Australian Broker Call

Morgan Stanley rates BHP as Overweight (1) -

Morgan Stanley updates estimates to reflect two growth projects and a more detailed review of the liabilities surrounding Samarco. Mad Dog phase II and Spence Hypogene have now been incorporated into forecasts.

The stock is the broker's top pick, given a capacity to raise dividends, options to reinvest and the benefit of a slightly more diversified commodity mix including petroleum.

The broker retains an Overweight rating and Attractive industry view. Target moves up to $27 from $25.

Target price is $27.00 Current Price is $20.07 Difference: $6.93
If BHP meets the Morgan Stanley target it will return approximately 35% (excluding dividends, fees and charges).

Current consensus price target is $22.50, suggesting upside of 11.2% (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: 0.5

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

Morgan Stanley rates CSL as Underweight (5) -

The US FDA's approval of Shire's Cuvitru is another sign that an increasingly competitive environment for CSL's Hizentra is approaching, in Morgan Stanley's view.

The broker notes the launch is expected in the next few weeks. This is a more direct threat than that offered by Shire's HyQvia as that drug's dosing and temporary cosmetic consequences may have limited patient growth and its impact on CSL's Hizentra franchise has, to date, been small.

Underweight rating and In-Line industry view retained. Target is $98.29.

Target price is $98.29 Current Price is $101.04 Difference: minus $2.75 (current price is over target).
If CSL 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 $108.67, suggesting upside of 6.5% (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: 0.1

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

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

The US investor briefing underscored Morgan Stanley's decision to downgrade recently, with consensus capex assumptions requiring significant upward revision.

The broker believes margins need to improve by 50 basis points off the first quarter North American fibre cement margin in order for FY17 net profit to hit the mid point of guidance and, hence, this mid point (US$275m) may be too high.

While higher utilisation of the plant through FY17 may mean lower-than-average seasonality Morgan Stanley considers a decline in margins as likely.

Equal-weight retained. Target is $20.33. In-Line sector view.

Target price is $20.35 Current Price is $20.80 Difference: minus $0.45 (current price is over target).
If JHX meets the Morgan Stanley target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $21.84, suggesting upside of 4.9% (ex-dividends)

The company's fiscal year ends in March.

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: 0.4

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

Morgans rates KAM as Hold (3) -

FY16 profit was in line with Morgans. The net profit was down 80%, as expected, driven by materially lower performance fees.

Performance is rebounding and the broker looks for flows to stabilise but will await confirmation before taking a more positive view. Hold rating is maintained. Target is reduced to 40c from 42c.

Target price is $0.40 Current Price is $0.37 Difference: $0.035
If KAM meets the Morgans target it will return approximately 10% (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

Citi rates MYR as Buy (1) -

Citi was positioned above market consensus and guidance and thus had to tone down expectations as Myer's FY16 result was merely inside the company's guidance range. The analysts share management's optimism and see the return of profit growth ahead.

Q1 will be weak, but any share price weakness on the back of it should be treated as a buying opportunity in Citi's view. Myer’s gross margins fell 164bp in FY16 and Citi is forecasting further decline of 47bp in FY17. Buy rating retained. Target $1.40.

Target price is $1.40 Current Price is $1.27 Difference: $0.125
If MYR meets the Citi target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $1.34, suggesting upside of 4.2% (ex-dividends)

The company's fiscal year ends in July.

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 MYR as Outperform (1) -

FY16 results were in line with guidance and Credit Suisse finds the FY17 outlook a little worse than it expected. The company is reaching targets on productivity and merchandise changes appear positive, while the new format takes the store into a more defensible segment of the market.

Yet Credit Suisse believes the fourth quarter's "spring clean" is likely to mean a soft first quarter and July sales growth was weak, which highlights the potential downside.

Outperform rating retained. Target is reduced to $1.40 from $1.56.

Target price is $1.40 Current Price is $1.27 Difference: $0.125
If MYR meets the Credit Suisse target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $1.34, suggesting upside of 4.2% (ex-dividends)

The company's fiscal year ends in July.

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

Deutsche Bank rates MYR as Hold (3) -

FY16 results were slightly below forecasts but revealed to Deutsche Bank that some of the company's initiatives are gaining traction.

Nevertheless, sales growth has not resulted in operating leverage, despite constrained costs, because giving customers the brands they want has weighed on margins.

The broker expects sales versus gross margin trade off will be a challenge but reduced costs should result in some growth. Hold rating retained. Target is raised to $1.30 from $1.25.

Target price is $1.30 Current Price is $1.27 Difference: $0.025
If MYR meets the Deutsche Bank target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $1.34, suggesting upside of 4.2% (ex-dividends)

The company's fiscal year ends in July.

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

Macquarie rates MYR as Neutral (3) -

FY16 profit was down 10.7% but compared favourably to Macquarie's expectations. The beat was on gross margin and the broker notes the magnitude of aged inventory build up is not clear.

The company has let the suspicion around inventory quality taint its hard work in restructuring and the broker expects the balancing act between the sales performance and the exit of floor space will continue in FY17.

Neutral rating retained. Target rises to $1.29 from $1.16.

Target price is $1.29 Current Price is $1.27 Difference: $0.015
If MYR meets the Macquarie target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $1.34, suggesting upside of 4.2% (ex-dividends)

The company's fiscal year ends in July.

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 MYR as Equal-weight (3) -

FY16 results were in line with guidance and slightly ahead of Morgan Stanley's estimates. The broker notes gross margins fell to 38.7% but not as low as its forecasts for 38.3%.

Sales per square metre of 5.6% highlights an improved organic performance and a reduction in underperforming space. Morgan Stanley retains an Equal-weight rating and In-Line industry view. Target is $1.30.

Target price is $1.30 Current Price is $1.27 Difference: $0.025
If MYR meets the Morgan Stanley target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $1.34, suggesting upside of 4.2% (ex-dividends)

The company's fiscal year ends in July.

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

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

FY16 was Myer's fourth transition year and UBS observes it appears to be the last. Profit was in line with guidance and consensus and the broker observes some positive signs such as improving cash flow and positive like-for-like sales.

Refurbishments, space rationalisation and new brands all provide scope to grow sales and EBIT into FY17 and beyond, UBS believes.

The rating is downgraded to Neutral from Buy, following the lift in the share price since May. Target is raised to $1.30 from $1.25.

Target price is $1.30 Current Price is $1.27 Difference: $0.025
If MYR meets the UBS target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $1.34, suggesting upside of 4.2% (ex-dividends)

The company's fiscal year ends in July.

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 PLG as Initiation of coverage with Outperform (1) -

Credit Suisse takes up coverage of Propertylink with an Outperform rating and 92c target. The stock is an internally managed property trust with portfolio of 33 properties, predominantly industrial.

The funds management platform is growing and backed by eight global institutional investors. Credit Suisse observes a promising start to FY17 with the company running ahead of prospectus estimates on a number of fronts.

Target price is $0.92 Current Price is $0.75 Difference: $0.17
If PLG meets the Credit Suisse target it will return approximately 23% (excluding dividends, fees and charges).

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

Morgans rates REA as Upgrade to Add from Hold (1) -

The recent share price decline has meant the stock is now trading at a substantial discount to valuation and Morgans upgrades to Add from Hold.

While there may be a risk that paid depth ad volumes fail to grow at the 3% rate that is assumed, the broker envisages further volume downside is limited as sale listings are now at 15-year lows.

Morgans expects online share of total real estate marketing expenditure will continue to grow and as market leader REA will take a substantial share. Target is $60.97.

Target price is $60.97 Current Price is $55.79 Difference: $5.18
If REA meets the Morgans target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $57.60, suggesting upside of 2.0% (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

Deutsche Bank rates RWC as Hold (3) -

The company has a strong opportunity to expand its US presence through continued market share growth and potential upside from the Lowes contract, in Deutsche Bank's view.

The broker also believes the EvoPEX product launch in 2017 will provide longer dated growth potential, given a lower installed cost versus competitor products.

Notwithstanding issues with Home Depot, which terminated its exclusive contract, management remains confident in achieving prospectus forecasts. Hold rating and $2.87 target retained.

Target price is $2.87 Current Price is $2.94 Difference: minus $0.07 (current price is over target).
If RWC meets the Deutsche Bank target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.14, suggesting upside of 5.1% (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