Australian Broker Call

Morgan Stanley rates ANZ as Downgrade to Equal-weight from Overweight (3) -

Morgan Stanley has reduced confidence in the bank's ability to recover revenue and considers its loan loss versus normalised loss rates greater than its peers.

While the broker believes company-specific problems have passed, the estimate of risk tendency confirms the bank still has the highest risk profile of the majors.

Rating is downgraded to Equal-weight from Overweight. Target is reduced to $29 from $30. Sector view is In-Line.

Target price is $29.00 Current Price is $29.90 Difference: minus $0.9 (current price is over target).
If ANZ 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 $30.68, suggesting upside of 3.8% (ex-dividends)

The company's fiscal year ends in September.

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 APO as Neutral (3) -

The company has lost the Yarra Trams contract while the smaller of the two, Metro Trains Melbourne, has been retained. The company has disclosed the full loss from the Yarra Trams concession is around -$7m.

Credit Suisse downgrades forecasts for earnings per share by -9% across 2018-19. The broker retains a Neutral rating and reduces the target to $4.70 from $5.45.

Target price is $4.70 Current Price is $4.36 Difference: $0.34
If APO meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $5.29, suggesting upside of 20.7% (ex-dividends)

The company's fiscal year ends in December.

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

Deutsche Bank rates APO as Buy (1) -

The company has provided an update on the Yarra Trams contract, indicating it failed to retain the contract. Deutsche Bank suspects, although there is no confirmation, that JCDecaux will be the new operator as it is the only party which is likely to be able to operate the combined contract.

The broker adjusts earnings estimates to take into account the contract losses, reducing net profit estimates by -8% from FY18 onwards. The broker retains a Buy rating and lowers the target to $5.00 from $5.40.

Target price is $5.00 Current Price is $4.36 Difference: $0.64
If APO meets the Deutsche Bank target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $5.29, suggesting upside of 20.7% (ex-dividends)

The company's fiscal year ends in December.

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 APO as Add (1) -

The company has lost the Yarra Trams advertising contract which contributed around $7m to operating earnings. However, it has won the preferred partner status for Metro Trains Melbourne, retaining the rights to roadside in cross-track signs.

Morgans lowers forecasts to reflect the Yarra Trams contract loss. Earnings per share for 2018 and 2019 decline -7.2% and -6.3% respectively.

Add rating retained. Target is reduced to $5.48 from $5.76.

Target price is $5.48 Current Price is $4.36 Difference: $1.12
If APO meets the Morgans target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $5.29, suggesting upside of 20.7% (ex-dividends)

The company's fiscal year ends in December.

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 APO as Upgrade to Buy from Neutral (1) -

The company has lost the Yarra Trams contract. The annualised reduction to operating earnings is expected to be around -$7m.

UBS reduces 2018-19 forecasts for earnings per share by -9%. Having previously downgraded the stock to Neutral on rising margin/re-contracting headwinds and digital yield concerns, now, even factoring these in, the stock appears inexpensive.

Rating is upgraded to Buy and the target reduced to $4.75 from $5.25.

Target price is $4.75 Current Price is $4.36 Difference: $0.39
If APO meets the UBS target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $5.29, suggesting upside of 20.7% (ex-dividends)

The company's fiscal year ends in December.

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 BPT as Neutral (3) -

The company will purchase Lattice Energy for $1.585bn. Given the scale of the proposed acquisition, UBS expects the market will need time to understand the nature of the new Beach Energy.

Lattice Energy comprises most of Origin Energy's ((ORG)), primarily gas, assets. The fixed nature of some of the contract should reduce oil price exposure and increase Beach Energy's revenue certainty, in the broker's opinion.

Neutral rating retained. Target is raised to $0.78 from $0.73.

Target price is $0.78 Current Price is $0.86 Difference: minus $0.083 (current price is over target).
If BPT meets the UBS target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.80, suggesting downside of -9.7% (ex-dividends)

The company's fiscal year ends in June.

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

Morgans rates EPW as Hold (3) -

The share price has recovered from the lows of mid 2016 but Morgans believes the market remains cautious given the earnings volatility in recent years and the reduction to the dividend in FY17.

The broker downwardly adjusts forecasts relating to the US retail business, which is a key valuation lever because of the losses currently being generated versus the upside opportunity.

Target reduced to $1.39 from $1.51 and Hold retained.

Target price is $1.39 Current Price is $1.32 Difference: $0.075
If EPW meets the Morgans target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $1.43, suggesting upside of 9.7% (ex-dividends)

The company's fiscal year ends in June.

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 HT1 as Outperform (1) -

The company has announced that it has lost the street furniture component of the Yarra Trams tender. Credit Suisse observes this is significant, given Yarra Trams is currently the company's largest and most visible contract.

The company said the impact on annualised operating earnings could be up to -$15m. Nevertheless, the stock appears compelling to the broker on valuation grounds and an Outperform rating is retained. Target is lowered to $2.50 from $3.00.

Target price is $2.50 Current Price is $1.81 Difference: $0.69
If HT1 meets the Credit Suisse target it will return approximately 38% (excluding dividends, fees and charges).

Current consensus price target is $2.78, suggesting upside of 55.7% (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 HT1 as Buy (1) -

The company has provided an update on the Yarra Trams contract, indicating it failed to retain the contract. Deutsche Bank suspects, although there is no confirmation, that JCDecaux will be the new operator as it is the only party which is likely to be able to operate the combined contract.

The broker adjusts earnings estimates to take into account the contract losses, reducing net profit estimates by -13-14% from FY18 onwards. The broker retains a Buy rating and lowers the target to $2.90 from $3.20.

Target price is $2.90 Current Price is $1.81 Difference: $1.09
If HT1 meets the Deutsche Bank target it will return approximately 60% (excluding dividends, fees and charges).

Current consensus price target is $2.78, suggesting upside of 55.7% (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

UBS rates HT1 as Buy (1) -

The stock has been underperforming with few items of news and UBS suspects some potential for loss of the Yarra Trams contract was being factored in.

Nevertheless, the quantum of the earnings impact, around -$15m to operating earnings, surprised the broker. UBS suspects guidance factors in not only the loss of the Yarra contract but also the effect on the rest of the AdShel advertising network.

UBS retains a Buy rating. Target drops to $2.25 from $2.75.

Target price is $2.25 Current Price is $1.81 Difference: $0.44
If HT1 meets the UBS target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $2.78, suggesting upside of 55.7% (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

Macquarie rates MIN as Outperform (1) -

The company upgrades medium-term production forecasts for the Mount Marion project to 450,000 tpa of spodumene concentrate. This drives upgrades to Macquarie's earnings estimates.

The likely positive catalysts include updates on potential transactions and the announcement of offtake partners for the planned spodumene development at Wodgina.

Outperform rating retained. Target is raised to $20.40 from $20.00.

Target price is $20.40 Current Price is $16.94 Difference: $3.46
If MIN meets the Macquarie target it will return approximately 20% (excluding dividends, fees and charges).

Current consensus price target is $17.60, suggesting upside of 2.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.7

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

Macquarie rates NMT as Outperform (1) -

Macquarie upgrades medium-term production forecasts for the Mount Marion project to 450,000 tpa of spodumene concentrate, in line with commentary in the annual report.

Aside from associate earnings from this project, the company is stepping up work for the Barrambie titanium project which presents upside to the broker's base case estimates.

Outperform rating retained. Target is raised to $0.38 from $0.37.

Target price is $0.38 Current Price is $0.30 Difference: $0.08
If NMT meets the Macquarie target it will return approximately 27% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

Deutsche Bank rates OFX as Hold (3) -

Deutsche Bank reduces FY18 estimates for operating earnings by -11%, given low volatility in major FX pairs which has, historically, been a significant headwind to revenue.

The elevated Australian dollar also poses further downside risk. The broker retains a Hold rating based on weak earnings momentum. Target is reduced to $1.40 from $1.60.

Target price is $1.40 Current Price is $1.68 Difference: minus $0.28 (current price is over target).
If OFX meets the Deutsche Bank target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in March.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.5

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

Ord Minnett rates PAC as Buy (1) -

The company has sold its 40% stake in IML for $120m. Ord Minnett is disappointed with the sale in terms of valuation and earnings, although acknowledges it does provide significant capital with which to make new investments.

The broker does not expect the proceeds to remain in place for long as the company has suggested there is a strong pipeline of opportunities in prospective asset management sectors. Removing IML from the broker's valuation reduces the target to $8.11 from $9.26. Buy rating is retained.

Target price is $8.11 Current Price is $6.74 Difference: $1.37
If PAC meets the Ord Minnett target it will return approximately 20% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

Citi rates QBE as Neutral (3) -

As the company has increased its catastrophe allowance, Citi lowers 2017 estimates for earnings per share by -61%. The downgrade also has an impact on future years as it leads to lower estimates for investment income on shareholder funds.

In the near-term, the broker notes QBE appears relatively insulated from potential re-insurance rate increases, so should benefit.

Neutral rating retained. Target price falls to $10.80 from $11.50.

Target price is $10.80 Current Price is $9.82 Difference: $0.98
If QBE meets the Citi target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $11.35, suggesting upside of 13.7% (ex-dividends)

The company's fiscal year ends in December.

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

Credit Suisse rates QBE as Underperform (5) -

QBE has increased its 2017 allowance for catastrophe claims by US$600m.

Credit Suisse notes the debate about the possibility of exceeding this allowance and calculates that aggregate cover has been exhausted and the business will be exposed to any further major events for the remainder of 2017.

Earnings estimates are downgraded by -62%. Underperform retained. Target is $11.

Target price is $11.00 Current Price is $9.82 Difference: $1.18
If QBE meets the Credit Suisse target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $11.35, suggesting upside of 13.7% (ex-dividends)

The company's fiscal year ends in December.

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 QBE as Overweight (1) -

The company has over-run its catastrophe budget by US$600m for 2017 which Morgan Stanley calculates equates to a -60% hit to cash earnings.

While the quantum of the downgrade surprised the broker, the likely FY18 pricing response bodes well for the company and, with greater clarity on the earnings risks, now is considered the time to buy the stock.

Overweight maintained. Target is reduced to $12.90 from $13.00. Industry view: In-Line.

Target price is $12.90 Current Price is $9.82 Difference: $3.08
If QBE meets the Morgan Stanley target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $11.35, suggesting upside of 13.7% (ex-dividends)

The company's fiscal year ends in December.

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

Morgans rates QBE as Add (1) -

QBE has signalled it will take a -US$600m hit to 2017 earnings from recent catastrophes. The size of the downgrades surprised Morgans.

The broker lowers 2018 estimates for earnings per share by -75%, taking a more conservative line on insurance margin assumptions. Future year earnings forecasts are also lowered by -5-6%.

Target is reduced to $11.63 from $12.55. Add retained.

Target price is $11.63 Current Price is $9.82 Difference: $1.81
If QBE meets the Morgans target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $11.35, suggesting upside of 13.7% (ex-dividends)

The company's fiscal year ends in December.

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

Ord Minnett rates QBE as Lighten (4) -

The company has downgraded 2017 guidance on the back of the recent earthquake and hurricane events.

Ord Minnett had expected QBE would breach allowances but the extent of the downgrade surprised and suggests it will affect the propensity for buybacks.

Target is reduced to $9.80 from $10.00. Lighten retained.

This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.

Target price is $9.80 Current Price is $9.82 Difference: minus $0.02 (current price is over target).
If QBE 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 $11.35, suggesting upside of 13.7% (ex-dividends)

The company's fiscal year ends in December.

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

UBS rates QBE as Buy (1) -

QBE has increased its allowance for catastrophes by US$600m, following three major hurricanes and the earthquake in Mexico.

Although the company's catastrophe claims estimates for 2017 are larger than UBS would have expected, more details are required to objectively assess the share of losses across each event.

Revised guidance for the December quarter appears conservative and, should this be exceeded, the broker believes it would continue to strengthen the debate around the hardening of re-insurance prices.

The broker retains a Buy rating and $12.20 target.

Target price is $12.20 Current Price is $9.82 Difference: $2.38
If QBE meets the UBS target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $11.35, suggesting upside of 13.7% (ex-dividends)

The company's fiscal year ends in December.

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

Deutsche Bank rates SCG as Initiate Coverage with Buy (1) -

Deutsche Bank initiates coverage with a Buy rating and target of $4.26.

The broker observes, since its restructuring in 2014,  the company has re-positioned the portfolio through selling eight assets, buying one asset and spending over $1.7m on developments.

While believing Amazon is a risk to retail, the broker's analysis suggests that well-located centres in high population and income growth locations will continue to perform.

Target price is $4.26 Current Price is $3.91 Difference: $0.355
If SCG meets the Deutsche Bank target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $4.47, suggesting upside of 15.3% (ex-dividends)

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

Ord Minnett rates SSG as Buy (1) -

The update on earnings for FY18 disappointed Ord Minnett. EBITDA is guided at $13-15m versus $14.9m for FY17. Guidance assumes Daigou channel sales fall away.

Ord Minnett opts to downgrade operating earnings estimates for FY18 to the bottom of the guided range.

Buy rating retained. Target is lowered to $0.55 from $1.18.

Target price is $0.55 Current Price is $0.44 Difference: $0.11
If SSG meets the Ord Minnett target it will return approximately 25% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

Macquarie rates TNE as Outperform (1) -

The company has lowered FY17 profit growth guidance to 7-9% from the 10-15% that was provided in May. Consulting profitability was below expectations and the primary driver of the revisions.

The downward revision in guidance was unexpected but Macquarie considers some of the contributing factors are one-off in nature and expects a return to double digit net profit growth in FY18.

Outperform retained. Target is reduced to $5.68 from $6.32.

Target price is $5.68 Current Price is $4.55 Difference: $1.13
If TNE meets the Macquarie target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $5.20, suggesting upside of 15.0% (ex-dividends)

The company's fiscal year ends in September.

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 TNE as Hold (3) -

The company has downgraded guidance by -6% and now expects FY17 net profit growth of 7-9%. Morgans observes, had three significant negative events not occurred in this year, profit growth would have been closer to 20%.

The broker rates the business high-quality, given relatively defensive earnings and a long-term track record of above-market growth.

Target is reduced to $4.16 from $5.69. Hold rating retained.

Target price is $4.16 Current Price is $4.55 Difference: minus $0.39 (current price is over target).
If TNE meets the Morgans target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.20, suggesting upside of 15.0% (ex-dividends)

The company's fiscal year ends in September.

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 VRL as Neutral (3) -

The company has reached agreement to sell its 50% stake in Golden Village to its JV partner. Macquarie believes the deal demonstrates a renewed focus on de-leveraging.

The main challenge for the company is in restoring credibility and investor confidence following a period of successive downgrades, in the broker's opinion.  Hence, improved operating performance and investment returns will be key.

Neutral retained. Target rises to $4.10 from $3.95.

Target price is $4.10 Current Price is $3.94 Difference: $0.165
If VRL meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $3.84, suggesting downside of -0.5% (ex-dividends)

The company's fiscal year ends in June.

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