Australian Broker Call

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

The ability and willingness of the banks to reprice their mortgage books has surprised Macquarie, and led the broker to believe near term earnings trends should remain supportive. There is scope, the broker suggests, for the majors to beat FY17 consensus forecasts.

ANZ leads the big four in capital position, therefore it is well placed to meet APRA's new capital requirements, the announcement of which is pending. Macquarie upgrades to Outperform. Target rises to $30.50 from $30.00.

Target price is $30.50 Current Price is $28.72 Difference: $1.78
If ANZ meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $30.63, suggesting upside of 6.4% (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

Morgan Stanley rates AOG as Overweight (1) -

The company has denied claims of overcharging and excessive complaints against the group, in the wake of media reports regarding allegations it used exorbitant fees and complex contracts to increase profits.

The company has applied for approval to start a buy-back, which cannot be activated until after the August result. Directors have increased their holdings to inspire confidence, Morgan Stanley observes.

The broker believes the fees are not excessive, as the total cost for an average customer is similar to the cost of a standard house split between an up-front cost and rent. Morgan Stanley notes service departments have been out of favour for some time and the company is converting to its Freedom model which offers aged care-like services but with the benefit of being in a non-institutional setting.

The broker retains an Overweight rating and In-Line industry view. The target is $4.20.

Target price is $4.20 Current Price is $2.78 Difference: $1.42
If AOG meets the Morgan Stanley target it will return approximately 51% (excluding dividends, fees and charges).

Current consensus price target is $4.09, suggesting upside of 53.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.9

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

Deutsche Bank rates APO as Initiation of coverage with Buy (1) -

Deutsche Bank initiates coverage on the Australian outdoor advertising sector. Despite having the lowest proportion of digital revenue relative to others, the broker notes APN Outdoor is exposed to favourable industry dynamics.

The recent sell-off in the stock represents an attractive entry point in the broker's view and coverage kicks off with a Buy rating and $5.40 target.

Target price is $5.40 Current Price is $4.81 Difference: $0.59
If APO meets the Deutsche Bank target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $6.12, suggesting upside of 27.1% (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 AVI as Add (1) -

Avalon is earning up to an 80% interest in Satulinmaki, Finland, and has confirmed previous drilling in its recent program. Geophysical surveys have confirmed the potential for a large gold system.

Recent drilling has intersected higher grade shoots at Viscaria project where the economics are expected to further improve.

Morgans considers a major upside risk to its target price, reduced to 6.6c from 7c, will be exploration success at Bramaderos and/or for gold or lithium in the Nortec joint venture longer term. Add rating retained.

Target price is $0.07 Current Price is $0.02 Difference: $0.051
If AVI meets the Morgans target it will return approximately 340% (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

Macquarie rates AWE as Neutral (3) -

AWE has completed the BassGas compression project under time and budget. This is positive news, the broker suggests, for a project that has been beset by reserve downgrades and impairments over the past few years. Attention now moves to the contracting of gas from BassGas and Casino/Henry and drilling results from Waitsia, news of which is expected with the upcoming quarterly report.

Following divestments, AWE now has little direct exposure to the oil price, the broker notes. However the balance sheet remains a key risk. Neutral and 50c target retained.

Target price is $0.50 Current Price is $0.45 Difference: $0.055
If AWE meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $0.54, suggesting upside of 17.8% (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

Morgans rates CWP as Add (1) -

The company has announced the sale of the Target headquarters building for $58.2m. The sale is expected to contribute around $10-50m in net profit in FY19.

Morgans considers the medium-term growth profile attractive, supported by solid sector conditions and a mature development pipeline. Add rating retained. Target is reduced to $5.80 from $6.06.

Target price is $5.80 Current Price is $5.21 Difference: $0.59
If CWP meets the Morgans target it will return approximately 11% (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

Credit Suisse rates FBU as Outperform (1) -

Credit Suisse observes new NZ residential consents are currently supportive of its estimates for FY18 earnings.

The stock represents a broad-based exposure to the Australasian building and construction sector, with around 66% of operating earnings (EBIT) sourced from New Zealand and 23% from Australia.

Outperform retained. Target is NZ$9.80.

Current Price is $7.61. Target price not assessed.

Current consensus price target is $9.00, suggesting upside of 18.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

This company reports in NZD. 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

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

Morgans suspects that a negative performance in June, lower-than-expected FY17 performance fees and further market volatility may mean the share price weakens in the short term.

The broker estimates that outperformance versus benchmark has been eroded in the primary funds in June and lowers its expectations for performance fees in FY17.

Rating is downgraded to Hold from Add. The broker believes any broader market volatility could provide a better entry point for longer-term investors. Target is raised to $27.95 from $27.80.

Target price is $27.95 Current Price is $28.84 Difference: minus $0.89 (current price is over target).
If MFG meets the Morgans target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $27.27, suggesting downside of -3.3% (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

UBS rates MFG as Downgrade to Neutral from Buy (3) -

The stock has been the top performer in Australia diversified financials in the year-to-date, UBS observes.

The company has delivered a 24% total return and investment outperformance has also been a factor, with key global equity funds 1.4% ahead of benchmark.

UBS now believes the stock is fairly valued and downgrades to Neutral from Buy. Target is raised to $28.40 from $26.40.

Target price is $28.40 Current Price is $28.84 Difference: minus $0.44 (current price is over target).
If MFG meets the UBS target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $27.27, suggesting downside of -3.3% (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

Deutsche Bank rates MIN as Buy (1) -

The company has revised FY17 operating earnings (EBITDA) guidance to a range of $460-480m, down from the prior guidance provided at the half yearly result.

The downgrade was driven by a higher-than-expected discount for lower-grade 58% iron ore. Deutsche Bank now assumes a 72% price realisation versus benchmark.

The broker continues to believe lithium earnings can offset weak iron ore product discounts. Buy rating and $12 target retained.

Target price is $12.00 Current Price is $10.85 Difference: $1.15
If MIN meets the Deutsche Bank target it will return approximately 11% (excluding dividends, fees and charges).

Current consensus price target is $13.27, suggesting upside of 27.5% (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 NAB as Upgrade to Neutral from Underperform (3) -

The ability and willingness of the banks to reprice their mortgage books has surprised Macquarie, and led the broker to believe near term earnings trends should remain supportive. There is scope, the broker suggests, for the majors to beat FY17 consensus forecasts.

Given recent share price underperformance against peers, Macquarie upgrades NAB to neutral. Target rises to $32.00 from $31.50.

Target price is $32.00 Current Price is $29.59 Difference: $2.41
If NAB meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $31.63, suggesting upside of 6.3% (ex-dividends)

The company's fiscal year ends in September.

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

Deutsche Bank rates OML as Initiation of coverage with Buy (1) -

Deutsche Bank initiates coverage on the Australian outdoor advertising sector. oOh!Media offers exposure to continued growth in the market via the most highly digitised portfolio among Australian outdoor operators.

The broker remains comfortable that the company is well-positioned to capitalise on the favourable dynamics and initiates with a Buy rating and $5.30 target.

Target price is $5.30 Current Price is $4.12 Difference: $1.18
If OML meets the Deutsche Bank target it will return approximately 29% (excluding dividends, fees and charges).

Current consensus price target is $5.01, suggesting upside of 21.4% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.9

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

Deutsche Bank rates QMS as Initiation of coverage with Buy (1) -

Deutsche Bank initiates coverage on the Australian outdoor advertising sector. QMS Media has undertaken an aggressive expansion of its portfolio increasing digital billboards to more than 68 as of June 2017.

The company has the greatest exposure to New Zealand, among the pure outdoor operators, a market which the broker observes has accelerated over the course of 2016.

Deutsche Bank initiates coverage with a Buy rating and $1.30 target.

Target price is $1.30 Current Price is $1.16 Difference: $0.14
If QMS meets the Deutsche Bank target it will return approximately 12% (excluding dividends, fees and charges).

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 RSG as Initiation of coverage with Outperform (1) -

Resolute Mining is currently trading at a discount to mid-cap gold peers, the broker notes. Yet the miner offers a unique combination of long-life development assets and low-cost production. Once in production, the broker expects Resolute to achieve 20% free cash flow.

Macquarie initiates coverage with an Outperform rating and a target of $1.80, based on a forecast total shareholder return of 47%. The broker believes the stock has been underperforming due to perceived development risks, but de-risking should occur over time.

Target price is $1.80 Current Price is $1.19 Difference: $0.61
If RSG meets the Macquarie target it will return approximately 51% (excluding dividends, fees and charges).

Current consensus price target is $1.87, suggesting upside of 56.2% (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

Credit Suisse rates S32 as Outperform (1) -

Operations at the Appin mine have been suspended, given continued elevated gas levels. It is not clear how long the prohibition notice will last. This marks the third incident at Appin since the initial gas problems were raised in October, Credit Suisse observes.

The broker believes the risk to production for FY18 is clearly on the downside, although recent commodity price movements, namely thermal coal and aluminium, provide some upside risk for earnings estimates.

Outperform rating and $2.95 target retained.

Target price is $2.95 Current Price is $2.68 Difference: $0.27
If S32 meets the Credit Suisse target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $3.02, suggesting upside of 12.1% (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: 0.8

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

Macquarie rates S32 as Outperform (1) -

South32 has halted production at Appin as a precautionary measure, although no breach of gas limits has been detected. The state government has banned mining on site until reassurances can be provided following recent incidents in the Illawarra.

While risks remain, the broker notes South32 continues to trade at a deep discount to diversified peers, therefore offers compelling value. Outperform and $3.50 target retained.

Target price is $3.50 Current Price is $2.68 Difference: $0.82
If S32 meets the Macquarie target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $3.02, suggesting upside of 12.1% (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: 0.8

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

Deutsche Bank rates WES as Sell (5) -

Bunnings UK & Ireland issued a statement indicating it plans to double the size of the store pilot program and will now have 20 in operation by the end of the year.

Deutsche Bank observes the decision to expand the store roll-out appears to be on the back of early signs of success. The broker believes this is an aggressive timetable, particularly as it will need to be done in time for Christmas trading.

The accelerated roll-out adds some risk but, on balance, the broker believes it is a positive sign, as it appears the Bunnings format is resonating well with customers. Sell rating and $38 target retained.

Target price is $38.00 Current Price is $40.12 Difference: minus $2.12 (current price is over target).
If WES meets the Deutsche Bank target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $40.40, suggesting downside of -0.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.3

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