.25 Current Price is $1.99 Difference: minus $0.74 (current price is over target).
If AAD meets the Citi target it will return approximately minus 37% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.83, suggesting downside of -6.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.1

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

Deutsche Bank rates AAD as Hold (3) -

The company has guided to FY17 core EBITDA of $73-75m, ahead of Deutsche Bank's estimates at the mid point. The company has noted that Main Event fourth quarter revenue was up 20%, although constant centre sales growth was negative. This was a surprise to Deutsche Bank given the positive momentum flagged in March.

The company has identified several centre-specific issues as being contributors to weakness but the broker's broader concern is the adaptability of the concept to new markets and resilience of the brand against increasing competition.

The broker revises forecasts down by -6% for FY18 to account for lower Main Event margins and a slower return for traffic at Dreamworld. Target is reduced to $1.85 from $1.95.  Hold retained.

Target price is $1.85 Current Price is $1.99 Difference: minus $0.14 (current price is over target).
If AAD meets the Deutsche Bank target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.83, suggesting downside of -6.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.1

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

Ord Minnett rates AAD as Hold (3) -

Guidance for FY17 fell short of Ord Minnett's expectations. Main Event like-for-like sales remain negative and margins are deteriorating and commentary suggests to the broker rolling out of centres has become more cautious.

The broker cannot find valuation support, even with the share price declines over the past three years. Nevertheless, in the near term, there are some aspects of the outlook that should start to deliver for Main Event, while private equity interest probably limits the downside for the share price.

Hold rating retained. Target is reduced to $1.65 from $1.70.

Target price is $1.65 Current Price is $1.99 Difference: minus $0.34 (current price is over target).
If AAD meets the Ord Minnett target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.83, suggesting downside of -6.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.1

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

UBS rates CLW as Neutral (3) -

Since it listed, the stock is up 10.5% and outperforming the A-REIT sector by 3%. UBS observes the stock is currently trading on a 6.2% distribution yield and 4% growth rate until FY20, with no material leasing risk until 2024.

The broker estimates the stock has $30m available in liquidity and, assuming 30% leverage for future acquisitions, it needs to acquire assets yielding over 6.3% in order to maintain its current earnings profile.

Neutral rating retained. Target rises to $4.28 from $4.16.

Target price is $4.28 Current Price is $4.29 Difference: minus $0.01 (current price is over target).
If CLW meets the UBS target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.20, suggesting downside of -1.8% (ex-dividends)

The company's fiscal year ends in June.

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

Citi rates CSL as Buy (1) -

Haegarda is expected to deliver half of FY18 growth in earnings per share. Sales estimates are unchanged at US$350m for FY18. Citi expects the immediate launch and rapid adoption of the product.

Buy retained. Target is $148.

Target price is $148.00 Current Price is $143.33 Difference: $4.67
If CSL meets the Citi target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $138.70, suggesting downside of -3.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

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

Citi rates CSR as Sell (5) -

The company's AGM re-stated the FY18 outlook commentary made at the FY17 result.

Based on Citi's modelling of housing completions for FY18, the demand environment appears at least as robust as FY17, so a combination of efficiencies and price should provide greater growth in EBIT.

Sell rating retained, as the broker continues to envisage FY18 as the peak of the earning cycle which aligns with the valuation multiple compression that has been reflected in recent share price movements. Target is $4.10.

Target price is $4.10 Current Price is $4.30 Difference: minus $0.2 (current price is over target).
If CSR 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 $4.28, suggesting downside of -0.2% (ex-dividends)

The company's fiscal year ends in March.

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

Deutsche Bank rates CSR as Hold (3) -

The company has provided additional guidance at its AGM, expecting EBIT growth for FY18 that is in line with Deutsche Bank's expectations.

Deutsche Bank updates forecasts for aluminium, estimating a price of US$1872/t in FY18, and FX, in line with its quarterly review. As a result FY18 underlying net profit forecasts increase 1%.

The broker retains a Hold rating on valuation. Target is raised to $4.47 from $4.39.

Target price is $4.47 Current Price is $4.30 Difference: $0.17
If CSR meets the Deutsche Bank target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $4.28, suggesting downside of -0.2% (ex-dividends)

The company's fiscal year ends in March.

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

Macquarie rates DRM as Neutral (3) -

The company has updated on its FY18 guidance for the Deflector mine, which is now scheduled to produce 60-65,000 ounces over the next financial year.

The ramp up of Deflector has been a drawn-out process, Macquarie observes, with higher-than-expected levels of native copper affecting gold recovery. While there should be stronger production in FY18, costs will also be significantly higher.

Neutral rating retained. Target is reduced to $0.30 from $0.34.

Target price is $0.30 Current Price is $0.32 Difference: minus $0.015 (current price is over target).
If DRM meets the Macquarie target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

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

UBS rates LLC as Buy (1) -

UBS has increased its valuation for the Australian engineering business and retirement living.

The broker retains a Buy rating to reflect the increased win rate for the Australian engineering division, leading to earnings upgrades, and the diversification of the development business both geographically and by product.

The broker also recognises the value of the written investment in retirement living. Target rises to $17.70 from $16.70.

Target price is $17.70 Current Price is $16.26 Difference: $1.44
If LLC meets the UBS target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $16.98, suggesting upside of 3.6% (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

Credit Suisse rates RHC as Neutral (3) -

Despite the small improvements in May, Credit Suisse observes growth rates for all diagnostic/surgical/procedural services are below longer term averages.

The lack of any significant recovery remains a concern to the broker and suggests a more structural change is occurring, supported by a number of factors.

The broker also believes adverse case-mix is continuing to dilute revenue growth for hospital operators. Neutral rating and $73 target retained.

Target price is $73.00 Current Price is $72.98 Difference: $0.02
If RHC meets the Credit Suisse target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $75.42, suggesting upside of 2.4% (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 RIO as Accumulate (2) -

Ord Minnett has updated its long-term assumptions for copper, aluminium and the Australian dollar. The revisions equate to cuts of around -15% for the metals and -5% for the currency.

Accumulate rating retained. Target is raised to $72 from $71.

Target price is $72.00 Current Price is $58.83 Difference: $13.17
If RIO meets the Ord Minnett target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $71.63, suggesting upside of 20.7% (ex-dividends)

Forecast for FY17:

Forecast for FY18:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.9

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

Credit Suisse rates SGM as Underperform (5) -

Following along the lines of Schnitzer, the company's other competitor, CMC, has also reported a disappointing scrap result. This could significantly undermine the Sims Metal story, Credit Suisse suggests, if it is to deliver the same outcome.

Underperform and $11 target retained.

Target price is $11.00 Current Price is $13.70 Difference: minus $2.7 (current price is over target).
If SGM meets the Credit Suisse target it will return approximately minus 20% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $13.39, suggesting downside of -1.6% (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

Morgans rates STO as Hold (3) -

Morgans suspects the federal government's threat to impose export restrictions on LNG producers that are net gas consumers has increased the pressure on Santos.

The broker envisages the company can either step up development of its CSG fields or buy LNG on the spot market to meet obligations to LNG customers. In either scenario there is risk of an increase in costs, unfortunately unfolding at a time of week oil prices.

The size of the company's cash-flow sensitivity to oil affects its investment appeal, in the broker's opinion. A potential positive catalyst could be the sale of non-core assets. Target is reduced to $3.17 from $4.19. Hold retained.

Target price is $3.17 Current Price is $2.92 Difference: $0.25
If STO meets the Morgans target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $4.02, suggesting upside of 34.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

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