Australian Broker Call

Macquarie rates AJM as Underperform (5) -

The company has provided an update on commissioning activity at its Altura lithium project. First concentrate shipments are expected in July/August.

Given its funding structure and the need to finance stage 2, Macquarie believes the company is approaching a critical point and, for equity investors, the risk is to the downside.

Underperform rating and $0.25 target maintained.

Target price is $0.25 Current Price is $0.35 Difference: minus $0.1 (current price is over target).
If AJM meets the Macquarie target it will return approximately minus 29% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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 BRG as Buy (1) -

The US government has updated its original list of imported items from China that are subject to trade tariffs. Ord Minnett notes a majority of the focus is on industrial goods and some of the commercial food items from the original list have been removed.

The broker still expects no significant impact on Breville's earnings, although a ramping up of trade tensions could harm the stock based on sentiment, as China has indicated it will respond. Buy rating and $15.60 target maintained.

Target price is $15.60 Current Price is $11.42 Difference: $4.18
If BRG meets the Ord Minnett target it will return approximately 37% (excluding dividends, fees and charges).

Current consensus price target is $13.56, suggesting upside of 18.8% (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

Morgan Stanley rates CPU as Underweight (5) -

Morgan Stanley believes the market is underestimating the drag to revenue from the core registry business. Pricing is falling in the US and the company continues to lose market share. Computershare is also a notable underperformer in the UK market.

Morgan Stanley believes the risk/reward is unattractive and, as momentum stalls, attention is likely to return to the fundamental headwinds.

Underweight rating. Target is $13.50. Industry view: In-Line.

Target price is $13.50 Current Price is $18.18 Difference: minus $4.68 (current price is over target).
If CPU meets the Morgan Stanley target it will return approximately minus 26% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $17.24, suggesting downside of -5.1% (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

Deutsche Bank rates FLT as Hold (3) -

Deutsche Bank observes travel volumes in April slowed after a strong March. While Easter can cloud the numbers the broker does not believe this will have been a factor.

International returns in April grew by 4.0%, which represents a deterioration relative to the 7.3% growth in March. Hold rating and $52 target maintained.

Target price is $52.00 Current Price is $62.74 Difference: minus $10.74 (current price is over target).
If FLT meets the Deutsche Bank target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $53.14, suggesting downside of -15.3% (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

UBS rates HVN as Neutral (3) -

UBS reduces forecasts for Harvey Norman by -5-6% and takes a more cautious outlook on housing. The broker believes Harvey Norman is the most exposed of the listed retailers.

UBS suggests that the top-line and margins will be under pressure on a 1-3-year view as competitive headwinds are building with Amazon and capital management is looking less likely.

The broker maintains a Neutral rating and reduces the target to $3.50 from $4.10.

Target price is $3.50 Current Price is $3.45 Difference: $0.05
If HVN meets the UBS target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $3.81, suggesting upside of 10.4% (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 MGR as Downgrade to Neutral from Outperform (3) -

Credit Suisse downgrades to Neutral from Outperform. Whilst the company has reaffirmed FY18 guidance, a number of external factors point to a deteriorating residential market.

One of these is tougher regulatory scrutiny and a focus on expenses which is leading to tighter lending standards. The broker reduces the target to $2.38 from $2.50.

Target price is $2.38 Current Price is $2.23 Difference: $0.15
If MGR meets the Credit Suisse target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $2.34, suggesting upside of 5.1% (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

Macquarie rates MHJ as Outperform (1) -

Macquarie identifies a considerable value gap between the current share price and its DCF valuation. The broker believes Michael Hill should be able to deliver on the considerable growth potential in the core business.

The broker expects the renewed focus on operations, product and new technology should underpin gains in market share and provide the catalyst for margin expansion.

Outperform maintained. Target is $1.30.

Target price is $1.30 Current Price is $0.96 Difference: $0.34
If MHJ meets the Macquarie target it will return approximately 35% (excluding dividends, fees and charges).

Current consensus price target is $1.30, suggesting upside of 35.1% (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 MIN as Hold (3) -

The company has updated the market on its DSO volumes, expecting shipments to progressively decline to zero by the end of 2018.

FY18 operating earnings guidance of more than $500m has been reiterated despite successive DSO downgrades, which suggests to Ord Minnett that the crushing business is exceeding expectations.

The broker reduces its final dividend assumptions to $0.35 per share from $0.40. Hold maintained. Target is reduced to $18.00 from $19.50.

Target price is $18.00 Current Price is $16.52 Difference: $1.48
If MIN meets the Ord Minnett target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $20.45, suggesting upside of 23.8% (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 MLX as Outperform (1) -

Macquarie updates forecasts to incorporate the latest port shipment data. The broker cuts forecasts for Nifty to one shipment from two. A weak June quarter is expected because of production losses relating to the planned replacement of the underground conveyor as well as issues with stoping.

The broker remains confident that the company will achieve production rates of over 30,000tpa in the next 12 months. Outperform retained. Target is reduced to $1.10 from $1.30.

Target price is $1.10 Current Price is $0.82 Difference: $0.28
If MLX meets the Macquarie target it will return approximately 34% (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

Morgan Stanley rates MQG as Upgrade to Overweight from Equal-weight (1) -

Morgan Stanley believes Macquarie Group is benefiting from a favourable and diversified business mix. On a five-year outlook the broker is increasingly confident and upgrades to Overweight from Equal-weight.

Morgan Stanley observes the business is geared to the real economy, not just financial markets, and remains a leading alternative asset manager. Initial guidance is also usually conservative, implying upside risk to consensus expectations. Target is raised to $130 from $100.

Target price is $130.00 Current Price is $118.97 Difference: $11.03
If MQG meets the Morgan Stanley target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $114.14, suggesting downside of -4.1% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.6

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

Deutsche Bank rates MTS as Hold (3) -

While no update was provided for liquor & hardware at the recent update regarding the future of the food business without Drakes Supermarkets from 2019, Deutsche Bank expects solid results for FY18 because of the contribution from new liquor contracts.

The main issues will be whether cost reductions are sufficient to offset operating de-leverage in food and the earnings impact from the loss of Drakes. Hold maintained. Target is $2.80.

Target price is $2.80 Current Price is $2.78 Difference: $0.02
If MTS meets the Deutsche Bank target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $3.14, suggesting upside of 12.8% (ex-dividends)

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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

Macquarie rates PLS as Outperform (1) -

The company has completed the first shipment of DSO from its Pilgangoora project. Commissioning of the concentrator is also well advanced and first concentrate is expected by the end of June.

Macquarie suggests this will be a significant achievement and, with offtake and funding already secured, expects the company to move directly to phase 2.

Outperform and $1.20 target retained.

Target price is $1.20 Current Price is $0.91 Difference: $0.29
If PLS meets the Macquarie target it will return approximately 32% (excluding dividends, fees and charges).

Current consensus price target is $1.10, suggesting upside of 20.9% (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

Citi rates RIO as Buy (1) -

Rio Tinto has reaffirmed expectations that it will achieve system capacity of 360mtpa from its Pilbara iron ore operations by the end of 2019 once the rail automation is completed. Capital expenditure will rise over the next few years.

Citi observes productivity improvements are also required to offset operating costs from higher diesel and the modest cost pressures returning in labour/contractors. The broker maintains a Buy rating and $86 target.

Target price is $86.00 Current Price is $84.16 Difference: $1.84
If RIO meets the Citi target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $88.06, suggesting upside of 4.6% (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: 0.8

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

Credit Suisse rates RIO as Outperform (1) -

The company's presentation on iron ore has confirmed the opportunities in the integrated network and the focus on rail.

Rail and mine are expected to match port capacity by the end of 2019 while sustaining capital expenditure is expected to run at around US$1bn per annum for the next three years. Credit Suisse observes the company's message remains "value over volume".

Outperform and $82 target retained.

Target price is $82.00 Current Price is $84.16 Difference: minus $2.16 (current price is over target).
If RIO meets the Credit Suisse target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $88.06, suggesting upside of 4.6% (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: 0.8

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

Macquarie rates RIO as Outperform (1) -

The company has reaffirmed 2018 Pilbara shipment guidance of 330-340mt. Macquarie expects integration of AutoHaul together with the scheduled track improvements will lift rail capacity.

This is expected to reduce the system bottleneck to the port by the end of 2019 when combined with continued technology-driven improvements at mine sites.

Outperform rating retained. Target is $94.

Target price is $94.00 Current Price is $84.16 Difference: $9.84
If RIO meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $88.06, suggesting upside of 4.6% (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: 0.8

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

Ord Minnett rates RIO as Accumulate (2) -

The company has guided to 2018 shipments of 330-340mt. The rail bottleneck is expected to be improved by the end of 2019 with port and mine capacity already at 360mtpa.

Ord Minnett found little new information in the presentation but considers the company's iron ore business the best in class, which should benefit over the long-term from a structural increase in demand for higher quality ore. Accumulate rating and $96 target maintained.

Target price is $96.00 Current Price is $84.16 Difference: $11.84
If RIO meets the Ord Minnett target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $88.06, suggesting upside of 4.6% (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: 0.8

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

Citi rates S32 as Neutral (3) -

The company will acquire the remaining 83% of Arizona Mining for US$1.3bn. The main asset is the Hermosa zinc project where the preliminary economic assessment study has allowed for a mine life of 29 years based on 3.3mt annual throughput and construction capital of US$519m.

Citi considers the transaction a mixed outcome. There is little margin for error based on preliminary work done so far and the broker awaits a bankable feasibility study to obtain more confidence in the project economics.

Neutral rating and $3.80 target maintained.

Target price is $3.80 Current Price is $3.85 Difference: minus $0.05 (current price is over target).
If S32 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 $3.77, suggesting downside of -2.2% (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

Credit Suisse rates S32 as Neutral (3) -

The company will acquire the remaining 83% of Arizona Mining, a base metals explorer listed on the Canadian stock exchange. The company is focused on the development of the Hermosa project in Santa Cruz, Arizona.

Recent drill intercepts have indicated potential upside to the resource grade. Further work and modelling are needed in order to demonstrate this opportunity, Credit Suisse believes. Neutral rating and $3.75 target maintained.

Target price is $3.75 Current Price is $3.85 Difference: minus $0.1 (current price is over target).
If S32 meets the Credit Suisse target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.77, suggesting downside of -2.2% (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 S32 as Outperform (1) -

The company has announced a US$1.3bn offer for the remaining 83% of Arizona Mining. Macquarie believes a lack of growth options in the portfolio has been a consistent source of negative sentiment for the stock.

This latest acquisition and the company's stake in Eagle Downs as well as Trilogy Metals now gives three clear medium-term growth options. The company has stated that the transaction will not affect capital management plans.

Outperform. Target is $4.

Target price is $4.00 Current Price is $3.85 Difference: $0.15
If S32 meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $3.77, suggesting downside of -2.2% (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

Ord Minnett rates S32 as Hold (3) -

The company will acquire the remaining 83% of Arizona Mining for US$1.3bn. This will provide control of the Hermosa project, a zinc/lead/silver resource located in Arizona.

Ord Minnett considers the transaction positive and strategically sound, as it introduces another growth option for the company. Nevertheless, the acquisition is not large enough to change the investment thesis and leads the broker to maintain a Hold rating and $4.00 target.

Target price is $4.00 Current Price is $3.85 Difference: $0.15
If S32 meets the Ord Minnett target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $3.77, suggesting downside of -2.2% (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

UBS rates S32 as Neutral (3) -

The company will acquire the remaining 83% of Arizona Mining for US$1.3bn. The company has clarified that, despite the purchase, it remains committed to delivering the remaining US$400m of capital management by April 2019.

UBS considers the acquisition sound with upside potential to increase reserves as the Taylor deposit is open at depth and laterally.

UBS maintains a Neutral rating and $3.70 target.

Target price is $3.70 Current Price is $3.85 Difference: minus $0.15 (current price is over target).
If S32 meets the UBS target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.77, suggesting downside of -2.2% (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

UBS rates SUL as Downgrade to Neutral from Buy (3) -

The share price has risen around 30% over the last three months outperforming the market by a similar amount. Super Retail now trades at a -38% discount to the ASX 200 industrials ex financials.

A more negative view on housing has caused UBS to downgrade to Neutral from Buy. The main driver of the Buy call was a large negative valuation implied in the share price for leisure which is now considered more balanced. Target is $8.70.

Target price is $8.70 Current Price is $8.37 Difference: $0.33
If SUL meets the UBS target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $8.52, suggesting upside of 1.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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

Macquarie rates SXY as Outperform (1) -

The company has announced a partnership with Jemena to construct the processing facility and pipeline at Project Atlas. Macquarie observes the deal removes around $140m in upfront capital expenditure and lowers the debt requirement for Senex Energy.

The broker believes the deal validates the project and expects further near-term catalysts will unlock value. Macquarie maintains an Outperform rating and the target is raised to $0.55 from $0.50.

Target price is $0.55 Current Price is $0.42 Difference: $0.13
If SXY meets the Macquarie target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $0.44, suggesting upside of 4.4% (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

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

The company will partner with Jemena on Project Atlas. Morgan Stanley considers this a favourable development as it brings a credible partner to the table and reduces Senex Energy's upfront equity investment.

Jemena will build, own and operate the gas facility plus a 60km pipeline to link with the Darling Downs.

Equal-weight maintained. Target is $0.40. Industry view: Attractive.

Target price is $0.40 Current Price is $0.42 Difference: minus $0.02 (current price is over target).
If SXY 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 $0.44, suggesting upside of 4.4% (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

Ord Minnett rates SXY as Hold (3) -

The company has finalised an agreement with infrastructure operator Jemena for the development of a new 60km pipeline and associated gas processing for Project Atlas. The next stage of Project Atlas will be resource delineation.

Ord Minnett incorporates the agreement into modelling which results in a 2% increase to net present value. Hold rating retained and target raised to $0.46 from $0.45.

Target price is $0.46 Current Price is $0.42 Difference: $0.04
If SXY meets the Ord Minnett target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $0.44, suggesting upside of 4.4% (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 SYR as Outperform (1) -

June quarter guidance has been lowered for the Balama graphite operation. Credit Suisse observes nameplate should be around 88,000t or four times what is now expected in the quarter.

The broker is disappointed with the challenges that have developed in the commissioning but considers this immaterial to valuation.

Outperform and $6.60 target retained.

Target price is $6.60 Current Price is $2.81 Difference: $3.79
If SYR meets the Credit Suisse target it will return approximately 135% (excluding dividends, fees and charges).

Current consensus price target is $4.93, suggesting upside of 75.4% (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

Morgan Stanley rates TAH as Overweight (1) -

The Western Australian government is considering the sale of the WA TAB, Australia's fourth-largest TAB.

Morgan Stanley estimates a potential acquisition could add seven percentage points of turnover market share, and this would take Tabcorp to around 54% market share on pro forma FY17. It could generate $58-65m in operating earnings from WA TAB.

The broker believes Tabcorp is an attractive defensive growth story. Overweight rating and $5.20 target. Industry view is Cautious.

Target price is $5.20 Current Price is $4.61 Difference: $0.59
If TAH meets the Morgan Stanley target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $5.21, suggesting upside of 13.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.7

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