Australian Broker Call

Citi rates BAL as Neutral (3) -

The company's acquisition of a canning plant and a $60m capital raising resolves several significant uncertainties, in Citi's view. The pathway to CFDA certification becomes clearer although the timing is long dated.

The company will pay Fonterra $27.5m to access bulk powder at a favourable price with the potential for volume rebates and has indicated second half net sales will be above the mid point of the $105-120m guidance range.

Citi believes the company still needs to address challenges surrounding escalating organic supply costs, excess inventory and reliance on the daigou.  Neutral/High Risk retained. Target is raised to $5.75 from $4.30.

Target price is $5.75 Current Price is $5.76 Difference: minus $0.01 (current price is over target).
If BAL meets the Citi target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.74, suggesting downside of -17.7% (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 CHC as Outperform (1) -

Macquarie notes media speculation that signals the company is in discussions with Westpac ((WBC)) regarding the acquisition of Hastings Funds Management.

The broker considers the rationale is sound, envisaging merit in extending the company's significant domestic and international property investor relationships into new infrastructure opportunities.

If this is indeed the case, this would be a company transforming transaction in the broker's opinion. Outperform rating and $6.03 target retained.

Target price is $6.03 Current Price is $5.84 Difference: $0.19
If CHC meets the Macquarie target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $5.53, suggesting downside of -5.8% (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 CSL as Buy (1) -

The company will acquire an 80% stake in Chinese plasma fractionator Wuhan Zhong Yuan Rui De Biologics for US$352m. Citi observes the acquisition is small in the context of the CSL group but a positive development.

It provides a strategic presence in the Chinese plasma market. The transaction is expected to close in the second half of the year and be debt financed.

Buy retained. Target is $148.

Target price is $148.00 Current Price is $137.65 Difference: $10.35
If CSL meets the Citi target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $137.55, suggesting downside of -1.8% (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

Credit Suisse rates CSL as Outperform (1) -

CSL will acquire 80% of a Chinese plasma fractionator. The size of the operations and ability to expand the footprint makes the opportunity beneficial, in the company's opinion.

Credit Suisse believes increased awareness and diagnosis of diseases in which the plasma products are used will continue to drive strong growth rates over the longer term. The acquisition of a local entity provides the opportunity to participate in this growth.

Target is $134. Outperform retained.

Target price is $134.00 Current Price is $137.65 Difference: minus $3.65 (current price is over target).
If CSL 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 $137.55, suggesting downside of -1.8% (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

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

The company will acquire an 80% stake in plasma-derived therapies manufacturer, Wuhan Zhong Yuan Rui De Biologics for US$352m. China is the fastest-growing immunoglobulin market in the world and, for volume, second only to the US.

In five years time the company expects the asset to generate sales of US$100m at an EBIT comparable to the current Behring business. Morgan Stanley believes the acquisition is strategically sound, albeit the price seems high.

Equal-weight rating, In-Line industry view retained. Target is $120.

Target price is $120.00 Current Price is $137.65 Difference: minus $17.65 (current price is over target).
If CSL meets the Morgan Stanley target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $137.55, suggesting downside of -1.8% (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

Ord Minnett rates CSL as Accumulate (2) -

CSL has acquired an 80% stake in a small Chinese fractionator. Ord Minnett observes, at face value, the price of US$352m is high but this reflects the potential of the market  and the competition for Chinese  plasma assets.

The deal will provide an entry point to a high growth, but highly regulated, market without undue risk. The investment has limited impact on near-term estimates and  the broker reiterates an Accumulate rating and target of $145.

Target price is $145.00 Current Price is $137.65 Difference: $7.35
If CSL meets the Ord Minnett target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $137.55, suggesting downside of -1.8% (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

UBS rates CSL as Buy (1) -

CSL  will use debt to fund an 80% purchase of Wuhan Zhong Yuan (Ruide), a Chinese fractionator, for US$352m.

UBS believes, taking a toehold in China, means the company will benefit from growing improvement in diagnosis and use of plasma products. CSL estimates the size of the market at US$3.3bn in 2016 and expects it to be worth US$4.9bn by 2020.

UBS retains a Buy rating and $145 target.

Target price is $145.00 Current Price is $137.65 Difference: $7.35
If CSL meets the UBS target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $137.55, suggesting downside of -1.8% (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 ILU as Downgrade to Underperform from Neutral (5) -

Macquarie observes sentiment is improving and the company has been able to push through a 13% rise in zircon reference prices. Nevertheless, despite strong demand for titanium dioxide, the increase in rutile pricing has been more subdued at just 4%.

The broker suspects the company is likely to focus capital on the Sierra Rutile assets over the next few years in preference to Balranald, and develop Cataby in  tandem. The development of Cataby is critical in Macquarie's opinion as the company needs it to sustain output of synthetic rutile.

Macquarie transfers coverage to a new analyst and downgrades to Underperform from Neutral. The broker makes a number of material changes to production assumptions with a net earnings impact of a -24% reduction to 2017 estimates offset by a 77% increase to 2018 and 2019  estimates. Target is raised to $6.70.

Target price is $6.70 Current Price is $8.68 Difference: minus $1.98 (current price is over target).
If ILU meets the Macquarie target it will return approximately minus 23% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.43, suggesting downside of -0.7% (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

Macquarie rates IPL as Outperform (1) -

Falling fertiliser prices are creating negative earnings momentum for the short term, Macquarie observes. The focus is on finding a floor in prices.

The stock provides good exposure to a positive US outlook and this should strengthen over the next 12 months in Macquarie's opinion. Target is reduced to $3.90 from $4.10. Outperform rating retained.

Target price is $3.90 Current Price is $3.59 Difference: $0.31
If IPL meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $3.77, suggesting upside of 4.5% (ex-dividends)

The company's fiscal year ends in September.

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 MPL as Downgrade to Sell from Neutral (5) -

The erosion of margins is not a new theme yet UBS is becoming more bearish following analysis of the escalating underlying inflationary pressures in private health insurance.

The broker concedes, off a low base, the brand data points could improve in coming months and regulatory reform for claims inflation may help. Both will take time to meaningfully affect earnings per share.

While appreciating the defensiveness of the stock, the broker believes the margin outlook is a core driver of both sentiment and earnings momentum and finds it increasingly difficult to be optimistic.  Downgrade to Sell from Neutral. Target drops to $2.50 from $2.75.

Target price is $2.50 Current Price is $2.81 Difference: minus $0.31 (current price is over target).
If MPL meets the UBS target it will return approximately minus 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.67, suggesting downside of -3.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.6

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

UBS rates MQA as Neutral (3) -

UBS expects underlying cash flow to grow by around 40% over the next three years stemming from Dulles Greenway, which starts distributions in 2019, APRR debt and swap maturities driving down interest costs and the delayed scheduled debt amortisation in Eiffarie.

The broker believes it likely that the company will exercise pre-emptive rights to acquire an additional 9% pro-rata stake in APRR over the next 6-12 month. UBS retains a Neutral rating and raises the target to $5.80 from $5.30.

Target price is $5.80 Current Price is $5.93 Difference: minus $0.13 (current price is over target).
If MQA 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 $5.65, suggesting downside of -6.9% (ex-dividends)

The company's fiscal year ends in December.

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 PGH as Neutral (3) -

The company is building out its new contract manufacturing division and Credit Suisse estimates this accounts for 27% of sales and 21% of EBITDA in FY18 estimates.

The broker also observes organic growth opportunities arising from cross selling Pascoe's formulating and packaging capabilities with existing customers. The broker continues to rate the stock Neutral, although better value is observed to have emerged in recent weeks. Target is $6.45.

Target price is $6.45 Current Price is $5.97 Difference: $0.48
If PGH meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $6.68, suggesting upside of 11.1% (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 RIO as Outperform (1) -

Glencore has submitted a proposal to acquire the company's interest in Coal &  Allied for US$2.55bn. The offered exceeds Yancoal Australia's ((YAL)) bid. Glencore is also offering to buy out Mitsubishi's minority interests.

Macquarie makes modest increases to forecasts after incorporating recent upgrades to the production outlook for Escondida. The emergence of a counter offer for the Coal & Allied assets is positive in the broker's opinion and could be the start of a bidding war.

Outperform retained. Target is $78.

Target price is $78.00 Current Price is $62.61 Difference: $15.39
If RIO meets the Macquarie target it will return approximately 25% (excluding dividends, fees and charges).

Current consensus price target is $71.88, suggesting upside of 15.9% (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: 0.9

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

Citi rates SGR as Buy (1) -

Citi trims FY17 EBITDA forecast by -1%, incorporating a softer domestic trading environment. The broker assumes modest growth in May and June and remains positive on the FY18/19 earnings outlook.

The valuation is considered compelling and a Buy rating is retained.  Target is reduced to $6.65 from $6.70.

Target price is $6.65 Current Price is $5.09 Difference: $1.56
If SGR meets the Citi target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $6.04, suggesting upside of 18.1% (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

Deutsche Bank rates SGR as Buy (1) -

Deutsche Bank reduces estimates for earnings by -2-4% to reflect a softer consumer environment but believes this has been excessively discounted in the current share price as the stock is underperforming the market by -4% in the June quarter to date.

Relative to market expectations, the broker believes risks are starting to move to the upside and this could be in evidence ahead of the opening of the new Gold Coast hotel in December.

Buy rating retained. Target is reduced to $5.95 from $6.05.

Target price is $5.95 Current Price is $5.09 Difference: $0.86
If SGR meets the Deutsche Bank target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $6.04, suggesting upside of 18.1% (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

Deutsche Bank rates WOR as Buy (1) -

Deutsche Bank observes the number of project sanctions suggests oil & gas capital expenditure is recovering. The broker notes there have been 13 major upstream projects reach final investment decisions for 2017 to date, which already exceeds the number in 2015 and 2016.

The broker believes the company will be a major beneficiary of any recovery in global oil & gas expenditure.  A Buy rating is reiterated. Target is $13.73.

Target price is $13.73 Current Price is $12.07 Difference: $1.66
If WOR meets the Deutsche Bank target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $12.30, suggesting downside of -0.6% (ex-dividends)

The company's fiscal year ends in June.

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