Australian Broker Call

Deutsche Bank rates AZJ as Hold (3) -

Deutsche Bank has reviewed prior cyclones and, using Cyclone Marcia as an estimate (2015), this results in a reduction to FY17 EBIT forecasts of $27.6m.

The broker notes Cyclone Debbie has affected the majority of the coal network, with multiple mine closures and the suspension of operations at the major export terminals.

Given the one-off nature of the impact, the broker retains a Hold rating and $5.10 target.

Target price is $5.10 Current Price is $5.25 Difference: minus $0.15 (current price is over target).
If AZJ 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 $4.78, suggesting downside of -9.0% (ex-dividends)

The company's fiscal year ends in June.

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

UBS rates BLD as Buy (1) -

The extensive rainfall recently in Sydney poses a threat to guidance, UBS believes. While in acknowledging an analysis of Sydney alone is too narrow, given the company's geographic profile, the broker notes  profitability in Sydney is above average.

The broker estimates that the company's guidance implies 15-20% underlying EBIT growth in the second half, which appears in aggressive target in the context of an estimated -2% decline in the first half.

Nevertheless, the short term risk is mitigated by the longer term opportunity as UBS notes the company's a beneficiary of the medium-term outlook for domestic infrastructure spending.

UBS also believes  the market is yet to fully incorporate the contribution from Headwaters. In this context,  the broker believes any potential weakness in the share price related to rain-based threats to FY17 would make an attractive buying opportunity..

Buy and $6.90 target retained.

Target price is $6.90 Current Price is $5.84 Difference: $1.06
If BLD meets the UBS target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $6.46, suggesting upside of 10.6% (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

Citi rates CBA as Sell (5) -

Citi analysts note APRA is getting tougher with macro-prudential tightening to rein in housing lending growth in Australia. The analysts suspect there's a lot more going on behind the scenes than is publicly being disclosed.

The recent rally in share prices, in combination with a tougher stance by regulators in Australia, translates into a more cautious stance on the sector overall.

Target price is $75.00 Current Price is $85.91 Difference: minus $10.91 (current price is over target).
If CBA meets the Citi target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $80.76, suggesting downside of -6.0% (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

Credit Suisse rates CBA as Neutral (3) -

APRA has announced further measures to tighten lending practices for residential mortgages. The flow of new interest-only lending will be restricted to 30% of total housing lending. There is no change in the existing 10% cap on growth in investor loans.

Strict internal limits must be applied for any interest-only loans above 80% of the loan-to-valuation ratio while justification must be provided for loans over 90% of the LVR.

Credit Suisse suspects the modest impact on credit growth could be mitigated by new interest-only flows being directed into principal & interest loans.

The Neutral rating and $89 target are unchanged.

Target price is $89.00 Current Price is $85.91 Difference: $3.09
If CBA meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $80.76, suggesting downside of -6.0% (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

Deutsche Bank rates CBA as Hold (3) -

APRA has announced further measures to tighten lending practices for residential mortgages. The flow of new interest-only lending will be restricted to 30% of total housing lending. There is no change in the existing 10% cap on growth in investor loans.

Strict internal limits must be applied for any interest-only loans above 80% of the loan to valuation ratio while justification must be provided for loans over 90% of the LVR.

Deutsche Bank expects the majority of borrowers should be able to switch to P&I loans and that the overall impact on loan growth will be modest. The broker already incorporates a decline in housing loan growth over the next two years for the sector.

Target is $86.60. Hold rating.

Target price is $86.60 Current Price is $85.91 Difference: $0.69
If CBA meets the Deutsche Bank target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $80.76, suggesting downside of -6.0% (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

Macquarie rates CBA as Neutral (3) -

Macquarie believes the decision by APRA to keep the 10% investor cap should provide scope for banks to continue lending to investors to meet the growing demand.

APRA has moved to limit interest-only lending flow to 30% of total new residential lending, which in the broker's view is prudent given the higher risk nature of the segment.

This action is expected to further tighten the bank lending criteria,  which ultimately should result in lower longer-term credit growth across the market. In the near term this places further constraints on the domestic housing market, Macquarie asserts.

Neutral rating and $85 target retained.

Target price is $85.00 Current Price is $85.91 Difference: minus $0.91 (current price is over target).
If CBA meets the Macquarie target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $80.76, suggesting downside of -6.0% (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

Morgan Stanley rates CBA as Underweight (5) -

APRA has announced further measures to tighten lending practices for residential mortgages. The flow of new interest-only lending will be restricted to 30% of total housing lending. There is no change in the existing 10% cap on growth in investor loans.

Strict internal limits must be applied for any interest-only loans above 80% of the loan to valuation ratio while justification must be provided for loans over 90% of the LVR.

Morgan Stanley suspects the latest measures may not be enough to address financial stability concerns and believes mortgage risk weight should be lifted further.

The latest measures should reduce the amount of higher-risk lending but the broker is not convinced this will materially slow down growth in investment property lending or the build up in household debt.

Underweight retained. Target is $73. Industry view: In-line.

Target price is $73.00 Current Price is $85.91 Difference: minus $12.91 (current price is over target).
If CBA meets the Morgan Stanley target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $80.76, suggesting downside of -6.0% (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 CBA as Hold (3) -

APRA has announced further measures to tighten lending practices for residential mortgages. The flow of new interest-only lending will be restricted to 30% of total housing lending. There is no change in the existing 10% cap on growth in investor loans.

Strict internal limits must be applied for any interest-only loans above 80% of the loan to valuation ratio while justification must be provided for loans over 90% of the LVR.

Ord Minnett believes this will have a muted effect on overall volumes but should improve the quality of the mortgage books. Any re-pricing to control flows for this segment of the portfolio would enhance bank margins, in the broker's opinion.

Hold rating. Target is $75.

Target price is $75.00 Current Price is $85.91 Difference: minus $10.91 (current price is over target).
If CBA meets the Ord Minnett target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $80.76, suggesting downside of -6.0% (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 CBA as Neutral (3) -

APRA has announced further measures to tighten lending practices for residential mortgages. The flow of new interest-only lending will be restricted to 30% of total housing lending.

Strict internal limits must be applied for any interest-only loans above 80% of the loan to valuation ratio while justification must be provided for loans over 90% of the LVR.

UBS believes this is a step towards taking some of the heat out of the housing market. The broker expects the banks to substantially reduce the discounts offered to new interest-only loans.

While this will slow credit growth, UBS finds the impact on the marginal buyer in the overheated Sydney and Melbourne housing markets harder to gauge.

Neutral retained. Target is $83.

Target price is $83.00 Current Price is $85.91 Difference: minus $2.91 (current price is over target).
If CBA meets the UBS target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $80.76, suggesting downside of -6.0% (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

Morgan Stanley rates DOW as Downgrade to Underweight from Equal-weight (5) -

Prior to the bid for Spotless ((SPO)) Morgan Stanley observes the company shares had re-rated materially. Investors interpreted an upgrade of FY17 guidance as a sign of improving operations. The broker believes this re-rating is premature.

Contract roll-offs are expected to challenge earnings through to FY20. In response, the broker suspects, the company is now looking to embark on an aggressive M&A growth drive.

Morgan Stanley expects investors will progressively consider the stock a less-compelling investment proposition. Rating is downgraded to Underweight from Equal-weight and the target is raised to $4.83 from $4.01. Industry view is Cautious.

Target price is $4.83 Current Price is $5.79 Difference: minus $0.96 (current price is over target).
If DOW meets the Morgan Stanley target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.20, suggesting upside of 7.2% (ex-dividends)

The company's fiscal year ends in June.

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

Citi rates EPW as Upgrade to Buy from Sell (1) -

The company has guided towards stronger retail margins in Australia, well above Citi's estimate, and the analysts are now taking the view that a positive news cycle may have begun for the company.

On this basis, the stock is being doubly upgraded to Buy/High Risk from Sell. High electricity prices plus state government support are likely to translate into move renewables projects forward, the analysts predict. Target price jumps to $1.46 from $1.05.

Target price is $1.46 Current Price is $1.31 Difference: $0.15
If EPW meets the Citi target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $1.24, suggesting downside of -5.6% (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

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

The company has revised its FY17 gross margin outlook to $3.50 per megawatt-hour from $3.00/MWh. FY18 guidance has been provided at $3.50/MWh versus Macquarie's expectations of $2.70/MWh.

The broker finds it challenging to predict the company's retail business as earnings visibility is low and a function of the hedge book. Rating is upgraded to Neutral from Underperform on the back of the new guidance. Target is raised to $1.20 from $1.15.

Target price is $1.20 Current Price is $1.31 Difference: minus $0.11 (current price is over target).
If EPW meets the Macquarie target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.24, suggesting downside of -5.6% (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

Morgans rates EPW as Hold (3) -

ERM has announced that while the bulk of the FY17 outlook provided at its result in February remains the case, Australian retail gross margin expectations have been upgraded by 16.7%, with FY18 expected to see similar numbers.

The surprise upgrade leads the broker to increase earnings forecasts by 12-14%. Target rises to $1.24 from $1.05, with the possibility of higher dividends. But given the share price response on Friday, the broker retains Hold.

Target price is $1.05 Current Price is $1.31 Difference: minus $0.26 (current price is over target).
If EPW meets the Morgans target it will return approximately minus 20% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.24, suggesting downside of -5.6% (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

Morgan Stanley rates FAR as Overweight (1) -

The company has announced an agreement with CNOOC aimed at bidding on new acreage within Senegal.

Morgan Stanley believes the move is sensible one, as it combines the company's expertise in the region with a large oil company that has greater financial depth and operating experience.

Overweight retained. Target is $0.13. Industry view: In-Line.

Target price is $0.13 Current Price is $0.08 Difference: $0.048
If FAR meets the Morgan Stanley target it will return approximately 59% (excluding dividends, fees and charges).

Current consensus price target is $0.16, suggesting upside of 95.1% (ex-dividends)

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

Deutsche Bank rates GBT as Buy (1) -

Aegon has stated its current platform, GBST's Composer, will be the base of its combined Aegon/Cofunds platform. Deutsche Bank believes this is an important announcement in the context of GBST's very weak second half guidance.

The business will underpin a significant amount of services work in FY18 and FY19, with a positive operating leverage likely to occur in FY18. Buy rating and $4.40 target retained.

Target price is $4.40 Current Price is $2.93 Difference: $1.47
If GBT meets the Deutsche Bank target it will return approximately 50% (excluding dividends, fees and charges).

Current consensus price target is $3.85, suggesting upside of 31.5% (ex-dividends)

The company's fiscal year ends in June.

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

Citi rates PRU as Neutral (3) -

Perseus has updated the financial world on its key project in Cote D'Ivoire, Sissingue. Construction of the operation is circa 40% completed. The project remains on schedule for a March 2018 start, and remains on budget, Citi analysts have been assured.

Management is guiding towards annual production of 70koz over the five year mine life, with average all-in costs (AISC) of US$628/oz, but Citi analysts are a bit more conservative in their assumptions.

The analysts point out, getting Sissingue right is important as it will reflect on the next project, Yaoure, also in Cote D'Ivoire. Target price loses 3c to $0.36. Neutral/High Risk rating retained. Estimates have been scaled back.

Target price is $0.36 Current Price is $0.31 Difference: $0.05
If PRU meets the Citi target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $0.45, suggesting upside of 46.2% (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

Credit Suisse rates PRU as Outperform (1) -

An updated mine plan has been released for Sissingue. Credit Suisse observes the net result is negligible on valuation and earnings relative to its modelling but takes comfort in the confirmed economics and the fact the development is tracking to plan.

The inclusion of Bele into the life-of-mine plan largely offsets the lost Sissingue ozs and delivers only modestly lower project returns on the company's assumptions.

Credit Suisse retains an Outperform rating and $0.85 target.

Target price is $0.85 Current Price is $0.31 Difference: $0.54
If PRU meets the Credit Suisse target it will return approximately 174% (excluding dividends, fees and charges).

Current consensus price target is $0.45, suggesting upside of 46.2% (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 PRU as Equal-weight (3) -

The company's revised mine plan for Sissingue, capturing the Bele deposits, signals to Morgan Stanley that the recent downgrades can be worked through.

The broker is looking for further confirmation of a recovery in operations and if that is delivered, and the equity continues to languish in the 30c region, believes the value debate will become more acute.

Morgan Stanley raises the target to $0.36 from $0.33. Equal -weighted rating retained. Industry view is Attractive.

Target price is $0.37 Current Price is $0.31 Difference: $0.056
If PRU meets the Morgan Stanley target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $0.45, suggesting upside of 46.2% (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