Australian Broker Call

Deutsche Bank rates A2M as Upgrade to Buy from Hold (1) -

Deutsche Bank analysts have dug deep into what makes a2 Milk tick, and what should potentially still lay ahead. The end result is they have "materially" increased their revenue growth outlook. This has pushed up the price target to NZ$5 (up 52% from prior target).

The broker's optimism is partially based upon the observation that brand interest in key end market China remains strong and the fact it remains materially higher than key brand peers Wyeth and FrieslandCampina.

In addition, states the broker, there's ongoing support from macro factors such as the relaxation of China's single child policy. Upgrade to Buy from Hold.

Current Price is $3.66. Target price not assessed.

Current consensus price target is $3.65, suggesting downside of -4.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

This company reports in NZD. 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 AJA as Upgrade to Buy from Hold (1) -

It's a two-step upgrade from Ord Minnett on the back of the broker's observation the transaction market has strengthened in Japan, resulting in yields firming marginally over the past six months for the type of assets Astra Japan Property Group owns.

Ord Minnett has pushed up FY18 realisable NTA estimate to $7.20 (up 7% from $6.75 prior). FY18 DPS forecast moves higher by 2% to $0.47. The latter is linked to AJA’s recent shopping centre acquisitions, explains the broker.

Target price is $7.20 Current Price is $6.37 Difference: $0.83
If AJA meets the Ord Minnett target it will return approximately 13% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

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

Macquarie rates AJM as Neutral (3) -

Altura has secured 200ktpa in binding offtake agreements for its Pilgangoora lithium project, split 50/50 between the revision of an existing contract and a new contract with a Chinese battery manufacturer. Both contracts are conditional on Altura securing finance by August.

The agreements are an important step in de-risking the project, the broker notes, but finance is the next risk. The broker assumes this will consist of a combination of debt and an equity raising. Neutral and 16c target retained.

Target price is $0.16 Current Price is $0.16 Difference: $0.005
If AJM meets the Macquarie target it will return approximately 3% (excluding dividends, fees and charges).

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

Macquarie rates BEN as Upgrade to Neutral from Underperform (3) -

Given regional banks have a greater proportional exposure to mortgages in their lending than the majors and are not subject to the government levy, Macquarie calculates the belated move to reprice investor/interest-only mortgages will provide a significant near term earnings tailwind.

To that end the broker upgrades Bendelaide to Neutral. Target rises to $11.50 from $11.00.

Target price is $11.50 Current Price is $11.22 Difference: $0.28
If BEN meets the Macquarie target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $11.08, suggesting downside of -2.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.6

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

Macquarie rates BOQ as Upgrade to Outperform from Neutral (1) -

Given regional banks have a greater proportional exposure to mortgages in their lending than the majors and are not subject to the government levy, Macquarie calculates the belated move to reprice investor/interest-only mortgages will provide a significant near term earnings tailwind.

To that end the broker upgrades Bank of Qld to Outperform. Target unchanged at $12.50.

Target price is $12.50 Current Price is $11.81 Difference: $0.69
If BOQ meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $11.60, suggesting downside of -2.5% (ex-dividends)

The company's fiscal year ends in August.

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

Macquarie rates BPT as Underperform (5) -

The broker has slightly lowered its June quarter earnings expectations across the energy sector given maintenance and operational issues among some producers, a lower than expected average oil price for the quarter and ongoing oversupply of LNG.

Underperform and $0.60 target retained for Beach.

Target price is $0.60 Current Price is $0.58 Difference: $0.02
If BPT meets the Macquarie target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $0.68, suggesting upside of 17.2% (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

Morgan Stanley rates IEL as Initiation of coverage with Overweight (1) -

Morgan Stanley has initiated coverage with an Overweight rating, In-Line sector view and $5.75 price target. The analysts forecast strong structural tailwinds and above-industry growth to continue, backed up by "significant margin upside".

Underlying, IDP operates high-quality businesses that are well positioned in key international education segments, finds the broker. The regulatory environment is seen as supportive while the valuation is still considered attractive.

Target price is $5.75 Current Price is $229.15 Difference: minus $223.4 (current price is over target).
If IEL meets the Morgan Stanley target it will return approximately minus 97% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.79, suggesting downside of -6.9% (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

Morgans rates IPL as Hold (3) -

Stockbroker Morgans notes fertiliser prices have fallen since the interim result release, while the AUD has risen since. The combination will provide a headwind for the company's performance over the period.

The analysts have reduced their forecasts in response. They note revised estimates are now "materially below" market consensus estimates.

On expectation that others will be doing the same in the days/weeks ahead, Morgans sees downward pressure building on the share price. Hold rating retained. Price target drops to $3.30 from $3.70.

Target price is $3.30 Current Price is $3.29 Difference: $0.01
If IPL meets the Morgans target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $3.70, suggesting upside of 10.4% (ex-dividends)

The company's fiscal year ends in September.

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

Macquarie rates MFG as Downgrade to Neutral from Outperform (3) -

Fund underperformance in June has led to lower funds under management and lower performance fees for Magellan than Macquarie had expected. The broker has subsequently cut earnings forecasts by -8% and -3% in FY17-18 and cut its target to $26.37 from $26.63.

Given Magellan shares have substantially outperformed the index since May, Macquarie downgrades to Neutral.

Target price is $26.37 Current Price is $27.00 Difference: minus $0.63 (current price is over target).
If MFG meets the Macquarie target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $27.08, suggesting downside of -0.3% (ex-dividends)

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

Macquarie rates OSH as Outperform (1) -

The broker has slightly lowered its June quarter earnings expectations across the energy sector given maintenance and operational issues among some producers, a lower than expected average oil price for the quarter and ongoing oversupply of LNG.

Outperform and $7.00 target retained for Oil Search.

Target price is $7.00 Current Price is $6.47 Difference: $0.53
If OSH meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $7.84, suggesting upside of 20.8% (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

Macquarie rates PTM as Downgrade to Underperform from Neutral (5) -

Platinum's international fund has outperformed over 12 months and represents 43% of funds under management. Macquarie notes, while the Asia fund (18%) continues to underperform. Despite international outperformance, Platinum saw net FUM outflows of -7% in June.

Given the drag of outflows, the broker has cut forecast earnings and its target to $3.88 from $4.43, and downgraded to Underperform.

Target price is $3.88 Current Price is $5.02 Difference: minus $1.14 (current price is over target).
If PTM meets the Macquarie target it will return approximately minus 23% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.06, suggesting downside of -18.7% (ex-dividends)

The company's fiscal year ends in June.

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

Morgan Stanley rates PTM as Underweight (5) -

Morgan Stanley estimates June saw further outflows to the tune of -$200m. It fits in with the broker's forecast of -$2.4bn outflows for FY18. Funds under Management (FuM) are reducing on larger than forecast retail distributions.

While the fund performance was strong in June, the broker maintains large performance fees are rather unlikely in H2 FY17. The analysts acknowledge the large retail backbook somewhat cushions downside risks on flows, while the prospect of a buyback could support the share price.

All in all, the stock still doesn't look cheap, says Morgan Stanley. Underweight rating retained. In-Line sector view. Target unchanged at $3.90.

Target price is $3.90 Current Price is $5.02 Difference: minus $1.12 (current price is over target).
If PTM meets the Morgan Stanley target it will return approximately minus 22% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.06, suggesting downside of -18.7% (ex-dividends)

The company's fiscal year ends in June.

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

Citi rates QAN as Buy (1) -

Since May Qantas shares have been on a tear, roughly rallying from $4 to seemingly heading for $6 in July. Citi analysts have been arguing for a while the shares were too cheap, and undeservedly so.

Qantas's discount is fundamentally unjustified, argues Citi, adding the market has started appreciating the benefits from a gentle duopoly in Australia, see the rally since May.

The analysts remain of the view the re-rating has further to go. One look at their price target explains why the rating remains Buy. Target $7.09.

Target price is $7.09 Current Price is $5.83 Difference: $1.26
If QAN meets the Citi target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $5.54, suggesting downside of -5.6% (ex-dividends)

The company's fiscal year ends in June.

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

Credit Suisse rates S32 as Outperform (1) -

Operations at the Appin mine will be extended for longer than first assumed as an operational review is conducted. While difficult to predict, the broker is assuming at least another month followed by a cautious resumption of production. The broker has cut its FY18 earnings forecast by -6.4%.

Valuation is little changed with the buyback process also incorporated. Outperform and $2.95 target retained.

Target price is $2.95 Current Price is $2.72 Difference: $0.23
If S32 meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $3.02, suggesting upside of 8.8% (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: 0.8

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

Macquarie rates S32 as Outperform (1) -

South32 has announced the outage at its Appin coal mines following a number of gas events will now likely last for months rather than weeks while a major operational review is conducted. The broker has cut forecast earnings by -2% and -13% in FY17-18 and lowered its target to $3.30 from $3.50.

The outage is concern given operational issues are becoming more commonplace for South32, the broker notes, but Outperform retained given the stock continues to look cheap and strong cash flows boost the capacity for capital management.

Target price is $3.30 Current Price is $2.72 Difference: $0.58
If S32 meets the Macquarie target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $3.02, suggesting upside of 8.8% (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: 0.8

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

UBS rates S32 as Buy (1) -

While prior gas events have seen outages of 2-4 weeks, South32 has decided to conduct an extensive operational review at the suspended Appin coal mine and that could take some time, the broker notes. Every month off line represents a -2% hit to earnings.

The valuation impact should nevertheless be minor, the broker suggests, given Appin's extensive mine life. Buy and $3.00 target retained.

Target price is $3.00 Current Price is $2.72 Difference: $0.28
If S32 meets the UBS target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $3.02, suggesting upside of 8.8% (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: 0.8

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

Credit Suisse rates SCP as Upgrade to Neutral from Underperform (3) -

Shopping Centres has a track record of outperforming guidance and Credit Suisse believes FY17 might prove another case, given recent transactional activity and the later than expected launch of the second SURF fund. Solid growth in Woolworths ((WOW)) sales augur well for the landlord but specialty sales growth may prove a drag.

Ahead of the result next month, the broker has lifted forecasts to above consensus and raised its target to $2.18 from $2.04, prompting an upgrade to Neutral.

Target price is $2.18 Current Price is $2.15 Difference: $0.03
If SCP meets the Credit Suisse target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $2.21, suggesting upside of 2.2% (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

UBS rates SGP as Neutral (3) -

The broker notes Stockland's land development business is currently in a "sweet spot" given a focus on owner-occupier affordable housing in areas of population growth. NSW and Vic are particularly strong, offset by some pockets of weakness in WA and North Qld which are not surprising.

Despite such strength, the broker believes the market will not re-rate Stockland until the impact of recent APRA tightening becomes apparent. Neutral and $4.76 target retained. The broker prefers Mirvac ((MGR)).

Target price is $4.76 Current Price is $4.28 Difference: $0.48
If SGP meets the UBS target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $4.84, suggesting upside of 14.1% (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

Macquarie rates STO as Outperform (1) -

The broker has slightly lowered its June quarter earnings expectations across the energy sector given maintenance and operational issues among some producers, a lower than expected average oil price for the quarter and ongoing oversupply of LNG.

Outperform and $4.00 target retained for Santos.

Target price is $4.00 Current Price is $2.91 Difference: $1.09
If STO meets the Macquarie target it will return approximately 37% (excluding dividends, fees and charges).

Current consensus price target is $4.02, suggesting upside of 37.7% (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

Deutsche Bank rates TAH as Buy (1) -

It has transpired the ACCC will appeal the Australian Competition Tribunal's authorisation of the proposed combination of Tabcorp and Tatts ((TTS)). Deutsche Bank analysts are taking the view this will delay, but not kill off the proposed merger.

All in all, a minor negative in the view of the analysts who also believe the market has yet to price in predicted synergies from the deal. Buy rating retained. Target unchanged at $5.35.

Target price is $5.35 Current Price is $4.29 Difference: $1.06
If TAH meets the Deutsche Bank target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $4.59, suggesting upside of 7.6% (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 TAH as Lighten (4) -

Ord Minnett notes the Australian Competition and Consumer Commission's (ACCC) decision to appeal to the Federal Court for a judicial review of the Australian Competition Tribunal (ACT) decision to approve the proposed merger between Tabcorp and Tatts Group ((TTS)).

Drawing parallels with historical precedents, the broker is of the view the ACCC move can potentially inflict serious delay to the merger process, and ultimately this might even sink the merger.

Also, the broker points out anticipation of a weak Tatts result has been well telegraphed in recent trading updates and may see Tabcorp shares drag down further.

Target price is $4.20 Current Price is $4.29 Difference: minus $0.09 (current price is over target).
If TAH meets the Ord Minnett target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.59, suggesting upside of 7.6% (ex-dividends)

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

Morgans rates VVR as Add (1) -

While acknowledging the shares can potentially fall victim to bond market mayhem, Morgans maintains Viva Energy offers an attractive yield in a world still hungry for income.

The stockbroker has slightly changed its modeling to incorporate the capital raising undertaken to fund the latest acquisition of eight petrol service stations. This has sliced off 1c from the price target; $2.53.

Add rating retained with the analysts summing up potential catalysts for the shares: additional accretive acquisitions, asset re-ratings, and DPS outperformance.

Target price is $2.53 Current Price is $2.27 Difference: $0.26
If VVR meets the Morgans target it will return approximately 11% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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

Macquarie rates WPL as Neutral (3) -

The broker has slightly lowered its June quarter earnings expectations across the energy sector given maintenance and operational issues among some producers, a lower than expected average oil price for the quarter and ongoing oversupply of LNG.

Neutral and $29.50 target retained for Woodside.

Target price is $29.50 Current Price is $29.41 Difference: $0.09
If WPL meets the Macquarie target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $31.90, suggesting upside of 8.2% (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: 0.2

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