Australian Broker Call

Ord Minnett rates AAD as Lighten (4) -

Dave & Buster's, a competitor to the company's Main Event business in the US, has raised FY18 guidance for like-for-like sales to decline -2.0%, from -3.5% previously. Ardent Leisure does not provide such guidance for the Main Event.

Ord Minnett believes there is some risk to Ardent Leisure earnings and struggles with the valuation at current levels. The AGM is scheduled for November 20. Lighten rating and $1.65 target maintained.

Target price is $1.65 Current Price is $1.74 Difference: minus $0.09 (current price is over target).
If AAD meets the Ord Minnett target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.99, suggesting upside of 14.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.2

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

Macquarie rates BHP as Outperform (1) -

After a brief lull Macquarie believes the earnings upgrade cycle for the diversified major miners has resumed. There are some downside risks for most base and precious metals but the company's core commodities are all trading well above forecasts for both the short and medium-term.

Macquarie retains a preference for BHP Billiton over Rio Tinto ((RIO)) because of its superior earnings upside at spot prices and larger cash returns to shareholders in FY19. Outperform rating and $40 target maintained.

Target price is $40.00 Current Price is $31.48 Difference: $8.52
If BHP meets the Macquarie target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $36.35, suggesting upside of 15.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

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 BSL as Accumulate (2) -

Based on Ord Minnett's modelling of the potential expansion of North Star, the project looks to be viable at both the lower end and high-end of capacity and costs.

Should the expansion not proceed, the broker believes BlueScope will have the opportunity to return around $1.5bn to shareholders over the next two years. Accumulate rating and $19.70 target maintained.

Target price is $19.70 Current Price is $16.19 Difference: $3.51
If BSL meets the Ord Minnett target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $19.52, suggesting upside of 20.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.5

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

Morgans rates CIP as Hold (3) -

Propertylink ((PLG)) has made an indicative proposal to acquire Centuria Industrial REIT. The proposal is a combination of scrip and cash and, Morgans observes, based on Propertylink's last close implies a price of $3.03.

The proposal is by way of an off market takeover comprising 2.5327 PLG securities and $0.33 cash for each Centuria Industrial security. Morgans notes that in December 2017 Centuria Industrial acquired a 7.7% interest in PLG at $0.95.

The broker expects Centuria Industrial to be a target as it is one of the few listed A-REITs offering a pure exposure to Australian industrial property. The broker sets the target in line with the implied price of $3.03, up from $2.64.

Near-term catalysts relate to a superior bid emerging. Downside risk to forecasts include falls in asset prices, lease/tenant default and lack of access to funding. The broker retains a Hold rating.

Target price is $3.03 Current Price is $2.95 Difference: $0.08
If CIP meets the Morgans target it will return approximately 3% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.0

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 travel volumes continued strongly in July, with returns up 5.9% and consistent with the growth in June, Deutsche Bank observes.

The ABS has shifted its focus to resident arrivals from resident departures yet provided some data on departures. Departure volumes increased by 4.4%.

Hold rating and $56 target maintained for Flight Centre.

Target price is $56.00 Current Price is $54.33 Difference: $1.67
If FLT meets the Deutsche Bank target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $57.58, suggesting upside of 6.0% (ex-dividends)

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.1

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

Credit Suisse rates PLS as Outperform (1) -

The company has reported a 35% increase in the Pilgangoora reserve which supports an interim six-year life extension to 23 years at the expanded 5mtpa processing rate. Further drilling, which will commence in the March quarter 2019, aims to further increase resources and reserves.

Credit Suisse welcomes the upgrade.Outperform and $1.15 target retained.

Target price is $1.15 Current Price is $0.79 Difference: $0.36
If PLS meets the Credit Suisse target it will return approximately 46% (excluding dividends, fees and charges).

Current consensus price target is $1.08, suggesting upside of 36.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.8

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

Macquarie rates PLS as Outperform (1) -

The company has updated on the Pilgangoora operation. The resource estimate has been revised after lowering the cut-off grade to 0.2% lithium from 0.5%. Total resources are lifted 2%. Reserve tonnage is lifted 35% while grade is down -1%.

Macquarie observes the project is progressing well against targets. Outperform and $1.20 target retained.

Target price is $1.20 Current Price is $0.79 Difference: $0.41
If PLS meets the Macquarie target it will return approximately 52% (excluding dividends, fees and charges).

Current consensus price target is $1.08, suggesting upside of 36.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.8

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

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

UBS has analysed Australian shopping habits and brand positions across the fashion sector. The data is broadly supportive of Premier Investments in terms of brand awareness and online strength, particularly at Peter Alexander.

The survey suggests some weakness in fashion expenditure early in 2018 but recent data from the ABS indicates trends have improved since April. The broker expects a solid FY18 result on September 20 but downgrades the rating to Neutral from Buy on valuation grounds. Target is raised to $20.30 from $17.30.

Target price is $20.30 Current Price is $19.21 Difference: $1.09
If PMV meets the UBS target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $16.46, suggesting downside of -14.3% (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

UBS rates QAN as Neutral (3) -

UBS observes the Australian dollar oil price is at a four-year high, which represents a $1.3bn fuel cost for Qantas over the next two years. UBS models the economic variables for passenger revenue and, as a result, increases FY19 domestic unit revenue growth assumptions to 7%.

However, the benefit has been more than offset by a $10/bbl increase in spot oil price assumptions, non-executive bonuses and accounting changes. This delivers a -11-12% downgrade to underlying pre-tax profit in FY19-21. UBS maintains a Neutral rating and reduces the target to $6.20 from $6.50.

Target price is $6.20 Current Price is $6.11 Difference: $0.09
If QAN meets the UBS target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $6.75, suggesting upside of 10.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.3

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

Macquarie rates RIO as Outperform (1) -

After a brief lull Macquarie believes the earnings upgrade cycle for the diversified major miners has resumed. There are some downside risks for most base and precious metals but the company's core commodities are all trading well above forecasts for both the short and medium-term.

Macquarie retains a preference for BHP Billiton ((BHP)) because of its earnings upside at spot prices, larger cash returns and a more diverse asset portfolio as well as options for organic growth.

Macquarie maintains an Outperform rating and $91 target.

Target price is $91.00 Current Price is $73.16 Difference: $17.84
If RIO meets the Macquarie target it will return approximately 24% (excluding dividends, fees and charges).

Current consensus price target is $86.52, suggesting upside of 18.3% (ex-dividends)

The company's fiscal year ends in December.

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: 0.7

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

Credit Suisse rates RRL as Neutral (3) -

Executive chairman Mark Clark will retire as managing director and chairman at the November AGM after founding and building Equigold and Regis Resources. Jim Beyer has been chosen to succeed Mark Clark as managing director and will be appointed in October. Non-executive director James Mactier will become chairman.

Credit Suisse expects business as usual but recognises that the Australian gold sector is ripe for consolidation and Regis Resources is a solid foundation for growth or a potential core building block.

Neutral rating maintained. Target is $4.45.

Target price is $4.45 Current Price is $3.89 Difference: $0.56
If RRL meets the Credit Suisse target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $4.18, suggesting upside of 7.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.1

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

Macquarie rates RRL as Outperform (1) -

Executive chairman Mark Clark has stepped down as managing director and will retire from the company and the board at the AGM in November. Jim Beyer has been appointed managing director and James Mactier will become non-executive chairman.

Macquarie considers the developments positive as the company moves forward with its growth plans. Outperform rating and $4.90 target maintained.

Target price is $4.90 Current Price is $3.89 Difference: $1.01
If RRL meets the Macquarie target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $4.18, suggesting upside of 7.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.1

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

Ord Minnett rates RWC as Accumulate (2) -

After visiting John Guest facilities in the UK Ord Minnett believes Reliance Worldwide has acquired a business with impressive manufacturing capabilities. The integration is well underway, with an early October deadline for merging product offerings.

Ord Minnett understands the majority of the company's European sales team has moved across to John Guest. Accumulate rating maintained. Target is $6.20.

Target price is $6.20 Current Price is $5.39 Difference: $0.81
If RWC meets the Ord Minnett target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $5.89, suggesting upside of 9.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.3

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

Macquarie rates S32 as Outperform (1) -

After a brief lull Macquarie believes the earnings upgrade cycle for the diversified major miners has resumed. There are some downside risks for most base and precious metals but the company's core commodities are all trading well above forecasts for both the short and medium-term.

South32 continues to offer the largest upside at spot prices driven mainly by alumina and manganese and Macquarie retains a positive view despite the 15% rise in the share price recently. Outperform rating and $4 target maintained.

Target price is $4.00 Current Price is $3.80 Difference: $0.2
If S32 meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $3.89, suggesting upside of 2.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.6

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

Ord Minnett rates SGM as Buy (1) -

As China's labour costs rise and environmental concerns become more central, Ord Minnett considers scale a key competitive advantage for Sims Metal. The ability to invest in assets, such as metal recovery plants, means the company can extract higher margins.

As a result, capital-constrained businesses will be unable to adapt and Sims Metal believes there may be opportunities to acquire assets at distress prices. The broker retains a preference for the stock in the sector with a Buy rating and $16.70 target.

Target price is $16.70 Current Price is $12.72 Difference: $3.98
If SGM meets the Ord Minnett target it will return approximately 31% (excluding dividends, fees and charges).

Current consensus price target is $15.01, suggesting upside of 18.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.3

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

Macquarie rates SYD as Downgrade to Underperform from Neutral (5) -

The Productivity Commission review in the next nine months resets the focus to the threat around regulatory intervention, Macquarie observes. Submissions are taking a similar approach to previous reviews, with the airports supporting the current regime and airlines arguing for a more credible threat of "final offer" arbitration.

However, Macquarie doubts that regulatory intervention would make an impact on end-users versus lifting airline profitability. The broker takes a conservative approach, suggesting the pace of dividend growth will likely need to slow to ensure a smooth path for re-pricing and a shift to tax being paid.

Rating is downgraded to Underperform from Neutral. Target is raised to $7.13 from $7.05.

Target price is $7.13 Current Price is $7.19 Difference: minus $0.06 (current price is over target).
If SYD meets the Macquarie target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $7.48, suggesting upside of 4.1% (ex-dividends)

The company's fiscal year ends in December.

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

UBS rates TCL as Buy (1) -

UBS rejigs forecasts to allow for the $4.8bn equity raising and $4.4bn acquisition of a 25.5% stake in WestConnex. This results in dilution of around -20% until WestConnex generates meaningful cash flow distribution from 2024.

Dividend forecasts have been modeled to grow by 6% per annum over the next 10 years. UBS expects WestConnex to generate $1.7bn in operating earnings by 2028 which will account for 10% of the group's earnings. Buy rating maintained. Target is reduced to $13.30 from $13.35.

Target price is $13.30 Current Price is $11.47 Difference: $1.83
If TCL meets the UBS target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $12.43, suggesting upside of 8.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.5

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

Macquarie rates URW as Outperform (1) -

The company has raised US$1bn in debt at an average cost of 4.38% and average maturity of 15 years. Macquarie assesses the financial implications, as well as the cost of financing, as this was the first senior fixed-rate notes issue in the US market by the group.

The debt will be used to pay down revolving credit facilities as opposed to paying down US dollar hedged debt. Given the difference in the cost, the broker estimates this will be a -1.3% headwind to earnings on an annualised basis.

Macquarie maintains an Outperform rating and reduces the target to $16.29 from $16.70.

Target price is $16.29 Current Price is $14.26 Difference: $2.03
If URW meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $17.65, suggesting upside of 23.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

This company reports in EUR. 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