Australian Broker Call

Credit Suisse rates CGF as Neutral (3) -

The company will commence a quota share reinsurance of US dollar-denominated annuities issued in the Japanese market by MS Primary, a subsidiary of MS&AD.

While Credit Suisse expects planner activity to recover over the next 12-18 months the risk is to the downside if this is delayed.

Hence, the annuity sales opportunity from the Japanese agreement, worth around $640m to over $3bn per annum, provides base annuity book growth of 10-15% per annum and the risk is now skewed to the upside.

Neutral rating maintained. Target rises to $8.30 from $7.55.

Target price is $8.30 Current Price is $8.00 Difference: $0.3
If CGF meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $8.22, suggesting upside of 2.7% (ex-dividends)

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 CGF as Upgrade to Hold from Sell (3) -

The relationship between Challenger and its Japanese partner is deepening and Deutsche Bank notes MS Primary will now provide to Challenger an annual amount of reinsurance, across both Australian and US dollar annuities, of at least JPY50bn (circa $640m) per year for a minimum of five years.

The revised arrangement remains subject to review in the event of any material adverse change for either of the parties and comes also with an increased equity stake in Challenger. Target price jumps to $8 from $7. Rating has been upgraded to Hold from Sell.

Target price is $8.00 Current Price is $8.00 Difference: $0
If CGF meets the Deutsche Bank target it will return approximately 0% (excluding dividends, fees and charges).

Current consensus price target is $8.22, suggesting upside of 2.7% (ex-dividends)

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

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

MS&AD will increase its shareholding in Challenger to over 15% and assume a seat on the board. The quota share agreement has been extended to include US-dollar 20-year annuities.

Previously, Challenger reinsured earnings only in Australian dollar annuities distributed by MS&AD. Morgan Stanley notes the increase in shareholding strengthens the partnership and may increase longer term buy-out prospects.

Equal-weight rating maintained. Target is $7.50. Industry view: In-line.

Target price is $7.50 Current Price is $8.00 Difference: minus $0.5 (current price is over target).
If CGF meets the Morgan Stanley target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.22, suggesting upside of 2.7% (ex-dividends)

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

Morgans rates CGF as Hold (3) -

Challenger has extended its relationship with MS Primary to include a reinsurance agreement regarding annuities issued in Japan and Australia across both USD and AUD. It's a positive deal for Challenger, the broker suggests, as it puts a floor under Japanese annuity sales.

Despite this news the broker remains cautious of the near term earnings pressures that were evident in the company's first half result. Target rises to $8.64 from $8.39, Hold retained.

Target price is $8.64 Current Price is $8.00 Difference: $0.64
If CGF meets the Morgans target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $8.22, suggesting upside of 2.7% (ex-dividends)

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

Ord Minnett rates CGF as Lighten (4) -

Challenger will expand its relationship with MS&AD to provide guaranteed investment returns on US-dollar denominated annuities. MS&AD will seek to increase its stake in Challenger to more than 15%.

Challenger offers an excellent deal for MS&AD, Ord Minnett suggests, while for Challenger shareholders the risks are considered too high and out of step with annuity writers globally.

The broker envisages Challenger will struggle to make its cost of capital after adjusting for historical levels of underperformance. The broker maintains a Lighten rating and raises the target to $7.00 from $6.85.

Target price is $7.00 Current Price is $8.00 Difference: minus $1 (current price is over target).
If CGF meets the Ord Minnett target it will return approximately minus 13% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $8.22, suggesting upside of 2.7% (ex-dividends)

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

UBS rates CGF as Neutral (3) -

The company has extended its reinsurance quota share with MS&AD subsidiary, MS Primary, to encompass US dollar as well as Australian dollar denominated annuities.

UBS believes this provides increased conviction in the company's ability to deliver double-digit growth in life assets over the medium term. UBS maintains a Neutral rating and $8.30 target.

Target price is $8.30 Current Price is $8.00 Difference: $0.3
If CGF meets the UBS target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $8.22, suggesting upside of 2.7% (ex-dividends)

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

Ord Minnett rates CHC as Accumulate (2) -

Ord Minnett assesses the company has eight vehicles that can raise and deploy capital on the back of the strong environment for office, industrial and long weighted average lease expiry segments.

Over the next three years the broker expects Charter Hall to increase assets under management to $40-45bn, implying 50% growth, as well as lift underlying property funds management margins to 55% from 43%.

This should ease potential concerns surrounding reversion risk in earnings from the tapering off of performance fees. The broker maintains an Accumulate rating and raises the target to $11.00 from $9.75.

Target price is $11.00 Current Price is $10.18 Difference: $0.82
If CHC meets the Ord Minnett target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $9.82, suggesting downside of -3.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.6

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

Citi rates COL as Buy (1) -

Buy rating and $13.40 price target retained as Coles announced an exclusive partnership with UK based Ocado to boost its online aspirations. Citi analysts believe it is practically impossible not to see improvement/benefits for Coles from this deal, but also that investors won't be pricing any of it in while there are as yet no concrete achievements.

Two suggestions stand out from today's research update. On one hand, Citi estimates Ocado could drive Coles food margins 10-20bps higher, and group EBIT up 2.5%-5.0% from FY24 onwards. However, elevated supply chain capex over FY19–25 could place pressure on Coles' 80-90% payout ratio.

Target price is $13.40 Current Price is $11.87 Difference: $1.53
If COL meets the Citi target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $11.93, suggesting upside of 0.5% (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

Credit Suisse rates COL as Underperform (5) -

Coles is making its first move into automated B2C grocery distribution in Australia. The main aspects yet to be answered, Credit Suisse suggests, are on specific economics of the agreement struck with Ocado.

Under the agreement two customer fulfilment centres in Melbourne and Sydney will be developed. These will be highly automated and require capital expenditure of $130-150m.

Ocado will maintain the facilities and Coles will pay an ongoing maintenance fee. Underperform rating maintained. Target is $10.84.

Target price is $10.84 Current Price is $11.87 Difference: minus $1.03 (current price is over target).
If COL meets the Credit Suisse target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.93, suggesting upside of 0.5% (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

Deutsche Bank rates COL as Hold (3) -

At face value, suggest analysts at Deutsche Bank, the deal with UK-based Ocado will make Coles a leader from currently being a laggard in online sales in Australia, but the arrangement takes four years to implement, and four years is near an eternity in a rapidly changing environment.

The analysts also are not yet prepared that benefits, four years out, will outweigh the costs associated with putting the revised strategy in place. Given short term sales momentum remains with competitor Woolworths ((WOW)), that's also where Deutsche Bank's sector preference resides.

Also, the analysts add they would be surprised if Woolworths doesn't go down the automated fulfillment path at a similar time to Coles.

Target price is $12.50 Current Price is $11.87 Difference: $0.63
If COL meets the Deutsche Bank target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $11.93, suggesting upside of 0.5% (ex-dividends)

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 COL as Neutral (3) -

The company has undertaken an exclusive partnership with UK-based online retail group Ocado. This is expected to double the company's home-delivery capacity and improve online margins.

Macquarie assesses the announcement as a positive development after a difficult period for Coles following the weak convenience trading update. The partnership follows recent trends in supermarkets globally.

Macquarie welcomes the partnership, given the change in shopping habits, but considers actual competitive gains remain to be seen. Neutral rating maintained. Target is $12.19.

Target price is $12.19 Current Price is $11.87 Difference: $0.32
If COL meets the Macquarie target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $11.93, suggesting upside of 0.5% (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

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

The online fulfilment and home delivery arrangement with Ocado is expected to double the company's home delivery capacity and improve profit margins online, which Morgan Stanley notes are currently zero.

The broker suspects higher capital expenditure is likely to temper free cash flow over the coming years and margin dilution will continue, although the latter is expected to be relatively immaterial given the small proportion of sales generated online.

Equal-Weight retained. Industry view: Cautious. Target is $12.00.

Target price is $12.00 Current Price is $11.87 Difference: $0.13
If COL meets the Morgan Stanley target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $11.93, suggesting upside of 0.5% (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

Morgans rates COL as Hold (3) -

Coles has entered into a partnership with Ocado to improve its online offering, which will see $130-150m invested over the next four years to construct Customer Fulfillment Centres in Sydney and Melbourne, roughly doubling capacity and improving margins, the broker notes.

The broker sees such an investment as important to longer term competitiveness but does not change near term forecast given the centres won't commence operation until FY23. Hold retained, target rises to $12.21 from $12.15.

Target price is $12.21 Current Price is $11.87 Difference: $0.34
If COL meets the Morgans target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $11.93, suggesting upside of 0.5% (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

Ord Minnett rates COL as Lighten (4) -

Coles will form a partnership with online grocery platform Ocado to access online supply chain technology. New automated customer fulfilment centres are expected to be built by FY23.

Ord Minnett believes the initiatives are long dated, which suggests market share losses and sub-optimal margin performance versus Woolworths ((WOW)) will continue.

Ord Minnett suggests the incremental sales target of $1bn posts the partnership with Ocado could cannibalise existing store sales and affect store network requirements.

The broker also suggests there is limited potential upside to the dividend pay-out ratio. Lighten rating and $11 target maintained.

Target price is $11.00 Current Price is $11.87 Difference: minus $0.87 (current price is over target).
If COL meets the Ord Minnett target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $11.93, suggesting upside of 0.5% (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

UBS rates COL as Sell (5) -

Coles has announced an exclusive partnership with Ocado, gaining access to that company's global IP with respect to online ordering and fulfilment.

UBS observes the partnership mirrors similar deals globally and believes it de-risks Coles longer-term online strategy.

Little disclosure was made about the deal economics other than that Coles envisages it to be margin accretive versus the current break-even position of online business.

UBS maintains a Sell rating and $11.30 target.

Target price is $11.30 Current Price is $11.87 Difference: minus $0.57 (current price is over target).
If COL 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 $11.93, suggesting upside of 0.5% (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

Morgans rates DHG as Hold (3) -

Recent data show a strong decline in "for sale" listings, particularly in NSW and Victoria. On the assumption that listings remain weak at least until the May federal election, the broker has downgraded Domain earnings forecasts.

Target falls to $2.25 from $2.31. Hold retained, but the broker suggests investors looking for near term growth are best to look elsewhere.

Target price is $2.25 Current Price is $2.44 Difference: minus $0.19 (current price is over target).
If DHG meets the Morgans target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.72, suggesting upside of 11.5% (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 GOR as Downgrade to Neutral from Outperform (3) -

Macquarie downgrades to Neutral from Outperform after recent share price strength as first gold from Gruyere is imminent.

The target is raised to $1.10 from $0.90, given the more leveraged longer-term outlook.

Target price is $1.10 Current Price is $1.01 Difference: $0.09
If GOR meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

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

Macquarie rates KLL as Outperform (1) -

Kalium Lakes has entered a binding offtake agreement with German fertiliser producer and distributor K+S for 100% of Beyondie stage 1 production.

Macquarie believes this is a meaningful de-risking event and the company is now well-positioned to rapidly advance development of Beyondie.

The broker lifts the target to $0.80 from $0.70 and maintains an Outperform rating.

Target price is $0.80 Current Price is $0.49 Difference: $0.31
If KLL meets the Macquarie target it will return approximately 63% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 1.0

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

Credit Suisse rates KMD as Outperform (1) -

Operating earnings (EBITDA) were ahead of Credit Suisse forecasts. Growth appears robust but the broker notes the prior period did not include the Oboz business.

Underlying deterioration in earnings reflected weak trading in the NZ business and unfavourable Australian currency translation.

The broker also notes a clear uplift in core inventory, which drove a significant increase in working capital outflow.

Credit Suisse does not believe the market is adequately pricing in the attractive growth of the Oboz business or the upside potential from wholesaling. Outperform rating maintained. Target is reduced to NZ$2.75 from NZ$2.90.

Current Price is $2.22. Target price not assessed.

Current consensus price target is $2.65, suggesting upside of 19.4% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY19:

Forecast for FY20:

This company reports in NZD. 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

Macquarie rates KMD as Neutral (3) -

Macquarie observes trading in January has improved versus December and normalised net profit was ahead of expectations in the first half.

The broker believes the stock represents fair value at current levels given the uncertain retail outlook and currency headwinds affecting costs.

The broker raises the target to $2.30 from $2.28 and maintains a Neutral rating.

Target price is $2.30 Current Price is $2.22 Difference: $0.08
If KMD meets the Macquarie target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $2.65, suggesting upside of 19.4% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY19:

Forecast for FY20:

This company reports in NZD. 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

Macquarie rates MGX as Downgrade to Neutral from Outperform (3) -

Macquarie downgrades to Neutral from Outperform because of a lack of valuation upside and a rise of over 70% in the share price over the past three months.

The target is raised to $0.90 from $0.78 to reflect both a softer Australian dollar and an increase in the value of the resources currently outside of the mine plan.

Target price is $0.90 Current Price is $0.89 Difference: $0.01
If MGX meets the Macquarie target it will return approximately 1% (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

Macquarie rates NHC as Downgrade to Neutral from Outperform (3) -

Following the company's first half results, where it highlighted a higher proportion of low-grade coal in the sales mix, Macquarie envisages a challenge to earnings.

The broker also incorporates updated commodity prices and FX forecasts.

Macquarie reduces its earnings outlook for the business and downgrades to Neutral from Outperform. Target is reduced to $3 from $4.

Target price is $3.00 Current Price is $3.03 Difference: minus $0.03 (current price is over target).
If NHC 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 $3.60, suggesting upside of 18.8% (ex-dividends)

The company's fiscal year ends in July.

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

Macquarie rates PLS as Outperform (1) -

The company has released details of the stage 3 scoping study for expanding Pilgangoora. The study proposes a 50% lift in processing capacity to 7.5mtpa and is expected to deliver annual spodumene production of around 1.2mtpa as well as 1.1m pounds of 30% tantalite concentrate.

Macquarie believes the company is increasingly incentivised for this expansion, given the options it provides for downstream conversion. Outperform maintained. Target is raised to $1.30 from $1.20.

Target price is $1.30 Current Price is $0.71 Difference: $0.59
If PLS meets the Macquarie target it will return approximately 83% (excluding dividends, fees and charges).

Current consensus price target is $1.13, suggesting upside of 58.5% (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

Citi rates QAN as Buy (1) -

Citi has remodelled for weaker demand and the result is a -6%-7% reduction in forecasts. Buy rating retained, but price target drops to $6.90 from $7.30 (valuation drops to $7.14 from $7.54). As Jetstar services a cheaper segment of the market, its forecasts have been left unchanged.

Analysis of 20 years of data has taught Citi analysts the strongest correlation with airline demand is provided by... Australian house price changes. This explains the above.

Citi does not anticipate a rerun of the weakening demand context of 2016. Instead, the analysts point at differences this time around from a more rational domestic competitive setting, an inflationary fuel environment as well as the recovery of the Resources sector.

Target price is $6.90 Current Price is $5.43 Difference: $1.47
If QAN meets the Citi target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $6.02, suggesting upside of 10.9% (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

Deutsche Bank rates SBM as Upgrade to Buy from Hold (1) -

Deutsche Bank has upgraded to Buy from Hold. Now that the company has announced it will stick to trucking to move ore at Gwalia after alternative options have proved too expensive, Deutsche Bank has remodelled the outlook for the goldminer.

Admittedly, this has resulted in -20% less in Net Present Value (NPV) but the analysts retain a positive view on Gwalia overall. They also believe St Barbara can pay out 20c per annum to shareholders in a sustainable manner.

Price target drops to $3.80 from $4.80 prior.

Target price is $3.80 Current Price is $3.38 Difference: $0.42
If SBM meets the Deutsche Bank target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $3.54, suggesting upside of 4.7% (ex-dividends)

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 SFR as Upgrade to Outperform from Neutral (1) -

Macquarie upgrades to Outperform from Neutral after recent share price weakness. The company is exposed to strong near-term copper prices.

The broker envisages potential acquisition or the formal go-ahead for the Black Butte development project as key catalysts for the stock. Target is steady at $7.80.

Target price is $7.80 Current Price is $6.74 Difference: $1.06
If SFR meets the Macquarie target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $7.40, suggesting upside of 9.8% (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

Citi rates WES as Sell (5) -

Possibly to everyone's surprise (outside of the Wesfarmers board, we assume) Wesfarmers has announced a conditional bid for troubled rare earths miner Lynas Corp ((LYC)).

Citi analysts have responded by suggesting the surprise move is a reminder to all and sundry that acquiring an asset is more difficult than divesting assets in this market.

Citi analysts see the move on Lynas as a step up in the risk profile for Wesfarmers, which also reduces the near term potential for further capital returns. At face value, Citi estimates a successful deal could be 3% EPS accretive pre-synergies, with a return on capital of 10%.

Sell rating retained alongside a price target of $29.

Target price is $29.00 Current Price is $34.04 Difference: minus $5.04 (current price is over target).
If WES meets the Citi target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $32.17, suggesting downside of -5.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.4

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

Credit Suisse rates WES as Neutral (3) -

Credit Suisse is not surprised by the market reaction to the company's proposal to acquire Lynas Corp ((LYC)) but considers the move the sort of step out that the company has been suggesting.

Wesfarmers is looking at businesses with favourable industry characteristics and potentially being mis-priced on short-term factors.

The proposal is subject to resolution of the major risk, the Malaysian licence renewal. Credit Suisse suggests Wesfarmers should bring significant regulatory and political capability to the business as well as long-term funding certainty.

Neutral rating and $33.12 target maintained.

Target price is $33.12 Current Price is $34.04 Difference: minus $0.92 (current price is over target).
If WES 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 $32.17, suggesting downside of -5.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.4

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

Deutsche Bank rates WES as Hold (3) -

Now that Wesfarmers has shown its hand with an offer, conditionally, to shareholders in rare earths miner Lynas Corp ((LYC)), Deutsche Bank tries to make sense of it, but ultimately questions the associated risks for incorporating such a volatile mining operation in what has been a rather steady-as-she-goes business in years gone by.

Even if Wesfarmers achieves ownership on the cheap, the analysts point out associated sovereign and social risks won't be less. Hold. Price target $32.

Target price is $32.00 Current Price is $34.04 Difference: minus $2.04 (current price is over target).
If WES meets the Deutsche Bank target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $32.17, suggesting downside of -5.5% (ex-dividends)

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.4

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

Macquarie rates WES as Outperform (1) -

Wesfarmers has made an offer to acquire rare earths minor Lynas Corp ((LYC)) for $2.25 a share. The bid is contingent on the Malaysian operating licence being renewed.

The biggest risk for Lynas is around waste disposal, as the company is currently storing its waste on site and there has been significant opposition.

Macquarie assesses the rationale is tapping into the electric vehicle theme, as Lynas is the largest rare earth oxide producer outside of China, sourcing its ore from Mount Weld in Western Australia.

Outperform rating and $37.13 target maintained.

Target price is $37.13 Current Price is $34.04 Difference: $3.09
If WES meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $32.17, suggesting downside of -5.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.4

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

Morgan Stanley rates WES as Underweight (5) -

Wesfarmers has made an indicative proposal to acquire Lynas Corp ((LYC)) at $2.25 a share. The company ramped up production in recent years and delivered its first annual profit in FY18, the broker notes.

Morgan Stanley calculates earnings per share accretion of around 3%. The most pertinent issue is the regulatory environment in Malaysia, which remains challenging.

Underweight rating. Target is $29. Cautious industry view.

Target price is $29.00 Current Price is $34.04 Difference: minus $5.04 (current price is over target).
If WES meets the Morgan Stanley target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $32.17, suggesting downside of -5.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.4

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

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

Morgans can see the attraction of a business whose products are exposed to electric vehicles, wind turbines and other renewable applications, but also sees Malaysian political risk as a major factor. While the bid is only indicative at this stage, the licence for Lynas Corp's ((LYC)) Malaysian plant is up for renewal in September.

The issue for the plant has always been one of radioactive waste, which leads the broker to question why Wesfamers would exit coal on ethical grounds and then decide to get into rare earths. While more detail is required, Morgans pulls back to Hold for now on increased risk and drops its target to $34.54 from $36.50.

Target price is $34.54 Current Price is $34.04 Difference: $0.5
If WES meets the Morgans target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $32.17, suggesting downside of -5.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.4

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

Ord Minnett rates WES as Lighten (4) -

Wesfarmers has proposed the acquisition of rare earths miner Lynas Corp ((LYC)) for $2.25 or $1.5bn in total. Ord Minnett suggests the deal would represent a higher-risk use of surplus capital versus a special dividend.

Arguably Wesfarmers is yet to regain its "license" from the investment community for offshore M&A. The proposed acquisition is potentially attractive in the longer term but the execution risk is high and competitive advantage difficult to identify, in the broker's view.

Ord Minnett maintains a Lighten rating and $30 target.

Target price is $30.00 Current Price is $34.04 Difference: minus $4.04 (current price is over target).
If WES meets the Ord Minnett target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $32.17, suggesting downside of -5.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.4

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