Australian Broker Call

UBS rates ABC as Initiation of Coverage: Sell (3) -

UBS has "initiated" coverage of Adelaide Brighton despite having last rated the company Neutral with a $4.88 target at the February result release. The broker has established a Sell rating and $5.00 target.

The broker suggests that while Adelaide Brighton enjoys privileged positions in lime and cement, and has a track record of earnings resilience in down-cycles, cement margins have likely peaked. Ongoing lime growth depends on the Wagerup refinery expansion which the broker sees as unlikely in the medium term.

Target price is $5.00 Current Price is $5.67 Difference: minus $0.67 (current price is over target).
If ABC meets the UBS target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $5.21, suggesting downside of -6.2% (ex-dividends)

The company's fiscal year ends in December.

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

UBS rates AWC as Sell (5) -

The broker has lifted its alumina forecast by 11% and aluminium by 5%, offset by a rise to caustic soda prices. Alumina Ltd earnings forecasts rise as a result.

Target rises to $1.60 from $1.55. Sell retained on assumed risk to alumina prices.

Target price is $1.60 Current Price is $1.82 Difference: minus $0.215 (current price is over target).
If AWC meets the UBS target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.84, suggesting upside of 5.0% (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: -0.5

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

Morgans rates BHP as Add (1) -

Morgans has a number of issues with the proposal from US hedge fund Elliott Advisors. The broker does not think the dual-listed structure is preventing returns and already envisages the company is on a path to boosting dividends/buy-backs.

The broker's view is that the proposed changes appear to heavily favour BHP plc shareholders over the Australian-based shareholders.

The broker also suspects the market support for a spin-off of the US petroleum assets would have been much greater 12 months ago when more analysts/investors were concerned about the exposure at the bottom of the cycle.

Morgans retains an Add rating and $28.48 target.

Target price is $28.48 Current Price is $25.32 Difference: $3.16
If BHP meets the Morgans target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $27.87, suggesting upside of 14.7% (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: 0.4

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

UBS rates BHP as Neutral (3) -

The broker has made minor earnings forecast adjustments to reflect the surge in coal prices due to Debbie, the loss of coal volumes due rail damage caused by Debbie, and the loss of Escondida copper production due to the strike.

Neutral and $28 target retained.

Target price is $28.00 Current Price is $25.32 Difference: $2.68
If BHP meets the UBS target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $27.87, suggesting upside of 14.7% (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: 0.4

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

Ord Minnett rates BSE as Buy (1) -

March quarter production showed signs of accelerated momentum and Ord Minnett observes sulphate ilmenite continues to strengthen, with both demand and supply factors tightening markets.

The broker maintains a Speculative By recommendation and target of $0.40.

Target price is $0.40 Current Price is $0.33 Difference: $0.07
If BSE meets the Ord Minnett target it will return approximately 21% (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 FLT as Hold (3) -

International departures in February increased 5.0%, after adjusting for the prior leap year. Work travel improved, growing 9.2%, while leisure grew 3.9%.

 Deutsche Bank observes February is traditionally the smallest travel month but there are clear market-wide healthy departure volumes. Nevertheless, this is being driven by low airfares and industry feedback suggests conditions are relatively tough.

The company is growing market share but continued deflation in airfares is affecting total transaction growth and margins.

The broker observes cost control is encouraging but benefits need time to flow through and the business model needs to be adjusted for an environment where high single-digit transaction growth is no longer achievable.

Hold retained. Target is $31.

Target price is $31.00 Current Price is $31.00 Difference: $0
If FLT meets the Deutsche Bank target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $30.74, suggesting downside of -1.4% (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 GXY as Upgrade to Neutral from Underperform (3) -

Macquarie reviews its battery sector coverage, ahead of what it believes is a supply-side inflection point. Coverage is transferred to another analyst.

While the broker believes pricing will soon pass its peak, in the near term there is expected to be a benefit from high prices. Galaxy is upgraded to Neutral from Underperform, given it has now secured Mount Cattlin's position as an independent producer. Target is $0.46.

The broker remains broadly negative on the lithium sector, with significant supply expected to come online.

Target price is $0.46 Current Price is $0.42 Difference: $0.04
If GXY meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY16:

Forecast for FY17:

Market Sentiment: 0.0

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

Macquarie rates IGO as Upgrade to Outperform from Neutral (1) -

The company has updated FY17 production guidance from Nova. Nova is expected to hit full production during the first quarter of FY18.  Macquarie lifts FY17 nickel production forecast by 5% to better match the guidance.

The broker notes the company appears to have recovered from previously announced operating issues and upgrades to Outperform from Neutral. Target is raised to $4.10 from $4.00.

Target price is $4.10 Current Price is $3.62 Difference: $0.48
If IGO meets the Macquarie target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $4.13, suggesting upside of 10.6% (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 LNK as Outperform (1) -

Kinetic Super and Sunsuper have announced a decision to merge later this year. While the risk is that Kinetic will be lost as a Link client, Macquarie still believes Link will be a net beneficiary of consolidation over time.

The broker believes the company's outsourced fund administration business is well-positioned to provide cost-effective and value-added services for superannuation members. Outperform rating maintained. Target is reduced to $8.30 from $8.50.

Target price is $8.30 Current Price is $7.69 Difference: $0.61
If LNK meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $8.20, suggesting upside of 8.6% (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

UBS rates PDN as Neutral (3) -

The broker has increased its uranium price forecast by 18% in FY17. Paladin forecast earnings rise 5% in FY17-18. Paladin is currently fighting CNNC in court in Singapore over the exercise of an option to acquire the remaining 75% of Langer Heinrich on the basis of debt default.

Paladin has proposed a debt restructure to avoid default, which requires the approval of bondholders and shareholders. Neutral retained. Target rises to 12c from 9c.

Target price is $0.12 Current Price is $0.11 Difference: $0.015
If PDN meets the UBS target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $0.14, suggesting upside of 33.3% (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: 0.0

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

Morgans rates PPS as Add (1) -

March quarter gross inflows and closing funds on platform were better than Morgans expected.

Closing funds on platform were up 26% year-on-year, reflecting new clients joining the SMA platform and strong sales of Smartfunds managed portfolio products in the UK.

The broker retains an Ad rating and $0.52 target.

Target price is $0.52 Current Price is $0.41 Difference: $0.11
If PPS meets the Morgans target it will return approximately 27% (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

Citi rates PRU as Neutral (3) -

Citi analysts have kept their rating (Neutral) and price target (36c) unchanged, but the analysts acknowledge Perseus delivered a strong March quarter performance.

Both production and all-in costs (AISC) were noticeably better than expected. June guidance has been maintained, the analysts highlight. Equally important, the analysts report MD Jeff Quartermaine was insistent that there will be no equity raise or rights issue to fund Yaoure.

Target price is $0.36 Current Price is $0.36 Difference: $0
If PRU meets the Citi target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $0.47, suggesting upside of 32.4% (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

Credit Suisse rates PRU as Outperform (1) -

March quarter production numbers have restored confidence in the second half outlook, Credit Suisse observes. Edikan generated its first positive cash contribution in 18 months.

The company has confirmed record mill throughput, good reserve reconciliation and a period free from adverse operating issues.

Credit Suisse retains an Outperform rating and $0.85 target.

Target price is $0.85 Current Price is $0.36 Difference: $0.49
If PRU meets the Credit Suisse target it will return approximately 136% (excluding dividends, fees and charges).

Current consensus price target is $0.47, suggesting upside of 32.4% (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

Macquarie rates PRU as Neutral (3) -

The company's production was much improved in the March quarter and in line with Macquarie's expectations. The broker believes the company is on track to meet its reduced second half production guidance of 90,000 ounces.

The broker expects Sissingue will be the first leg of the company's future growth story. Target is raised to $0.40 from $0.32. Neutral retained.

Target price is $0.40 Current Price is $0.36 Difference: $0.04
If PRU meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $0.47, suggesting upside of 32.4% (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

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

The company is on track for guidance, with increased production in the March quarter.

Normally, Morgan Stanley observes, this would draw little reaction but, given the past issues, the report provides confidence that the problems have been addressed.

Target is $0.36. Equal -weighted rating retained. Industry view is Attractive.

Target price is $0.36 Current Price is $0.36 Difference: $0
If PRU meets the Morgan Stanley target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $0.47, suggesting upside of 32.4% (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 PRU as Neutral (3) -

Perseus has delivered on its promise by achieving a -41% reduction in costs in the March Q. Production beat the broker by 8% on higher grades and a lack of interruptions. It was the company's highest production/lowest cost quarter since June 2015.

Edikan production is running in line with guidance and Sissingue development is well underway. Yet the broker believes Perseus will need to continue to deliver on production/cost guidance before a re-rating is on the cards. Neutral retained. Target rises to 38c from 36c.

Target price is $0.38 Current Price is $0.36 Difference: $0.02
If PRU meets the UBS target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $0.47, suggesting upside of 32.4% (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 RIO as Buy (1) -

Rio Tinto underperformed the index in the March Q, likely due to a tip over in commodity prices, the broker suggests. But the company still generated truck loads of cash. With debt levels manageable, and few growth options available, the broker believes Rio will return cash to shareholders through increased dividends.

Buy and $75 target retained.

Target price is $75.00 Current Price is $61.89 Difference: $13.11
If RIO meets the UBS target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $71.78, suggesting upside of 21.4% (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: 0.8

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

Credit Suisse rates RRL as Downgrade to Underperform from Neutral (5) -

Credit Suisse expects marginally stronger production in the March quarter and downgrades FY17 estimates for earnings per share on the back of more moderate June quarter gold price forecasts.

The broker downgrades to Underperform from Neutral. The stock is one of the broker's least preferred exposures on valuation grounds. Target is $2.80.

Target price is $2.80 Current Price is $3.62 Difference: minus $0.82 (current price is over target).
If RRL meets the Credit Suisse target it will return approximately minus 23% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.14, suggesting downside of -12.7% (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 S32 as Buy (1) -

With coal and manganese prices ceasing their pullback in the March Q, the broker expects South32 to lift returns to shareholders due to strong cash flows. With insufficient franking credits to justify a special dividend or off-market buyback, the broker expects the on-market buyback announced last month to be expanded.

Buy and $2.80 target retained.

Target price is $2.80 Current Price is $2.96 Difference: minus $0.16 (current price is over target).
If S32 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 $3.11, suggesting upside of 9.7% (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: 0.7

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

Ord Minnett rates SPO as Hold (3) -

The company has reiterated its guidance to shareholders to take no action on the Downer EDI ((DOW)) bid, re-stating the negative points on the deal.

Ord Minnett highlights the $80-90m net profit guidance condition is most likely the way the Downer deal will fail, considered interesting as there is a risk on the downside and only 6% upside to the current share price.

The broker maintains a Hold rating and $1.05 target. The broker calculates the current share price is pricing a 25% chance of a 15% higher offer.

Target price is $1.05 Current Price is $1.09 Difference: minus $0.035 (current price is over target).
If SPO meets the Ord Minnett target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.89, suggesting downside of -19.2% (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 TLS as Sell (5) -

More disappointment for Telstra now TPG Telecom ((TPM)) is lifting competitive pressure in the Mobiles market which had been the main game for Telstra management to narrow the NBN earmings gap that lies ahead.

Citi analysts conclude the task at hand for Telstra has just become harder to achieve. Sell rating retained and price target cut by -9% to $4.

The analysts remind investors the ACCC is due to announce a decision on whether or not to declare a mobile roaming service, which can potentially imply further bad news.

Target price is $4.00 Current Price is $4.22 Difference: minus $0.22 (current price is over target).
If TLS meets the Citi target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.63, suggesting upside of 11.3% (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 TLS as Neutral (3) -

Incumbent mobile operators face direct and indirect impact from TPG Telecom ((TPM)), which has confirmed its entry as the fourth mobile network operator. Macquarie assumes, for Telstra, an incremental -2% revenue share loss by FY24 for, effectively 3-4 years after TPG completes its national roll-out.

The broker observes competitive pressures have already dampened growth in mobiles for Telstra and this has historically been the main growth driver for the business.

The broker believes the next catalyst for Telstra is a post-Easter decision on mobile roaming, which could shave as much as $0.35 per share  from the revised valuation. Target is reduced to $4.50 from $5.00. Neutral retained.

Target price is $4.50 Current Price is $4.22 Difference: $0.28
If TLS meets the Macquarie target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $4.63, suggesting upside of 11.3% (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 TLS as Buy (1) -

The underlying premise for Ord Minnett's Buy recommendation on Telstra does not change with the news that TPG Telecom ((TPM)) will build a fourth mobile operation in Australia.

The broker finds it hard to envisage how competitive or disruptive TPG could be, given it is only spending $600m  for a bare-bones network.

Nevertheless the broker lowers its optimism for growth in Telstra's mobile average revenue per user and assumes it will stay flat. Target is reduced to $5.00 from $5.35.

Target price is $5.00 Current Price is $4.22 Difference: $0.78
If TLS meets the Ord Minnett target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $4.63, suggesting upside of 11.3% (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 TPM as Downgrade to Neutral from Buy (3) -

Citi analysts have downgraded to Neutral from Buy while cutting their target price by -23% to $6.70 (was $8.65). They suggest expanding into Mobile is the correct strategy for the company, but the chosen path is too expensive for their calculations and comfort.

With a price tag of $1.9bn over three years, the analysts suggest meaningful revenue growth is unlikely to start to flow until the new network is largely built. They have reduced EPS estimates by -28% in FY18 and -62% in FY19. Cash flow projections have been heavily impacted too.

Target price is $6.70 Current Price is $6.66 Difference: $0.04
If TPM meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $7.36, suggesting upside of 10.5% (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

Credit Suisse rates TPM as Underperform (5) -

The company will spend $1.9bn to enter the mobile market. Credit Suisse remains sceptical that a low-cost strategy can work in mobile and envisages a high risk that the company will have to spend more than it is currently planning to do.

The company plans to spend $600m to build a national mobile network, well below competitor expenditure. The metrics imply that offering will be materially inferior to competitors, and the broker expects this to limit the ability to attract and retain customers in a segment where network quality is extremely important.

Underperform rating retained. Target falls to $5.50 from $6.20.

Target price is $5.50 Current Price is $6.66 Difference: minus $1.16 (current price is over target).
If TPM meets the Credit Suisse target it will return approximately minus 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.36, suggesting upside of 10.5% (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

Morgan Stanley rates TPM as Overweight (1) -

The company has confirmed it has acquired 700MHz of spectrum which allows it to build a mobile business in Australia. Morgan Stanley highlights the price paid was above market expectations and the company has launched a $400m entitlement offer to help fund the investment.

The broker notes the company intends to follow its successful broadband strategy as an aggressively priced, disruptive, low-cost mobile operator, leveraging its existing customers.

Morgan Stanley retains an Overweight rating and In-Line industry view. Target is $10.00.

Target price is $10.00 Current Price is $6.66 Difference: $3.34
If TPM meets the Morgan Stanley target it will return approximately 50% (excluding dividends, fees and charges).

Current consensus price target is $7.36, suggesting upside of 10.5% (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

Morgans rates TPM as Reduce (5) -

The company will become the fourth mobile operator in Australia, with a $400m capital raising and expectations of $1.9bn in expenditure over three years.

Strategically, the move makes sense to Morgans but, in the short to medium term, the broker believes the company is facing a number of challenges and recommends investors remain underweight in legacy/full-service telcos.

Reduce rating retained. Target is lowered to $5.19 from $6.03.

Target price is $5.19 Current Price is $6.66 Difference: minus $1.47 (current price is over target).
If TPM meets the Morgans target it will return approximately minus 22% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.36, suggesting upside of 10.5% (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

UBS rates WHC as Neutral (3) -

The broker has increased Whitehaven earnings forecasts to account for the Debbie-related coal price spike. Target rises to $3.20 from $3.00. The broker also suggests the company might just decide to pay an FY17 dividend due to excess cash flow, but for now assumes not.

Neutral retained on the expectation coal prices will fall again once infrastructure is repaired.

Target price is $3.20 Current Price is $3.20 Difference: $0
If WHC meets the UBS target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $3.25, suggesting upside of 8.9% (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