Australian Broker Call

Deutsche Bank rates ALQ as Hold (3) -

The latest investor presentation in Hong Kong reveals to Deutsche Bank that mineral sample flow volumes have improved, with growth above 10% for the last month and peaking around 25%, above the rates suggested at the AGM in July.

The broker increases FY17 geochemistry revenue growth to 10% versus previous estimates of 1%. FX revisions have led to earnings-per-share forecast reductions of 0.6% for FY17-20. Deutsche Bank retains a Hold rating. Target is raised to $5.02 from $4.41.

Target price is $5.02 Current Price is $5.97 Difference: minus $0.95 (current price is over target).
If ALQ meets the Deutsche Bank target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.69, suggesting downside of -21.8% (ex-dividends)

The company's fiscal year ends in March.

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 APN as Neutral (3) -

UBS strategists ponder whether the growth trade is becoming vulnerable with a backdrop of negative earnings revisions and a potential lift in bond yields.

At current prices APN appears inexpensive but weaker radio momentum has led UBS to cut EBITDA forecasts for the division by 10%. The broker concedes management has executed well and driven shareholder value through the de-merger, radio/outdoor initiatives and de-leveraging.

The broker retains a Neutral rating and price target is moved to $3.50 from $4.20.

Target price is $3.50 Current Price is $3.49 Difference: $0.01
If APN meets the UBS target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $4.64, suggesting upside of 32.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.6

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

UBS rates APO as Buy (1) -

With the recent share price recovery APN Outdoor is still trading at a discount to the market, UBS observes. Recent industry data points to sector growth being buoyant.

UBS still envisages an earnings rebound in the first half of 2017 with overall market demand improving after a weaker fourth quarter that was partly affected by the Olympics. Buy retained. Target is raised to $6.00 from $5.50.

Target price is $6.00 Current Price is $5.44 Difference: $0.56
If APO meets the UBS target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $6.27, suggesting upside of 15.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.7

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

Macquarie rates BAP as Neutral (3) -

Bapcor will acquire specialist wholesale business, MTQ Engine Systems for $17m. At first blush the acquisition appears sound to Macquarie.

While the company is well managed and has a defensible growth outlook with a solid balance sheet the broker considers the trading multiples in the near term are full. Neutral retained. Target is raised to $6.89 from $6.78.

Target price is $6.89 Current Price is $6.23 Difference: $0.66
If BAP meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $6.50, suggesting upside of 5.2% (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

Citi rates BHP as Neutral (3) -

The company has updated on its petroleum business at a briefing in London. Citi observes there was more disclosure than ever before but it is unlikely to make any meaningful change to broker views.

Volumes in the petroleum business are expected to decline unless there is a pick up in oil and gas prices and the US onshore business is considered likely to struggle to achieve positive cash flow in the current environment.

Citi's main concern is that, under a high gas price scenario, the whole US industry will increase, thereby keeping a cap on any potential price recovery and returns from the company's onshore business.

Neutral retained with a $21 target.

Target price is $21.00 Current Price is $22.85 Difference: minus $1.85 (current price is over target).
If BHP meets the Citi target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $23.29, suggesting upside of 0.6% (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

Macquarie rates BHP as Outperform (1) -

The company's latest briefing confirmed Macquarie's view that higher energy prices will be required to grow volumes in the petroleum division.

Declining conventional production is considered only likely to be offset by shale if oil and gas prices move back towards US$60-70/bbl and US$3.25-3.50/mmbtu respectively.

The recent rise in coking coal prices and sustained strength in iron ore present material upside to base case forecasts, the broker believes. Outperform retained with $25 target.

Target price is $25.00 Current Price is $22.85 Difference: $2.15
If BHP meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $23.29, suggesting upside of 0.6% (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

Morgans rates BHP as Add (1) -

Morgans maintains its view that BHP Billiton is an attractive investment at the bottom of the cycle. The broker believes OPEC's decision to remove 750,000 bopd is a positive signal that the cartel will defend its market share.

Further upside is on offer in oil, the broker believes, given the market appears close to balanced supply and, as a result, vulnerable to any near-term disruptions.

Add rating and $25.30 target retained.

Target price is $25.30 Current Price is $22.85 Difference: $2.45
If BHP meets the Morgans target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $23.29, suggesting upside of 0.6% (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

Ord Minnett rates BHP as Hold (3) -

The petroleum division briefing signals a 20% drop in production between FY17 and FY21 because of natural field decline in US onshore business. Under consensus pricing the business does not generate material free cash flow until FY21.

Ord Minnett's estimates are around break even for free cash flow until FY21 and considered to be similar to the outlook projected by the company. Ord Minnett retains a Hold rating and $20 target.

Target price is $21.00 Current Price is $22.85 Difference: minus $1.85 (current price is over target).
If BHP meets the Ord Minnett target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $23.29, suggesting upside of 0.6% (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

Deutsche Bank rates BSL as Hold (3) -

Deutsche Bank updates forecasts in line with its quarterly commodities review and as a result FY17 and FY18 profit estimates decline by 14% and 9% respectively.

 While management expects first half EBIT to increase by around 50% versus the prior half the broker believes it will actually decline around 42%, largely because of lower steel prices and higher costs such as for coking coal.

The broker retains a Hold rating. Target is reduced to $7.65 from $7.86.

Target price is $7.65 Current Price is $7.79 Difference: minus $0.14 (current price is over target).
If BSL 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 $9.30, suggesting upside of 20.4% (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

UBS rates FXJ as Neutral (3) -

UBS strategists ponder whether the growth trade is becoming vulnerable with a backdrop of negative earnings revisions and a potential lift in bond yields.

On valuation Fairfax appears attractive to UBS, relative to other online classifieds, with Domain the main driver. Further growth should benefit from the roll out of the agent equity model. Still, print declines are likely to drive the company's earnings lower in FY17.

The broker maintains a Neutral rating and $1.00 target.

Target price is $1.00 Current Price is $0.96 Difference: $0.04
If FXJ meets the UBS target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $1.06, suggesting upside of 9.8% (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 IGO as Outperform (1) -

The company has announced a 19c a share bid for Windward Resources ((WIN)), which owns a large tenement that is adjacent to the Nova project. This significantly increases the holding in the Fraser Range.

Macquarie observes that securing additional tenements provides the potential to extend the life of the Nova nickel project. Outperform maintained. Target is $4.80.

Target price is $4.80 Current Price is $3.96 Difference: $0.84
If IGO meets the Macquarie target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $3.81, suggesting downside of -6.4% (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

UBS rates MYO as Neutral (3) -

UBS strategists ponder whether the growth trade is becoming vulnerable with a backdrop of negative earnings revisions and a potential lift in bond yields.

MYOB is a quality business UBS believes, with the benefit of an incumbent position and recurring revenue. The long-term growth profile hinges on cloud penetration and market share and the broker forecasts cloud penetration to lift to 80% in the long term.

The broker forecasts revenue growth of 11% and earnings per share growth of 12%. Neutral rating retained. Target is $3.60.

Target price is $3.60 Current Price is $3.77 Difference: minus $0.17 (current price is over target).
If MYO meets the UBS target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.01, suggesting upside of 6.4% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.5

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

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

UBS strategists ponder whether the growth trade is becoming vulnerable with a backdrop of negative earnings revisions and a potential lift in bond yields. TV is qualitatively the broker's least preferred media with audience declines still outpacing revenues.

UBS reduces TV forecasts because of the soft ad market outlook for FY17, cutting Nine's earnings per share estimates by 27% and by 26% for FY18.

The broker downgrades to Neutral from Buy given the structural concerns. Valuation appears reasonable but UBS believes the risk to earnings is skewed to the downside. Target is lowered to 90c from $1.30.

Target price is $0.90 Current Price is $1.01 Difference: minus $0.115 (current price is over target).
If NEC meets the UBS target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.05, suggesting upside of 5.0% (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

Macquarie rates ORE as Outperform (1) -

FY16 results revealed a net loss of US$22m, in line with Macquarie. FY17 production guidance is for over 15,000t. 

Macquarie finds the outlook less rosy than previously forecasts, with additional supply coming to the market putting a ceiling on prices while the lithium market appear to be coming off the boil.

If aspiring hard rock producers fail to bring production to market then the broker believes Orecobre is best placed to benefit. Outperform retained. Target drops to $4.30 from $5.00.

Target price is $4.30 Current Price is $3.52 Difference: $0.78
If ORE meets the Macquarie target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $4.12, suggesting upside of 16.4% (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

Morgans rates PPS as Add (1) -

The company will acquire Wensley Mackay, a provider of self managed pension services in the UK. Morgans conservatively estimate the deal will boost earnings per share by 5.5% by year four.

Until this deal the broker observes Praemium was unable to offer a complete investment solution in the UK for the pensions market.

Add rating retained and the target rises to 61c from 57c.

Target price is $0.61 Current Price is $0.47 Difference: $0.145
If PPS meets the Morgans target it will return approximately 31% (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

Credit Suisse rates RMD as Outperform (1) -

Credit Suisse reviews assumptions ahead of the first quarter results.

The broker remains aware that nationalisation of US competitive bidding remains a risk, with the potential for manufacturers to provide relief via price discounting, but believes the industry should benefit from robust underlying volume growth.

Target is reduced to $9.40 from $9.80 and Outperform retained.

Target price is $9.40 Current Price is $8.38 Difference: $1.02
If RMD meets the Credit Suisse target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $9.63, suggesting upside of 14.5% (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: 0.6

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

Macquarie rates SWM as Neutral (3) -

The company has sold its 50% stake in Presto to Foxtel. Macquarie expects, with the price undisclosed, that it is likely an impairment of the asset will follow. The removal of the associate losses is judged to be 5% accretive to adjusted earnings.

Macquarie continues to find the outlook for Seven West challenging, with increasing cost pressures and structural difficulties in the broader TV market. Neutral rating and 90c target retained.

Target price is $0.90 Current Price is $0.74 Difference: $0.16
If SWM meets the Macquarie target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $0.81, suggesting upside of 9.2% (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

UBS rates SWM as Neutral (3) -

UBS strategists ponder whether the growth trade is becoming vulnerable with a backdrop of negative earnings revisions and a potential lift in bond yields.

TV is qualitatively the broker's least preferred media with audience declines still outpacing revenues. Yet Seven Network continues to perform strongly in terms of audience share.

Near-term upside hinges on cost reductions, UBS believes. FY18 earnings per share estimates are lowered by 3.5% because of a reduction in TV revenue forecasts. Neutral rating is maintained. Target falls to 75c from 85c.

Target price is $0.75 Current Price is $0.74 Difference: $0.01
If SWM meets the UBS target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $0.81, suggesting upside of 9.2% (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

UBS rates SXL as Neutral (3) -

UBS strategists ponder whether the growth trade is becoming vulnerable with a backdrop of negative earnings revisions and a potential lift in bond yields. TV is qualitatively the broker's least preferred media with audience declines still outpacing revenues.

That said UBS envisages potential for Southern Cross to record a result at the top end of the guidance range for FY17 of $177-183m in EBITDA. Profitability is also expected to lift in FY18, with further upside should Southern Cross improve on the regional TV share that WIN was able to deliver.

The stock's valuation now looks stretched and UBS retains a Neutral rating. Target rises to $1.50 from $1.10.

Target price is $1.50 Current Price is $1.53 Difference: minus $0.025 (current price is over target).
If SXL meets the UBS target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.35, suggesting downside of -11.9% (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

Credit Suisse rates SYR as Outperform (1) -

Credit Suisse is surprised by the resignation of managing director Tolga Kumova. While stepping down from the position is a positive, allowing Mr Kumova to focus on the spherical business, the broker believes his resignation from the board needs explanation.

Chairman Jim Askew will be acting MD until a new one is recruited. Outperform rating retained. Target is $7.80.

Target price is $7.80 Current Price is $3.35 Difference: $4.45
If SYR meets the Credit Suisse target it will return approximately 133% (excluding dividends, fees and charges).

Current consensus price target is $6.36, suggesting upside of 72.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.5

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

Deutsche Bank rates SYR as Buy (1) -

Deutsche Bank considers the resignation of managing director Tolga Kumova a positive step. While Mr Kumova took the company to a fully funded developer of the world's highest grade graphite project he does not believe he has the appropriate skill set to take it to the commercial production phase.

Deutsche Bank is confident in the quality of the project and strength of the operations team. The broker's Buy rating is retained. Target is $7.30.

Target price is $7.30 Current Price is $3.35 Difference: $3.95
If SYR meets the Deutsche Bank target it will return approximately 118% (excluding dividends, fees and charges).

Current consensus price target is $6.36, suggesting upside of 72.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.5

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

Morgan Stanley rates SYR as Underweight (5) -

Morgan Stanley believes the sudden resignation of managing director Tolga Kumova raises some questions. Chairman Jim Askew will take on an executive role while the board searches for a replacement.

The broker acknowledges the move reflects an evolving strategic direction, as the company moves to a producer from explorer, but wonders whether the announcement could have been better planned and why a transition could not have been carried out in parallel.

The broker retains an Underweight rating and $3.75 target. Industry view is Attractive.

Target price is $3.75 Current Price is $3.35 Difference: $0.4
If SYR meets the Morgan Stanley target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $6.36, suggesting upside of 72.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.5

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

Ord Minnett rates WES as Hold (3) -

Ord Minnett reviews the company's divisional performance and identifies concerns regarding the slowing EBIT growth at Coles. Yet, the broker suggests Bunnings is under appreciated for its strong growth and high return on capital.

Overall the stock remains attractive to the broker but, given the share price performance, there is modest valuation support. Hold rating retained. Target rises to $44 from $40.

Target price is $44.00 Current Price is $44.15 Difference: minus $0.15 (current price is over target).
If WES meets the Ord Minnett target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $42.59, suggesting downside of -4.4% (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 XRO as Neutral (3) -

Macquarie updates forecasts to account for currency following the first half result. The business is in a rapid growth phase and is making significant investments in product and marketing.

The broker recalibrates its forecasts and raises the target to NZ$20.50 from NZ$16.50. The stock is judged to be the fifth most expensive when viewed against a sample of software comparables but has the third highest growth rate. This suggests to Macquarie the stock is trading around fair value and a Neutral rating is maintained.

Current Price is $18.50. Target price not assessed.

Current consensus price target is $18.00, suggesting downside of -3.1% (ex-dividends)

The company's fiscal year ends in March.

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