Australian Broker Call

Deutsche Bank rates BKW as Buy (1) -

First half results were ahead of Deutsche Bank's expectations, largely on the back of the investment earnings.

Management has indicated that housing has stabilised in Western Australia in the last few months, which is an important indicator for the second half.

The broker expects second half EBIT margin will expand as usual. As such, FY17 building products EBIT is expected to increase 4%.

Buy  recommendation retained. Target is reduced to $16.08 from $16.29.

Target price is $16.08 Current Price is $13.77 Difference: $2.31
If BKW meets the Deutsche Bank target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $14.91, suggesting upside of 7.0% (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 BKW as Neutral (3) -

First half results were ahead of Macquarie's expectations, solely driven by land and development earnings. The broker believes the stock has de-rated on the back of pressure on underlying assets in the investment portfolio and peaking housing activity.

Cyclical pressure on building products is expected to increase while value-driven gains in property have run their course, in the broker's opinion. Hence, Macquarie maintains a Neutral rating, although does acknowledge that lower-quality property sales could sustain earnings.

FY17 and FY18 earnings per share estimates are upgraded by 19% and 24% respectively. Target is raised to $15.45 from $14.05.

Target price is $15.45 Current Price is $13.77 Difference: $1.68
If BKW meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $14.91, suggesting upside of 7.0% (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

Morgans rates BKW as Hold (3) -

First half results were well ahead of expectations. The main highlight was land and development and Morgans believes the short-term outlook remains positive.

However,  the medium term outlook is more uncertain given higher energy costs and the potential slowdown in building activity. Hold maintained. Target is reduced to $13.62 from $14.33.

Target price is $13.62 Current Price is $13.77 Difference: minus $0.15 (current price is over target).
If BKW meets the Morgans target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $14.91, suggesting upside of 7.0% (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

Morgans rates CAT as Add (1) -

The company has signed its first Latin American league-wide deal for elite athlete wearable devices, contracting with Argentina's premier basketball league.

This is the first deal for 2017 and will generate $400,000 in annual recurring licence fees. The company is hopeful of more licensing deals prior to the end of the financial year.

Morgans make no changes  to forecasts or valuation but believes the market opportunity ahead of the company is large and the large gap between valuation and the share price is temporary and will close over time. Add retained. Target is $4.43.

Target price is $4.43 Current Price is $2.38 Difference: $2.05
If CAT meets the Morgans target it will return approximately 86% (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

Deutsche Bank rates CKF as Downgrade to Hold from Buy (3) -

The company has provided second half guidance which is around -9% below Deutsche Bank estimates, driven by increased corporate cost investment, KFC Australia margin compression and weakness in WA operations.

The broker has mixed sentiment on the acquisition of 16 KFC stores in the Netherlands, as the high EBIT multiple paid is offset by the company's increased European scale, portfolio quality and the options on roll-out.

Deutsche Bank downgrades to Hold from Buy on valuation grounds.Target is reduced to $5.40 from $6.35.

Target price is $5.40 Current Price is $5.88 Difference: minus $0.48 (current price is over target).
If CKF meets the Deutsche Bank target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in April.

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 CTX as Buy (1) -

The Caltex refiner margin at US$12.71/bbl for February was ahead of Deutsche Bank's forecasts. The broker increases forecasts for earnings per share in 2017 by 1.3%.

Buy recommendation retained. Target rises to $35.40 from $35.35.

Target price is $35.40 Current Price is $28.28 Difference: $7.12
If CTX meets the Deutsche Bank target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $33.79, suggesting upside of 17.4% (ex-dividends)

The company's fiscal year ends in December.

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

Morgans rates FDV as Add (1) -

The company's first annual investor update revealed a strong operating performance from key portfolio companies, such as Pakistan's Zameen.

Morgans believes the company is showing the benefits of operating a network and has been able to outpace competitors by sharing strategies and technology insights.

Add recommendation retained. Target lifts to $0.72 from $0.60.

Target price is $0.72 Current Price is $0.48 Difference: $0.24
If FDV meets the Morgans target it will return approximately 50% (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

Credit Suisse rates ING as Outperform (1) -

Credit Suisse envisages the current weakness in the stock as a buying opportunity.

The broker believes the factors weighing on the recent share price performance reflect the prevailing fear around recent IPOs rather than anything that is materially at risk.

The broker reiterates an Outperform rating and $3.90 target.

Target price is $3.90 Current Price is $3.12 Difference: $0.78
If ING meets the Credit Suisse target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $3.72, suggesting upside of 18.7% (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

Macquarie rates MQA as Resume coverage with Outperform (1) -

The company's mop up of Greenway appears to shift the direction of the fund away from an organised winding down to an ongoing business, in Macquarie's view.

Macquarie does not expect this will provide a mandate for management to seek new assets but there may be an incremental opportunity around APRR.

The broker resumes coverage with an Outperform rating and $5.65 target.

Target price is $5.65 Current Price is $4.94 Difference: $0.71
If MQA meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $5.51, suggesting upside of 11.1% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.7

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

Deutsche Bank rates MTS as Sell (5) -

The company has made a modest upgrade to synergy guidance and noted the integration of the Home Timber & Hardware acquisition is progressing well.

Previous synergy guidance has been maintained at  $15-20m, to be realised by FY18. This appears conservative to Deutsche Bank, given the cost and procurement benefits available.

The broker retains a Sell rating,  expecting that the food and grocery business will likely weaken as a result of the competitive market and improvement in Woolworths ((WOW)). Target is $1.60.

Target price is $1.60 Current Price is $2.32 Difference: minus $0.72 (current price is over target).
If MTS meets the Deutsche Bank target it will return approximately minus 31% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.25, suggesting downside of -3.1% (ex-dividends)

The company's fiscal year ends in April.

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

Morgan Stanley rates MTS as Overweight (1) -

After the investor briefing, Morgan Stanley has greater conviction in the company's hardware top-line growth, which should ultimately drive sustainable earnings.

Metcash expects to take 5-10% of the $950m in annual Masters sales, with the vast majority expected to move to Bunnings ((WES)).

Overweight rating maintained. In-Line sector view. Target is $2.80.

Target price is $2.80 Current Price is $2.32 Difference: $0.48
If MTS meets the Morgan Stanley target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $2.25, suggesting downside of -3.1% (ex-dividends)

The company's fiscal year ends in April.

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 MTS as Hold (3) -

The company has hosted an upbeat investor briefing showcasing its hardware business, Ord Minnett observes.

Guidance has been reiterated but the company also provided further details on the integration of the recently-acquired Home Timber & Hardware business.

Ord Minnett expects upside from this division but maintains a Hold rating and $2.00 target, noting the challenging environment in the main food & grocery business.

Target price is $2.00 Current Price is $2.32 Difference: minus $0.32 (current price is over target).
If MTS meets the Ord Minnett target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.25, suggesting downside of -3.1% (ex-dividends)

The company's fiscal year ends in April.

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 MTS as Sell (5) -

Following an investor day tour of Metcash's recently acquired hardware assets, the broker sees plenty of opportunity to both grow sales and reduce costs. While hardware represents only 16% of the broker's FY17 earnings forecast, it makes up some 25% of the broker's valuation.

In diversifying away from grocery and strengthening its balance sheet, Metcash is doing the right thing, the broker believes. But grocery remains a challenge and recent improved performance is only a reflection of cost cutting, which cannot last forever. 

The broker thus retains Sell. Target rises to $1.85 from $1.80.

Target price is $1.85 Current Price is $2.32 Difference: minus $0.47 (current price is over target).
If MTS meets the UBS target it will return approximately minus 20% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.25, suggesting downside of -3.1% (ex-dividends)

The company's fiscal year ends in April.

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 RKN as Hold (3) -

The company may de-merge its document management business into a new vehicle to be listed on London's Alternative Investment Market (AIM).

While this has potential to unlock value - and Ord Minnett believes it presents a cleaner M&A target - it takes the company back to where it was in 2012, albeit with higher debt.

Therefore, the broker struggles to understand the listing rationale. Hold retained. Target is raised to $1.68 from $1.65.

Target price is $1.68 Current Price is $1.72 Difference: minus $0.04 (current price is over target).
If RKN 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 $1.74, suggesting upside of 1.3% (ex-dividends)

The company's fiscal year ends in December.

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 SAR as Initiation of coverage with Buy (1) -

The title above today's initiation report gives it all away: "The new mid-tier gold miner". Citi analysts forecast strong YoY FY17 growth for revenues and profits. And growth is expected to continue in FY18/19/20 carried by expanded production and multiple new mines.

All-in costs (AISC) are projected to fall below A$1,100/oz in FY18. Initiation of coverage with Buy rating and price target of $1.25.

Citi expects Thunderbox to lift group production to a rate of 300kozpa by MarQ 2017.

Target price is $1.25 Current Price is $1.06 Difference: $0.19
If SAR meets the Citi target it will return approximately 18% (excluding dividends, fees and charges).

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

Citi rates SIP as Neutral (3) -

Assessing the reported FY17 financials (pre-announced earlier) as in-line, Citi analysts believe there are some real and serious challenges ahead for Sigma Pharma.

The analysts refer to necessary capex investments in new distribution centres and the switch to new ERP systems, "with increased execution risks".

Having said so, management does have a good history of delivery, Citi analysts acknowledge. A successful execution of capex plans has the potential to offer better than projected growth. Neutral. Target rises to $1.20 from $1.16 on slightly higher estimates.

Target price is $1.20 Current Price is $1.23 Difference: minus $0.03 (current price is over target).
If SIP meets the Citi target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.26, suggesting upside of 2.2% (ex-dividends)

The company's fiscal year ends in January.

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 SIP as Outperform (1) -

FY17 underlying earnings were in line with forecasts and guidance. The rise in the provision for doubtful debts disappointed Credit Suisse but additional costs are not expected to emerge in the near to medium term.

The highlight of the result was a material decline in working capital. The broker makes minor changes to modelling assumptions, which result in downgrades of around -3-4% to earnings estimates over the forecast period.

Outperform retained. Target slips to $1.30 from $1.35.

Target price is $1.30 Current Price is $1.23 Difference: $0.07
If SIP meets the Credit Suisse target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $1.26, suggesting upside of 2.2% (ex-dividends)

The company's fiscal year ends in January.

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 SIP as Underweight (5) -

FY17 results were in line with expectations. Morgan Stanley is confident management should be able to deliver on FY18 expectations. Improved organic growth trends are envisaged across the business but a material ramp up in capital expenditure is believed to be required to invest in growth.

This will have implications for debt, depreciation and interest, the broker notes. Morgan Stanley believes there is little room for upside surprises for now and retains an Underweight rating. Target is reduced to $1.15 from $1.20. Industry view is In-Line.

Target price is $1.15 Current Price is $1.23 Difference: minus $0.08 (current price is over target).
If SIP meets the Morgan Stanley target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.26, suggesting upside of 2.2% (ex-dividends)

The company's fiscal year ends in January.

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

UBS rates SIP as Buy (1) -

Sigma had pre-announced its result so yesterday's report brought no surprises. Second half growth outperformed despite a difficult industry backdrop, the broker notes.

The broker expects Hep C drug sales will slow in FY18 and as ever, Sigma remains beholden to the government's pharmacy review which is currently delayed. The share buyback is providing support and the broker retains Buy and  $1.40 target.

Target price is $1.40 Current Price is $1.23 Difference: $0.17
If SIP meets the UBS target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $1.26, suggesting upside of 2.2% (ex-dividends)

The company's fiscal year ends in January.

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 TPM as Overweight (1) -

One of the features of the first half results that impressed Morgan Stanley was the better cost reductions from the iiNet acquisition.

When the deal was announced in 2015 the initial target was $40m and 18 months later the company has delivered  around $80m lift to EBITDA, the broker observes.

Morgan Stanley retains an Overweight rating and In-Line industry view. Target is reduced to $10.00 from $10.75.

Target price is $10.00 Current Price is $6.65 Difference: $3.35
If TPM meets the Morgan Stanley target it will return approximately 50% (excluding dividends, fees and charges).

Current consensus price target is $7.79, suggesting upside of 16.5% (ex-dividends)

The company's fiscal year ends in July.

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

Credit Suisse rates WBC as Neutral (3) -

Following the bank's update on wealth management markets, Credit Suisse reiterates a $34 price target and Neutral rating.

The broker believes after over a decade of a range of landmark wealth acquisitions, wealth overall has been a disappointment for the major banks, with lower earnings growth and higher earnings volatility than bank earnings and challenging life insurance industry business.

Nevertheless, Westpac appears to be better positioned structurally in that it lacks legacy life insurance exposure and wealth subsidiary double-gearing of capital exposure.

Target price is $34.00 Current Price is $33.44 Difference: $0.56
If WBC meets the Credit Suisse target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $33.49, suggesting downside of -0.9% (ex-dividends)

The company's fiscal year ends in September.

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

Deutsche Bank rates WBC as Buy (1) -

BT Financial Group ((BTT)) is the best of breed among the major bank-owned wealth management divisions, in Deutsche Bank's view, as there is unusually strong growth across both investments and insurance in recent years and a sound return on equity.

The platform appears to have market leading functionality as well as significant integration with Westpac's online and mobile banking software. Buy recommendation and $35.90 target retained.

Target price is $35.90 Current Price is $33.44 Difference: $2.46
If WBC meets the Deutsche Bank target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $33.49, suggesting downside of -0.9% (ex-dividends)

The company's fiscal year ends in September.

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

Macquarie rates WBC as Outperform (1) -

The bank has highlighted a commitment and desire to grow and invest in its wealth management platform. Macquarie believes the new offering is leading in the sector although wealth management has still fallen short of aspirations set out 10-15 years ago.

Despite this, the broker believes the exposure is a good generator of capital, given a relatively high return that supports the bank's pay-out ratio. Outperform and $37 target retained.

Target price is $37.00 Current Price is $33.44 Difference: $3.56
If WBC meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $33.49, suggesting downside of -0.9% (ex-dividends)

The company's fiscal year ends in September.

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

Ord Minnett rates WBC as Hold (3) -

Ord Minnett found little that was surprising in the bank's wealth business update, with strong growth in funds under management.

With growth in wealth management expected to exceed that of the traditional banking business over the long term, the lower capital intensity of growth from this segment is expected to be an important contributor to dividends, given pay-out ratios are currently stretched at around 80%.

Ord Minnett retains a Hold rating and $32.50 target.

Target price is $32.50 Current Price is $33.44 Difference: minus $0.94 (current price is over target).
If WBC meets the Ord Minnett target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $33.49, suggesting downside of -0.9% (ex-dividends)

The company's fiscal year ends in September.

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