Australian Broker Call

Citi rates AGL as Upgrade to Neutral from Sell (3) -

Citi has analysed the data available on the entry of Alinta to the east coast and the price response observed in incumbent tariffs.

While the broker still believes consensus earnings estimates signal complacency, relative to the risk posed by retail competition, the share prices imply compensation is already adequate in terms of retail margin compression.

Hence, the broker upgrades to Neutral from Sell. Target is raised to $21.28 from $20.54.

Target price is $21.28 Current Price is $21.17 Difference: $0.11
If AGL meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $24.56, suggesting upside of 16.0% (ex-dividends)

The company's fiscal year ends in June.

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

Morgans rates APT as Hold (3) -

The main positive take away from the company's quarterly business update, in Morgans' view, is the growth in customer numbers and the stable net loss ratio.

The broker considers the main weakness was a -4% sequential decline in quarterly merchant sales. An update on the US business expansion will be provided in May.

The broker lowers FY18 and FY19 estimates for earnings per share by -6-7% on the reduced merchant sales forecasts. Target is reduced to $6.12 from $6.34. Hold maintained.

Target price is $6.12 Current Price is $5.32 Difference: $0.8
If APT meets the Morgans target it will return approximately 15% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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

Morgans rates BBN as Add (1) -

As several more players in the Australian baby goods industry have entered into administration this provides further headwinds for sales and margin at Baby Bunting as clearance activity ramps up, and there could be a risk to FY18 guidance, Morgans notes.

The broker is prepared to weather the short-term earnings risk resulting from continuing industry consolidation, given it makes the longer term market share opportunity more attractive. Add rating retained. Target is reduced $1.63 from $1.78.

Target price is $1.63 Current Price is $1.42 Difference: $0.21
If BBN meets the Morgans target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $1.55, suggesting upside of 8.8% (ex-dividends)

The company's fiscal year ends in July.

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 GDF as Add (1) -

The company has announced the acquisition of an industrial facility at Heathwood Queensland for $9.8m with an initial yield of 7.4%. The acquisition will be funded from cash and debt.

Morgans observes the company is offering exposure to east coast office and industrial property with an attractive distribution yield paid quarterly. Near-term catalysts will relate to successful leasing outcomes, accretive acquisitions and delivery on acquisitions.

Add rating maintained and the target is raised to $1.26 from $1.25.

Target price is $1.26 Current Price is $1.16 Difference: $0.1
If GDF meets the Morgans target it will return approximately 9% (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

Ord Minnett rates GPT as Upgrade to Accumulate from Hold (2) -

Ord Minnett observes retail property is undergoing an accelerated level of change caused by technology disruption. Not all assets are affected equally. Therefore, asset quality has never been more important, in the broker's opinion.

Hence the broker upgrades GPT to Accumulate from Hold. The company has a concentrated high-quality portfolio with a solid growth outlook. Other than via redevelopments, the portfolio is unlikely to change materially. Target is $5.35.

Target price is $5.35 Current Price is $4.70 Difference: $0.65
If GPT meets the Ord Minnett target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $5.31, suggesting upside of 13.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.4

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 received an indicative bid from oOh!media ((OML)) for its AdShel business. Details were not disclosed and the company has rejected the offer.

Credit Suisse believes the company is worth more in a break-up scenario than as currently constituted, which is reflected in the current implied valuation of its assets relative to listed peers.

The company expects EBITDA to be up 4-5% in the first half. As a result Credit Suisse raises FY18 estimates by 2%. Target is raised to $2.30 from $2.20. Outperform maintained.

Target price is $2.30 Current Price is $2.00 Difference: $0.3
If HT1 meets the Credit Suisse target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $2.29, suggesting upside of 14.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.6

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

Macquarie rates HT1 as No Rating (-1) -

HT&E has rejected a bid from oOh!media ((OML)) for its Adshel business on the basis of it being too low. HT&E is confident it can meet or beat current consensus earnings forecasts for FY18.

The bid confirms the broker's prior suggestion Adshel is an attractive target for outdoor advertisers. The proposed merger of oOh!media and APN Outdoor ((APO)), blocked by the ACCC, identified significant synergies.

The broker is advising in the matter and hence is restricted from making a recommendation on both HT1 and OML.

Current Price is $2.00. Target price not assessed.

Current consensus price target is $2.29, suggesting upside of 14.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.6

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

UBS rates HT1 as Neutral (3) -

The company has received a non-binding indicative offer for its AdShel assets from oOh!media ((OML)) and has rejected the offer on valuation grounds. The price was not disclosed.

UBS believes such a merger, were it to proceed, potentially poses fewer competition issues than the one between OML and APN Outdoor ((APO)) which was called off.

The company also provided an update which indicated Adshel revenues were tracking in line with the February trading update and first half revenues are expected to meet, or exceed, 2018 consensus estimates of $113-114m in EBITDA. Neutral and $1.80 target retained.

Target price is $1.80 Current Price is $2.00 Difference: minus $0.2 (current price is over target).
If HT1 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 $2.29, suggesting upside of 14.5% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.6

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

Citi rates IAG as Neutral (3) -

The company is confident it will reduce its cost base by 2020 and Citi incorporates at least $250m in cost savings in its calculations. The broker also factors in 2.5% in reserve releases in FY19 and FY20. Earnings estimates are lifted by 6% for FY19 and 11% for FY20.

Citi maintains a Neutral rating and raises the target to $7.75 from $7.50.

Target price is $7.75 Current Price is $7.59 Difference: $0.16
If IAG meets the Citi target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $7.45, suggesting downside of -1.8% (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 IAG as Neutral (3) -

The company has hosted an investor briefing, signalling to Credit Suisse it is confident in its cost targets and improvements in capital efficiency.

Nevertheless, Credit Suisse cannot ignore the external operating environment and remains cautious that the favourable premium rate environment could unwind by FY20.

The broker believes there is potential for another leg up in the share price on delivery of cost reductions and capital management. Confidence in the pricing environment is not expected until late 2018 or early 2019. Neutral. Target is $7.50.

Target price is $7.50 Current Price is $7.59 Difference: minus $0.09 (current price is over target).
If IAG 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 $7.45, suggesting downside of -1.8% (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

Macquarie rates IAG as Neutral (3) -

In the wake of IAG's investor day, the broker believes a focus on business simplification, cost reduction and increased capital efficiency is positive, but such programs need to be accelerated in the face of increasing competition, and a potential longer-dated threat posed by autonomous vehicles.

Neutral retained. Target rises to $6.45 from $6.40.

Target price is $6.45 Current Price is $7.59 Difference: minus $1.14 (current price is over target).
If IAG meets the Macquarie target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.45, suggesting downside of -1.8% (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

UBS rates IAG as Neutral (3) -

The company's investor briefing signalled confidence to UBS. The broker believes, while potentially disruptive challenges were acknowledged, the strength of the brand and margin tailwinds allow the business to conduct the necessary fixes to legacy systems and prepare for change.

The company has confirmed that premium rate rises are solid and support positive margin momentum across the group. UBS maintains a Neutral rating and $7.30 target.

Target price is $7.30 Current Price is $7.59 Difference: minus $0.29 (current price is over target).
If IAG meets the UBS target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.45, suggesting downside of -1.8% (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

Macquarie rates MIN as Outperform (1) -

Minerals Resources expects its takeover of Atlas Iron ((AGO)) will boost iron ore production and lead to a US$10/t reduction in group costs. Key to the company's longer term cost reduction goal is the planned bulk ore shuttle system (BOSS) in the Pilbara, the broker notes.

The broker sees the takeover as positive. Meanwhile, lithium shipments are running below guidance but this is not causing concern. Outperform and $23 target retained.

Target price is $23.00 Current Price is $16.43 Difference: $6.57
If MIN meets the Macquarie target it will return approximately 40% (excluding dividends, fees and charges).

Current consensus price target is $21.13, suggesting upside of 28.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.6

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

Morgan Stanley rates MIN as Overweight (1) -

The company has indicated there are further cost savings to be had at Mt Webber compared with Iron Valley, driven by lower strip ratio. Moreover, upside opportunities exist for revenue from blending the two ore sources.

Management has also indicated shipments are likely to be around -10% below guidance because of weather and mechanical issues. Morgan Stanley estimates an FY18 EBITDA impact of -5%.

Target is $22.50. Overweight retained. Industry view: Attractive.

Target price is $22.50 Current Price is $16.43 Difference: $6.07
If MIN meets the Morgan Stanley target it will return approximately 37% (excluding dividends, fees and charges).

Current consensus price target is $21.13, suggesting upside of 28.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.6

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

Macquarie rates OML as No Rating (-1) -

HT&E ((HT1)) has rejected a bid from oOh!media for its Adshel business on the basis of it being too low. HT&E is confident it can meet or beat current consensus earnings forecasts for FY18.

The bid confirms the broker's prior suggestion Adshel is an attractive target for outdoor advertisers. The proposed merger of oOh!media and APN Outdoor ((APO)), blocked by the ACCC, identified significant synergies.

The broker is advising in the matter and hence is restricted from making a recommendation on both HT1 and OML.

Current Price is $4.75. Target price not assessed.

Current consensus price target is $5.08, suggesting upside of 6.8% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.6

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

Citi rates ORG as Upgrade to Buy from Neutral (1) -

Citi has analysed the data available on the entry of Alinta to the east coast and the price response observed in incumbent tariffs.

While the broker still believes consensus earnings estimates signal complacency, relative to the risk posed by retail competition, the share prices imply compensation is already adequate in terms of retail margin compression.

Hence, the broker upgrades to Buy from Neutral. Target is raised to $10.06 from $9.61.

Target price is $10.06 Current Price is $8.86 Difference: $1.2
If ORG meets the Citi target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $9.70, suggesting upside of 9.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.6

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

Macquarie rates S32 as Outperform (1) -

The Columbian Constitutional Court has overturned the previous decision of a lower court, deciding South32's Cerra Matoso nickel mine is indeed the source of local health issues. The mine contributes around 5% of South32 earnings and its future is now unclear.

This risk is more than offset by upside risk to the broker's commodity price forecasts, with the stock trading on a 15% free cash flow yield at current spot prices. Outperform and $3.70 target retained.

Target price is $3.70 Current Price is $3.35 Difference: $0.35
If S32 meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges).

Current consensus price target is $3.35, suggesting upside of 0.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

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

Ord Minnett rates SGM as Upgrade to Accumulate from Hold (2) -

Ord Minnett believes the recent multiple de-rating presents a buying opportunity. Macro indicators remain positive such as US housing starts and industrial production, while Turkish scrap imports are trending higher and Chinese steel exports are still expected to fall.

The stock is trading below the broker's valuation and the rating is upgraded to Accumulate from Hold. Target is raised to $17.20 from $17.00.

Target price is $17.20 Current Price is $15.16 Difference: $2.04
If SGM meets the Ord Minnett target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $16.28, suggesting upside of 7.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: -0.1

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

Morgans rates SHV as Hold (3) -

In its latest trading update Select Harvests has kept FY18 production forecasts unchanged, although it has upgraded the almond pool price estimate. Around 80% of the crop has now been harvested and 20% processed, and the crop is expected to be up 6.4% on FY17.

Despite the price appreciation, Morgans notes almonds are still well priced compared with other tree nuts and the company continues to seek opportunities to gain mature orchards at the right price.

The broker makes upgrades to forecasts as earnings are materially leveraged to higher prices. The broker considers the stock fairly priced and maintains a Hold rating. Target is raised to $5.50 from $4.70.

Target price is $5.50 Current Price is $5.60 Difference: minus $0.1 (current price is over target).
If SHV meets the Morgans target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.0

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