Australian Broker Call

Citi rates ALQ as Sell (5) -

ALS Ltd's financial performance ended near the bottom of company guidance, Citi analysts observe. At the operating level the result slightly missed the analysts' expectations.

The analysts liked the quality of the result, as well as the fact several acquisitions were announced too. It is their view positive cyclical indicators are emerging, but also that the share price is already reflecting this.

Target rises to $5.60. Sell rating retained.

Target price is $5.60 Current Price is $6.06 Difference: minus $0.46 (current price is over target).
If ALQ 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 $5.67, suggesting downside of -7.5% (ex-dividends)

The company's fiscal year ends in March.

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 ALQ as Neutral (3) -

First half results were in line with Credit Suisse's expectations. The company's decision to divest a large part of its oil & gas business overshadowed the result.

While oil & gas losses will no longer be a drag on the broader group, the broker questions the timing in the context of a broader commodity price rally and removal of the potential for a higher sale price if conditions improve in time.

The broker retains a Neutral rating. With a change of analyst, the target is raised to $5.90 from $5.30.

Target price is $5.90 Current Price is $6.06 Difference: minus $0.16 (current price is over target).
If ALQ meets the Credit Suisse target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.67, suggesting downside of -7.5% (ex-dividends)

The company's fiscal year ends in March.

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 ALQ as Outperform (1) -

First half underlying profit of $51m compared with $61m in the prior corresponding half and was at the lower end of the guidance range.

Macquarie observes that in the case of cyclical businesses coming out of a downturn a turnaround is never as immediate as one would like. The share price has suffered from great expectations, yet guidance is similar to the pre-result consensus.

The company intends to divest its underperforming oil & gas business. Macquarie does not believe the investment thesis has changed much in terms of the positive leverage to the exploration cycle and the divestment is considered a sensible development.

An Outperform rating is retained. Target is lowered to $6.62.

Target price is $6.62 Current Price is $6.06 Difference: $0.56
If ALQ meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $5.67, suggesting downside of -7.5% (ex-dividends)

The company's fiscal year ends in March.

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

Morgan Stanley rates ALQ as Underweight (5) -

The first half result suggests to Morgan Stanley the business remains under pressure. Investor perceptions of a rapidly improving geochemistry cycle look to be offering little benefit.

The broker notes second half profit guidance of $50-60m is flat at best after adjusting for the contribution from oil & gas.

The broker continues to find the shares unattractive at this juncture and retains an Underweight rating. Industry view is Cautious. Target is steady at $3.27.

Target price is $3.27 Current Price is $6.06 Difference: minus $2.79 (current price is over target).
If ALQ meets the Morgan Stanley target it will return approximately minus 46% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.67, suggesting downside of -7.5% (ex-dividends)

The company's fiscal year ends in March.

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

Morgans rates ALQ as Add (1) -

ALS' first half result fell short of Morgans' forecast and came in at the bottom end of guidance, as it had done in FY16. Once again Life Sciences underperformed expectations, the broker notes. The plunge in the pound was one factor impacting on margins.

ALS' resources businesses have continued to provide a drag but minerals should turn the corner in FY17 thanks to a better environment, Morgans suggests, and the company is looking to divest its oil & gas business while retaining its O&G laboratory business, which the broker sees as a good move.

This will provide for acquisitions in Life Sciences. ALS shares look expensive on the local market but trade at a discount to global peers. Add retained. Target rises to $7.08 from $7.05.

Target price is $7.08 Current Price is $6.06 Difference: $1.02
If ALQ meets the Morgans target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $5.67, suggesting downside of -7.5% (ex-dividends)

The company's fiscal year ends in March.

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

Ord Minnett rates ALQ as Hold (3) -

First half net profit of $51.4m was in line with Ord Minnett estimates. The broker assumes all of the $122m in acquisitions are closed and the oil & gas business is sold for book value on April 1 2017.

The broker also upgrades the minerals division in the outer years. However, the upside to valuation is restricted by the downgrading of margin forecasts in the life sciences division.

Still, there is enough upside for the broker to become more positive in terms of its recommendation and the Hold rating is retained. Target is raised to $6.22 from $5.78.

Target price is $6.22 Current Price is $6.06 Difference: $0.16
If ALQ meets the Ord Minnett target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $5.67, suggesting downside of -7.5% (ex-dividends)

The company's fiscal year ends in March.

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

Morgans rates AMC as Hold (3) -

Amcor's share price has fallen 12% from the August high. Despite a strong FY16 result, the stock has been caught up in the rush to switch to cyclicals from defensives and the jump in the USD post US election, the broker notes.

The broker believes macro issues will continue to weigh on what is otherwise a quality company. Forecasts are updated to account for the Sonoco and Hebei acquisitions and for currency movements. Target falls to $14.68 from $16.66, Hold retained.

Target price is $14.68 Current Price is $14.51 Difference: $0.17
If AMC meets the Morgans target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $15.82, suggesting upside of 11.0% (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

Deutsche Bank rates BKW as Buy (1) -

Management has signalled that building products earnings will remain steady in the first half, with higher earnings on the east coast offset by lower earnings in Western Australia. Given the strong order book and an improved cost position, stronger earnings are anticipated in the second half.

Deutsche Bank notes earnings from investments are expected to benefit from the company's major holdings in New Hope ((NHC)), given the recent increase in coal prices. The broker retains a Buy rating and reduces the target to $16.60 from $17.90.

Target price is $16.60 Current Price is $12.89 Difference: $3.71
If BKW meets the Deutsche Bank target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $14.75, suggesting upside of 16.8% (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) -

Macquarie observes the company's building products business is facing the misfortunes of the downturn in Western Australia, which is weighing on the first half performance, while eastern markets are providing a strong offset.

The broker adjusts forecasts for earnings per share up by 13.2% for FY17 and by 16.2% for FY18 to reflect increased earnings from New Hope ((NHC)) and WH Soul Pattinson ((SOL)).

The broker maintains a Neutral rating and envisages little reason to own the stock in the context of a mature residential building cycle. Target is reduced to $14.05 from $14.50.

Target price is $14.05 Current Price is $12.89 Difference: $1.16
If BKW meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $14.75, suggesting upside of 16.8% (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

Citi rates CYB as Sell (5) -

FY16 marked a good performance from CYBG, that much Citi analysts acknowledge. But they see headwinds on the road forward, plus the UK banking sector is facing challenges. The combination of all these risks is keeping the rating on Sell. Target price 220p.

Current Price is $4.63. Target price not assessed.

Current consensus price target is $4.56, suggesting downside of -1.4% (ex-dividends)

The company's fiscal year ends in September.

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

Morgan Stanley rates EHE as Underweight (5) -

Morgan Stanley notes the volatile response to the AGM. The broker considers the update as a negative as EBITDA estimates and RAD inflow guidance are less than expected. The broker believes a tight liquidity position leaves little room for error.

The broker notes the company is conducting a strategic review to improve the performance of its portfolio with a number of opportunities highlighted to drive a sustainable improvement in EBITDA. Yet, the broker expects this will take time and there is little capacity to fund initiatives.

Morgan Stanley retains a Underweight rating and $2.50 target. Industry view is In-Line.

Target price is $2.50 Current Price is $2.71 Difference: minus $0.21 (current price is over target).
If EHE meets the Morgan Stanley target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.28, suggesting upside of 19.4% (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

Ord Minnett rates HUB as Upgrade to Buy from Accumulate (1) -

The company will acquire Agility Applications, a financial services technology provider, which will broaden broker relationships and enhance Hub24's non-custodial reporting on offer.

Ord Minnett notes Agility counts 40% of the broking market as clients and reports on $200bn of client assets, providing a rich cross selling opportunity with the Hub24 platform.

The broker reassesses its valuation methodology and includes Agility in its estimates. Rating is upgraded to Buy from Accumulate and the target is raised to $6.46 from $5.00.

Target price is $6.46 Current Price is $5.90 Difference: $0.56
If HUB meets the Ord Minnett target it will return approximately 9% (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

Ord Minnett rates IOF as Downgrade to Lighten from Hold (4) -

Ord Minnett considers the Investa Commercial Property Fund's acquisition of Morgan Stanley's 8.9% stake in IOF is aimed at protecting its ownership of the Investa business by reducing the potential for IOF to be acquired by a third party.

The broker believes this is a negative for the share price in that the stock is trading at a premium that reflects the increased probability of being acquired. The broker also envisages Cromwell ((CMW)) is now likely to exit its 9.8% stake post the December distribution ex date, which raises the possibility of a discounted sale to third-party investors.

As a result, Ord Minnett reduces its rating to Lighten from Hold and maintains a $4.23 target.

Target price is $4.23 Current Price is $4.28 Difference: minus $0.05 (current price is over target).
If IOF meets the Ord Minnett target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.34, suggesting upside of 2.6% (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 JBH as Upgrade to Neutral from Underperform (3) -

The company has completed the acquisition of The Good Guys on November 28, earlier than expected. Credit Suisse consolidates profit from that date having previously assumed it would occur on January 1 2017.

This results in a $16m increase in EBIT for the first half and a 5% upgrade to earnings per share  for FY17. The broker's target increases to $26.43 from $26.16 and, because of recent share price weakness, the rating is upgraded to Neutral from Underperform.

Target price is $26.43 Current Price is $26.80 Difference: minus $0.37 (current price is over target).
If JBH meets the Credit Suisse target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $29.71, suggesting upside of 7.0% (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

Credit Suisse rates MYX as Outperform (1) -

The AGM update signalled the business is trading in line with expectations. Credit Suisse incorporates a $26m cash settlement from US patent litigation, which means a more substantial upgrade to FY17 reported earnings.

The broker expects new product launches to support earnings growth over the forecast period, more than offsetting generic competition in the Doryx portfolio and broader price erosion. Outperform rating and $2 target retained.

Target price is $2.00 Current Price is $1.60 Difference: $0.4
If MYX meets the Credit Suisse target it will return approximately 25% (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 QAN as Buy (1) -

The proposed joint venture between Qantas and American Airlines has been withdrawn after the US Department of Transport sought to deny the application for anti-trust immunisation.

The companies will continue to interact as before with the basic code sharing arrangement resulting in commission being paid for bookings on each other's flight.

Deutsche Bank makes no changes to estimates but believes this development has to be considered as an additional headwind into FY18. A Buy rating is maintained and the target is steady at $4.30.

Target price is $4.30 Current Price is $3.18 Difference: $1.12
If QAN meets the Deutsche Bank target it will return approximately 35% (excluding dividends, fees and charges).

Current consensus price target is $4.28, suggesting upside of 33.3% (ex-dividends)

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

Ord Minnett rates QAN as Buy (1) -

Qantas and American Airlines have withdrawn their application to share trans Pacific revenue and costs following the US Department of Transport's draft decision to deny the application.

The decision may affect the long-term profitability of the airline's most important international market  but Ord Minnett believes the current Qantas share price already reflects significant earnings risk. Thus, the broker maintains a Buy rating. Target is $4.50.

Target price is $4.50 Current Price is $3.18 Difference: $1.32
If QAN meets the Ord Minnett target it will return approximately 42% (excluding dividends, fees and charges).

Current consensus price target is $4.28, suggesting upside of 33.3% (ex-dividends)

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

Macquarie rates S32 as Outperform (1) -

Macquarie lifts manganese production forecasts for the South African assets but with the mine generating only modest cash flow, changes have little impact on estimates.

The broker retains a Outperform rating and $3.40 target.

Target price is $3.40 Current Price is $2.80 Difference: $0.6
If S32 meets the Macquarie target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $2.69, suggesting downside of -2.1% (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: 0.1

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

Macquarie rates SKI as Outperform (1) -

Macquarie observes the stock has been sold off in the bond related sell-off, similar to other utilities and property trusts. Yet, the attraction for investors is that Spark Infrastructure is a low risk proposition as its major assets VPN and SAPN continue to outperform.

The broker notes the balance sheet is not stressed, there is scope to the upside in yield and the company has a larger leverage to the appeals process along with surplus cash flow.The broker retains a Outperform rating and target of $2.65.

Target price is $2.65 Current Price is $2.23 Difference: $0.42
If SKI meets the Macquarie target it will return approximately 19% (excluding dividends, fees and charges).

Current consensus price target is $2.51, suggesting upside of 12.7% (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

Morgans rates TGP as Downgrade to Hold from Add (3) -

360 Capital Group has entered into a transaction to sell 360 Capital Investment Management its responsible entity along with co-investment stakes in most of its funds, including 360 Capital Industrial ((TIX)) and 360 Capital Office ((TOF)), subject to a number of approvals from various stake holders.

The remaining entity will be cashed up, Morgans notes, and funds will be used for a buyback and to pursue new opportunities. The broker adjusts its target down to 95c, or close to net tangible asset valuation, from $1.04. Rating moves to Hold.

Target price is $0.95 Current Price is $0.90 Difference: $0.055
If TGP meets the Morgans target it will return approximately 6% (excluding dividends, fees and charges).

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

Citi rates VOC as Buy (1) -

Citi analysts had already assumed market expectations were too high, and they were proven right at the company's AGM. It goes without saying the disappointing market update was not well received and the share price dived by more than 24% on the day.

Citi had previously taken the view the sell-off had pulled the shares into Buy territory. This view hasn't changed. What has changed is that the price target has now fallen to $6.85 from $7.45 prior.

The analysts point out it is not easy to gauge what exactly is the growth being achieved inside Vocus today, with lots of moving parts and a big gap between reported and core earnings. Their projection is for ongoing growth, at a rate of circa 5% in FY18.

Target price is $6.85 Current Price is $4.35 Difference: $2.5
If VOC meets the Citi target it will return approximately 57% (excluding dividends, fees and charges).

Current consensus price target is $6.08, suggesting upside of 40.2% (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

Credit Suisse rates VOC as Outperform (1) -

The company's guidance for FY17 EBITDA of $430-450m is 3-7% below Credit Suisse's forecast. The shortfall is primarily from a lower-than-expected contribution from Nextgen and the loss of the earnings from a wholesale fibre build contract.

The broker reduces FY17 EBITDA forecasts by 5%. The broker believes, while the Nextgen weakness is disappointing, performance should now improve as the Vocus sales force can start selling the network.

The broker retains a Outperform rating and reduces the target to $6.00 from $6.65.

Target price is $6.00 Current Price is $4.35 Difference: $1.65
If VOC meets the Credit Suisse target it will return approximately 38% (excluding dividends, fees and charges).

Current consensus price target is $6.08, suggesting upside of 40.2% (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

Deutsche Bank rates VOC as Buy (1) -

Deutsche Bank was disappointed with the FY17 guidance provided at the AGM, which was 7% below consensus expectations.

Weakness is noted in the Nextgen acquisition, service issues appear in corporate & wholesale and Australian broadband subscriber growth is below management's internal expectations.

The issues in isolation are not significant but when combined make the broker cautious about the operational performance. A Buy rating is maintained on valuation grounds. Target is reduced to $8.19 from $12.01.

Target price is $8.19 Current Price is $4.35 Difference: $3.84
If VOC meets the Deutsche Bank target it will return approximately 88% (excluding dividends, fees and charges).

Current consensus price target is $6.08, suggesting upside of 40.2% (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

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

Morgan Stanley observes investors have de-rated the Australian telco sector in recent months and the company shares are down 40% in the year to date.

The broker believes the stock offers the highest risk/return characteristics in the sector. While from an industry perspective there remain revenue growth opportunities for the company as a vertically integrated telco in the NBN, there are two changes in recent months which have changed Morgan Stanley's fundamental view.

These are increased telco competition, which is negative for margins and future growth trajectory, and, specific to Vocus, disappointing early results from the just-completed acquisition of Nextgen.

Morgan Stanley downgrades to Equal-weight from Overweight. Target is reduced to $5.00 from $9.55. Industry view is In-Line.

Target price is $5.00 Current Price is $4.35 Difference: $0.65
If VOC meets the Morgan Stanley target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $6.08, suggesting upside of 40.2% (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

Morgans rates VOC as Hold (3) -

Vocus provided initial FY17 earnings guidance at its AGM of $430-450m, which is 8% below the broker's prior forecast.The miss relates to problems at NextGen before Vocus acquired the business, and provisioning issues for the original Vocus business, the broker notes.

The broker retains Hold, suggesting it will take time for Vocus' earnings trajectory to stabilise and time to restore investor confidence. Several acquisitions have made the company a complex beast and investors, and the broker, struggle with all the moving parts. Target falls to $4.46 from $6.05.

Target price is $4.46 Current Price is $4.35 Difference: $0.11
If VOC meets the Morgans target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $6.08, suggesting upside of 40.2% (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

UBS rates VOC as Buy (1) -

The company's guidance for FY17 EBITDA of $430-450m disappointed UBS. The broker notes a weaker underlying performance in Nextgen and the loss of a $17m fibre build contract.

UBS reduces FY17- FY18 EBITDA estimates by 7-8%.The broker now questions the long-term sustainability of NBN economics.

The stock appears cheap but is less appealing on free cash flow measures, UBS observes. The broker retains a Buy rating and reduces the target to $6.00 from $6.80.

Target price is $6.00 Current Price is $4.35 Difference: $1.65
If VOC meets the UBS target it will return approximately 38% (excluding dividends, fees and charges).

Current consensus price target is $6.08, suggesting upside of 40.2% (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