Australian Broker Call

Credit Suisse rates AGL as Outperform (1) -

Since the first half results the market price of hedges against high pricing period of over $300/megawatt hour has almost doubled because of an increasing frequency of peak price events.

Credit Suisse calculates, assuming higher prices are passed through to consumers, that the company is positively leveraged to higher prices because of its substantial gas and hydro peak generation capacity.

The broker retains a Outperform rating and $26 target, noting there remains significant upside to valuation because of prevailing forward electricity prices of $70-80/megawatt hour.

The broker decreases FY17 net profit forecast by -3.5% because of NSW coal supply issues and a Queensland peak demand event.

Target price is $26.00 Current Price is $25.45 Difference: $0.55
If AGL meets the Credit Suisse target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $25.41, suggesting upside of 0.7% (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 CSL as Buy (1) -

UBS analysis indicates a short supply cycle is emerging and this thesis will be tested with broad industry channel checks and a key PPTA conference on March 14.

Historically, the short cycle cannot be remedied in under three years and has been the catalyst for an earnings upgrade. Hence, the broker places its rating and price target under review pending confirmation of such.

Buy and $122 target retained.

Target price is $122.00 Current Price is $124.74 Difference: minus $2.74 (current price is over target).
If CSL 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 $124.39, suggesting upside of 0.2% (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: 0.8

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

Citi rates CTX as Buy (1) -

Further refining of the modeling has triggered minor adjustments to forecasts.Target price falls to $35.66 from $35.72. Buy.

Target price is $35.66 Current Price is $28.55 Difference: $7.11
If CTX meets the Citi target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $33.78, suggesting upside of 18.9% (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

Morgan Stanley rates FMG as Upgrade to Equal-weight from Underweight (3) -

Throughout 2016, the company has benefited from stronger iron ore prices.This has allowed cash flow to facilitate early debt reduction. With the iron ore price falling back from recent highs, the equity has now moved back to fair value, in Morgan Stanley's view.

Incorporating the commodities team's latest forecasts Morgan Stanley upgrades to Equal-weight from Underweight, raising the target to $6.30 from $6.00.

The broker's thesis for the miners is supported by mark-to-market upside and ongoing efficiency gains. Industry view is Attractive.

Target price is $6.30 Current Price is $6.15 Difference: $0.15
If FMG meets the Morgan Stanley target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $6.84, suggesting upside of 9.6% (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: 0.3

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

Macquarie rates GMA as Outperform (1) -

The company has confirmed its second largest customer is terminating its exclusivity agreement for the provision of lenders mortgage insurance. Macquarie had incorporated the termination in its forecasts following the 2016 result.

The broker notes earning support, 10% dividend yield for FY17-19 and forecast capital requirements support a capital return of around $2.05 per share over the same period.

The broker believes the volatility in the stock has been affected by the housing market/earnings outlook, expectations of a major shareholder's position and customer re-contracting risk, all of which remain factors in FY17. Outperform and $3.56 target retained.

Target price is $3.56 Current Price is $2.86 Difference: $0.7
If GMA meets the Macquarie target it will return approximately 24% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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

Macquarie rates MPL as Neutral (3) -

Competitor BUPA has advised that rules have been tightened around admission of policy holders to public hospitals as private patients.

Medibank Private does not appear to have made material changes to its fund rules, including the definition and admission of private patients to public hospitals. While any reduction in claims costs could ultimately flow through to slower premium growth, such a change could boost short-term net margins, Macquarie estimates.

The broker retains a Neutral rating and raises the target to $3.00 from $2.95.

Target price is $3.00 Current Price is $2.82 Difference: $0.18
If MPL meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $2.72, suggesting downside of -3.4% (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

Citi rates MYR as Buy (1) -

Myer is scheduled to release interim financials on Thursday this week (16th March). Citi's forecast is for core profit of $68m, up 14% on the pcp. LFL sales growth is expected to be 2.2%, boosted by strong Christmas trading.

Gross margin is expected to have decreased by -21bp. Citi's analysis indicates sales activity was broadly in-line with prior years, as was discounting. Buy. Target $1.40.

Target price is $1.40 Current Price is $1.16 Difference: $0.24
If MYR meets the Citi target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $1.29, suggesting upside of 11.3% (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 NUF as Outperform (1) -

Macquarie believes, over the next 6-9 months, Nufarm is well placed to take part in any industry consolidation. Five out of the six major global agricultural chemical players are in merger talks and potential divestments provide Nufarm with M&A opportunities.

The broker also notes, outside of acquisition opportunities, the company offers good growth via the $20m in strategic benefits that are planned in FY17 as well as other initiatives.

Outperform rating and $9.50 target retained.

Target price is $9.50 Current Price is $9.16 Difference: $0.34
If NUF meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $9.07, suggesting downside of -2.7% (ex-dividends)

The company's fiscal year ends in July.

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

Credit Suisse rates ORG as Upgrade to Outperform from Underperform (1) -

Credit Suisse finds some value at current levels despite a disappointing balance sheet. Rating is upgraded to Outperform from Underperform. Target is raised to $7.00 from $6.30.

The broker is mindful of the magnified risks on any downside in oil prices, caused by the company's excessive leverage, and acknowledges it would be considerably easier owning the stock if this balance sheet issue did not exist.

The broker believes Ironbark should be separated out of the planned divestments. Credit Suisse calculates it could ultimately contribute 40-50% in debt reduction as the entirety of a new business that is spun out. The broker believes Origin does not have the capital to develop Ironbark for some time.

Credit Suisse also struggles with the question of why the company has not raised equity as it is currently spending $60-120m on hedging.

Target price is $7.00 Current Price is $6.36 Difference: $0.64
If ORG meets the Credit Suisse target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $7.23, suggesting upside of 9.7% (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

Citi rates PRU as Neutral (3) -

As the company has managed to acquire US$60m in debt financing to fund its growth strategy, Citi analysts have updated their modeling. Estimates have largely remained unchanged, while the analysts consider it a positive (larger funding than they had anticipated). Neutral. Target 39c.

Target price is $0.39 Current Price is $0.35 Difference: $0.045
If PRU meets the Citi target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $0.45, suggesting upside of 26.1% (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 PRU as Equal-weight (3) -

Spot commodities may be moving lower, but Morgan Stanley believes many are still priced above its forecasts. Mark-to-market upside and efficiencies still drive cash flow potential.

The broker believes  the pull back in the first quarter renews the opportunity for upside. The industry may have outperformed and is now giving up some gains but the broker believes this largely reflects momentum-style investment re-positioning.

The broker incorporates the revised Edikan mine plan for extra waste movements. Equal -weighted rating retained. Target falls to $0.33 from $0.39.  Industry view is Attractive.

Target price is $0.33 Current Price is $0.35 Difference: minus $0.015 (current price is over target).
If PRU meets the Morgan Stanley target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.45, suggesting upside of 26.1% (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 RSG as Upgrade to Overweight from Equal-weight (1) -

Resolute Mining was the best performer in the ASX 200 throughout the first three quarters of 2016, Morgan Stanley observes, but gave up half the gains as gold miners moved lower in the wake of the US election.

Morgan Stanley believes the stock is undervalued, as the equity continues to perform like a highly leveraged stock, even though it is now net cash and has lowered its all-in sustaining costs.

Rating is upgraded to Overweight from Equal-weight. Target is reduced to $2.30 from $2.40.  Industry view is Attractive.

Target price is $2.30 Current Price is $1.34 Difference: $0.96
If RSG meets the Morgan Stanley target it will return approximately 72% (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

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

Spot commodities may be moving lower, but Morgan Stanley believes many are still priced above its forecasts. Mark-to-market upside and efficiencies still drive cash flow potential.

The broker believes the pull back in the first quarter renews the opportunity for upside. The industry may have outperformed and is now giving up some gains but the broker believes this largely reflects momentum-style investment re-positioning.

Equal-weight retained. Target falls to $2.75 from $3.15. Industry view is Attractive.

Target price is $2.75 Current Price is $2.49 Difference: $0.26
If SYR meets the Morgan Stanley target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $5.29, suggesting upside of 113.2% (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

UBS rates TPM as Initiation of coverage with Neutral (3) -

UBS initiates coverage with a Neutral rating and $6.20 target, with the shares trading close to valuation.

The broker believes the company is well placed to capitalise on the opportunity to take market share on the NBN, although this will be at the expense of margins.

A risk to the recommendation lies with forecasts for EBITDA to grow to $882m in FY19 from $775m in FY16, Which UBS admits are around 5% below  consensus.

The broker highlights NBN migration costs are likely to grow and it has a soft outlook for organic growth in corporate. UBS also incorporates Singapore losses.

Target price is $6.20 Current Price is $6.32 Difference: minus $0.12 (current price is over target).
If TPM 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 $8.49, suggesting upside of 28.2% (ex-dividends)

The company's fiscal year ends in July.

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

Deutsche Bank rates TWE as Hold (3) -

Deutsche Bank analysts have returned from company presentation and site tour with increased confidence this company remains on high growth path. Valuation is high, hence why the rating remains Hold. Target unchanged at $12.

Also, it is the analysts' view that improvement seen thus far is a credit to the management team given the low industry returns.

Target price is $12.00 Current Price is $12.31 Difference: minus $0.31 (current price is over target).
If TWE meets the Deutsche Bank target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.83, suggesting downside of -3.2% (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 TWE as Neutral (3) -

Macquarie observes the investor briefing has explained the future growth strategy but believes the risk to growth is increasing, as the company is relying on new regions and products to deliver upside.

Neutral and $10.98 target retained.

Target price is $10.98 Current Price is $12.31 Difference: minus $1.33 (current price is over target).
If TWE meets the Macquarie target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.83, suggesting downside of -3.2% (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