Australian Broker Call

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May 28, 2018

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COMPANIES DISCUSSED IN THIS ISSUE

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The number next to the symbol represents the number of brokers covering it for this report -(if more than 1)

Last Updated: 11:12 AM

Your daily news report on the latest recommendation, valuation, forecast and opinion changes.

This report includes concise but limited reviews of research recently published by Stockbrokers, which should be considered as information concerning likely market behaviour rather than advice on the securities mentioned. Do not act on the contents of this Report without first reading the important information included at the end.

For more info about the different terms used by stockbrokers, as well as the different methodologies behind similar sounding ratings, download our guide HERE

Today's Upgrades and Downgrades
EPW - ERM POWER Downgrade to Underperform from Neutral Macquarie
Downgrade to Hold from Add Morgans
Downgrade to Hold from Buy Ord Minnett
SPK - SPARK NEW ZEALAND Upgrade to Neutral from Underperform Macquarie
WES - WESFARMERS Downgrade to Sell from Neutral Citi
ASL  AUSDRILL LIMITED

Mining Sector Contracting

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Overnight Price: $2.51

Deutsche Bank rates ASL as Buy (1) -

The company has announced a new contract for its 50%-owned African underground mining business. The contract is for the provision of all underground mining services for the Siou mine in Burkina Faso.

Estimated value is US$211m over 70 months. Deutsche Bank expects associated project capital expenditure to be comfortably funded within the joint venture.

Buy rating maintained. Target is $3.20.

Target price is $3.20 Current Price is $2.51 Difference: $0.69
If ASL meets the Deutsche Bank target it will return approximately 27% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Deutsche Bank forecasts a full year FY18 dividend of 7.00 cents and EPS of 15.00 cents.
At the last closing share price the estimated dividend yield is 2.79%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 16.73.

Forecast for FY19:

Deutsche Bank forecasts a full year FY19 dividend of 10.00 cents and EPS of 17.00 cents.
At the last closing share price the estimated dividend yield is 3.98%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 14.76.

Market Sentiment: 1.0

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

CHC  CHARTER HALL GROUP

REITs

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Overnight Price: $6.40

Ord Minnett rates CHC as Accumulate (2) -

The company will issue around $230m in long-term debt to fund future investments, which are yet to be determined. Ord Minnett assesses this move shifts the business to a slightly higher-risk and higher-return model.

Accumulate rating and $6.90 target maintained.

This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.

Target price is $6.90 Current Price is $6.40 Difference: $0.5
If CHC meets the Ord Minnett target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $6.20, suggesting downside of -3.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Ord Minnett forecasts a full year FY18 dividend of 33.00 cents and EPS of 39.00 cents.
At the last closing share price the estimated dividend yield is 5.16%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 16.41.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 38.0, implying annual growth of -37.9%.

Current consensus DPS estimate is 32.6, implying a prospective dividend yield of 5.1%.

Current consensus EPS estimate suggests the PER is 16.8.

Forecast for FY19:

Ord Minnett forecasts a full year FY19 dividend of 39.00 cents and EPS of 45.00 cents.
At the last closing share price the estimated dividend yield is 6.09%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 14.22.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 40.1, implying annual growth of 5.5%.

Current consensus DPS estimate is 35.2, implying a prospective dividend yield of 5.5%.

Current consensus EPS estimate suggests the PER is 16.0.

Market Sentiment: 0.3

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

EPW  ERM POWER LIMITED

Infrastructure & Utilities

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Overnight Price: $1.65

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

The company has lowered its FY18-19 outlook and guidance for US gross margins but reiterated its expectations for Australia. Macquarie observes the company has a buyback, which will reduce liquidity and slow the weakness, but considers the fundamental value remains stretched.

Cash flow is attractive but another disappointment in the US suggests predictability is low. Target is reduced to $1.39 from $1.51, but the broker believes there is potential upside to $1.50 if management divests the US operation. Rating is downgraded to Underperform from Neutral.

Target price is $1.39 Current Price is $1.65 Difference: minus $0.26 (current price is over target).
If EPW meets the Macquarie target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.57, suggesting downside of -4.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Macquarie forecasts a full year FY18 dividend of 7.00 cents and EPS of minus 0.90 cents.
At the last closing share price the estimated dividend yield is 4.24%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is minus 183.33.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 8.4, implying annual growth of N/A.

Current consensus DPS estimate is 7.0, implying a prospective dividend yield of 4.2%.

Current consensus EPS estimate suggests the PER is 19.6.

Forecast for FY19:

Macquarie forecasts a full year FY19 dividend of 7.50 cents and EPS of 2.50 cents.
At the last closing share price the estimated dividend yield is 4.55%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 66.00.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 6.2, implying annual growth of -26.2%.

Current consensus DPS estimate is 7.5, implying a prospective dividend yield of 4.5%.

Current consensus EPS estimate suggests the PER is 26.6.

Market Sentiment: -0.3

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


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

The company's business update indicated domestic operations are performing well but the loss-making US venture is less profitable than previously expected. Morgans materially reduces expectations for the US retail business.

The broker downgrades to Hold from Add, given the outlook for total returns. Target is reduced to $1.64 from $1.93.

Target price is $1.64 Current Price is $1.65 Difference: minus $0.01 (current price is over target).
If EPW meets the Morgans target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.57, suggesting downside of -4.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Morgans forecasts a full year FY18 dividend of 7.00 cents and EPS of 4.00 cents.
At the last closing share price the estimated dividend yield is 4.24%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 41.25.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 8.4, implying annual growth of N/A.

Current consensus DPS estimate is 7.0, implying a prospective dividend yield of 4.2%.

Current consensus EPS estimate suggests the PER is 19.6.

Forecast for FY19:

Morgans forecasts a full year FY19 dividend of 7.00 cents and EPS of 6.00 cents.
At the last closing share price the estimated dividend yield is 4.24%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 27.50.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 6.2, implying annual growth of -26.2%.

Current consensus DPS estimate is 7.5, implying a prospective dividend yield of 4.5%.

Current consensus EPS estimate suggests the PER is 26.6.

Market Sentiment: -0.3

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


Ord Minnett rates EPW as Downgrade to Hold from Buy (3) -

The company has guided to lower sales volumes and margins in its US business, the second downgrade since the beginning of 2018. Ord Minnett understands the reasons but believes this reduces the market's confidence in the outlook for the US retail business.

Ord Minnett now values the US business at $34m, equivalent to less than 9% of the overall discounted cash flow valuation. The broker downgrades to Hold from Buy and lowers the target to $1.69 from $1.75.

Target price is $1.69 Current Price is $1.65 Difference: $0.04
If EPW meets the Ord Minnett target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $1.57, suggesting downside of -4.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Ord Minnett forecasts a full year FY18 dividend of 7.00 cents and EPS of 22.00 cents.
At the last closing share price the estimated dividend yield is 4.24%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 7.50.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 8.4, implying annual growth of N/A.

Current consensus DPS estimate is 7.0, implying a prospective dividend yield of 4.2%.

Current consensus EPS estimate suggests the PER is 19.6.

Forecast for FY19:

Ord Minnett forecasts a full year FY19 dividend of 8.00 cents and EPS of 10.00 cents.
At the last closing share price the estimated dividend yield is 4.85%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 16.50.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 6.2, implying annual growth of -26.2%.

Current consensus DPS estimate is 7.5, implying a prospective dividend yield of 4.5%.

Current consensus EPS estimate suggests the PER is 26.6.

Market Sentiment: -0.3

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

HIG  HIGHLANDS PACIFIC LIMITED

Nickel

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Overnight Price: $0.13

Morgans rates HIG as Add (1) -

Highlands Pacific is moving to an 11.3% interest in the Ramu nickel-cobalt project, from 8.56%. A streaming deal has been structured whereby partner Cobalt 27 will acquire the right to 55% of Highland Pacific's attributable payable cobalt and 27.5% of attributable nickel.

Morgans estimates this will cover Highland Pacific's all-in sustaining costs of production. The deal is expected to focus market interest on the inherent value of Ramu. The broker maintains an Add rating and raises the target to $0.33 from $0.21.

Target price is $0.33 Current Price is $0.13 Difference: $0.2
If HIG meets the Morgans target it will return approximately 154% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY18:

Morgans forecasts a full year FY18 dividend of 0.00 cents and EPS of 0.10 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 130.00.

Forecast for FY19:

Morgans forecasts a full year FY19 dividend of 0.00 cents and EPS of 0.80 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 16.25.

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

Market Sentiment: 1.0

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

LVT  LIVETILES LIMITED

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Overnight Price: $0.42

UPDATED

Citi rates LVT as Buy (1) -

Citi has only just initiated coverage (see one week ago) and LiveTiles announces the proposed acquisition of Hyperfish, a software solution to improve platform effectiveness. Citi analysts can see the rationale behind the acquisition.

Hyperfish is compatible with Microsoft platforms and others, and Citi suggests it could be accretive for LiveTiles from as early as FY19. Target price climbs to 59c from 56c. Buy/High Risk rating retained.

Target price is $0.59 Current Price is $0.42 Difference: $0.17
If LVT meets the Citi target it will return approximately 40% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Citi forecasts a full year FY18 dividend of 0.00 cents and EPS of minus 3.40 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is minus 12.35.

Forecast for FY19:

Citi forecasts a full year FY19 dividend of 0.00 cents and EPS of minus 4.80 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is minus 8.75.

Market Sentiment: 1.0

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

RIC  RIDLEY CORPORATION LIMITED

Agriculture

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Overnight Price: $1.45

Credit Suisse rates RIC as Neutral (3) -

Credit Suisse believes the company's decision to appoint a corporate advisor to explore options relating to Novacq is positive in that it follows expressions of interest and may lead to accelerated growth, relative to what the company could be able to fund alone.

The broker incorporates earnings reductions of around -12-13% because of the previously guided negative impact from the loss of raw materials rendering supply at Maroota. Neutral rating maintained and target is reduced to $1.35 from $1.45.

Target price is $1.35 Current Price is $1.45 Difference: minus $0.1 (current price is over target).
If RIC meets the Credit Suisse target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in June.

Forecast for FY18:

Credit Suisse forecasts a full year FY18 dividend of 4.06 cents and EPS of 8.22 cents.
At the last closing share price the estimated dividend yield is 2.80%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 17.64.

Forecast for FY19:

Credit Suisse forecasts a full year FY19 dividend of 4.26 cents and EPS of 8.55 cents.
At the last closing share price the estimated dividend yield is 2.94%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 16.96.

Market Sentiment: 0.0

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

RSG  RESOLUTE MINING LIMITED

Gold & Silver

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Overnight Price: $1.18

UPDATED

Citi rates RSG as Buy (1) -

Resolute Mining has reported drilling at Tabakoroni, 35km south of the Syama Gold Mine in Mali, Africa, has returned high-grade oxide and sulphide gold mineralisation.

Citi analysts revisit the time when they visited the Syama greenstone belt in March last year. At that time, they returned impressed with the gold prospectivity of the district. Strong Buy/High Risk rating retained. Price target $1.70.
 

Target price is $1.70 Current Price is $1.18 Difference: $0.52
If RSG meets the Citi target it will return approximately 44% (excluding dividends, fees and charges).

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 Outperform (1) -

The company has produced a strong set of drilling results from the Tabakoroni site near Syama. Macquarie believes the grade and widths signal the potential for underground mining and this should provide good grades for the Syama oxide circuit.

The Nord discovery also bodes well, in the broker's opinion, for the longevity of oxide mining at Tabakoroni. Outperform and $1.40 target retained.

Target price is $1.40 Current Price is $1.18 Difference: $0.22
If RSG meets the Macquarie target it will return approximately 19% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Macquarie forecasts a full year FY18 dividend of 0.60 cents and EPS of 8.30 cents.
At the last closing share price the estimated dividend yield is 0.51%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 14.22.

Forecast for FY19:

Macquarie forecasts a full year FY19 dividend of 0.90 cents and EPS of 17.40 cents.
At the last closing share price the estimated dividend yield is 0.76%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 6.78.

Market Sentiment: 1.0

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

SPK  SPARK NEW ZEALAND LIMITED

Telecommunication

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Overnight Price: $3.26

Credit Suisse rates SPK as Underperform (5) -

The company has decided to bring forward costs associated with the Quantum project labour savings from FY19 to FY18. This means a major upgrade to Credit Suisse's FY19 estimates for operating earnings.

Underperform rating retained and target is raised to NZ$3.21 from NZ$3.17.

Current Price is $3.26. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

Forecast for FY18:

Credit Suisse forecasts a full year FY18 dividend of 23.11 cents and EPS of 20.61 cents.
At the last closing share price the estimated dividend yield is 7.09%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 15.81.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 19.7, implying annual growth of N/A.

Current consensus DPS estimate is 22.9, implying a prospective dividend yield of 7.0%.

Current consensus EPS estimate suggests the PER is 16.5.

Forecast for FY19:

Credit Suisse forecasts a full year FY19 dividend of 23.11 cents and EPS of 22.09 cents.
At the last closing share price the estimated dividend yield is 7.09%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 14.76.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 21.4, implying annual growth of 8.6%.

Current consensus DPS estimate is 22.9, implying a prospective dividend yield of 7.0%.

Current consensus EPS estimate suggests the PER is 15.2.

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

Market Sentiment: 0.2

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


Macquarie rates SPK as Upgrade to Neutral from Underperform (3) -

The company has confirmed the acceleration of its Quantum program, bringing forward implementation costs of $25-30m in FY18. Macquarie observes competitive pressures remain but cost reductions provide an offset.

The broker envisages modest earnings growth in the next two years. Rating is upgraded to Neutral from Underperform. Target is raised to NZ$3.60 from NZ$3.50.

Current Price is $3.26. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

Forecast for FY18:

Macquarie forecasts a full year FY18 dividend of 23.11 cents and EPS of 19.04 cents.
At the last closing share price the estimated dividend yield is 7.09%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 17.12.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 19.7, implying annual growth of N/A.

Current consensus DPS estimate is 22.9, implying a prospective dividend yield of 7.0%.

Current consensus EPS estimate suggests the PER is 16.5.

Forecast for FY19:

Macquarie forecasts a full year FY19 dividend of 23.11 cents and EPS of 21.35 cents.
At the last closing share price the estimated dividend yield is 7.09%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 15.27.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 21.4, implying annual growth of 8.6%.

Current consensus DPS estimate is 22.9, implying a prospective dividend yield of 7.0%.

Current consensus EPS estimate suggests the PER is 15.2.

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

Market Sentiment: 0.2

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


Morgan Stanley rates SPK as Overweight (1) -

The company will accelerate its cost reduction program, called Quantum, bringing forward an extra NZ$25-30m in implementation costs. This is not a complete surprise to Morgan Stanley and the broker notes no guidance is yet being issued for FY19.

The news is considered incrementally positive and should improve the sustainability of medium-term earnings and distributions. Overweight rating. Industry view is In-Line. Price target is NZ$3.80.

Current Price is $3.26. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

Forecast for FY18:

Morgan Stanley forecasts a full year FY18 EPS of 20.34 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 16.03.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 19.7, implying annual growth of N/A.

Current consensus DPS estimate is 22.9, implying a prospective dividend yield of 7.0%.

Current consensus EPS estimate suggests the PER is 16.5.

Forecast for FY19:

Morgan Stanley forecasts a full year FY19 EPS of 22.19 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 14.69.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 21.4, implying annual growth of 8.6%.

Current consensus DPS estimate is 22.9, implying a prospective dividend yield of 7.0%.

Current consensus EPS estimate suggests the PER is 15.2.

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

Market Sentiment: 0.2

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


UBS rates SPK as Neutral (3) -

Spark NZ has announced the acceleration of its Quantum cost out program in FY18, which the broker believes is becoming more essential if the company is going to hit its aspiration targets. Spark will do what it can to avoid a credit rating and/or dividend downgrade.

A fiercely competitive broadband market means reinvestment is required to attract and retain customers, but the broker believes margins may now have bottomed out. Neutral retained, target rises to NZ$3.50 from NZ$3.35.

Current Price is $3.26. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in June.

Forecast for FY18:

UBS forecasts a full year FY18 dividend of 23.11 cents and EPS of 18.95 cents.
At the last closing share price the estimated dividend yield is 7.09%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 17.20.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 19.7, implying annual growth of N/A.

Current consensus DPS estimate is 22.9, implying a prospective dividend yield of 7.0%.

Current consensus EPS estimate suggests the PER is 16.5.

Forecast for FY19:

UBS forecasts a full year FY19 dividend of 23.11 cents and EPS of 20.15 cents.
At the last closing share price the estimated dividend yield is 7.09%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 16.18.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 21.4, implying annual growth of 8.6%.

Current consensus DPS estimate is 22.9, implying a prospective dividend yield of 7.0%.

Current consensus EPS estimate suggests the PER is 15.2.

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

Market Sentiment: 0.2

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

SVW  SEVEN GROUP HOLDINGS LIMITED

Diversified Financials

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Overnight Price: $19.59

Macquarie rates SVW as Outperform (1) -

Macquarie observes the upgrade cycle continues, with strong momentum across WesTrac, Coates and the energy divisions, supported by strengthening industry conditions.

The company has lifted margin expectations at WesTrac and reinforced its track record of capital allocation and investment decisions.

Macquarie maintains an Outperform rating and raises the target to $22.08 from $18.80.

Target price is $22.08 Current Price is $19.59 Difference: $2.49
If SVW meets the Macquarie target it will return approximately 13% (excluding dividends, fees and charges).

Current consensus price target is $21.56, suggesting upside of 10.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Macquarie forecasts a full year FY18 dividend of 41.00 cents and EPS of 101.00 cents.
At the last closing share price the estimated dividend yield is 2.09%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 19.40.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 99.5, implying annual growth of 1321.4%.

Current consensus DPS estimate is 42.0, implying a prospective dividend yield of 2.1%.

Current consensus EPS estimate suggests the PER is 19.7.

Forecast for FY19:

Macquarie forecasts a full year FY19 dividend of 40.00 cents and EPS of 125.60 cents.
At the last closing share price the estimated dividend yield is 2.04%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 15.60.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 117.7, implying annual growth of 18.3%.

Current consensus DPS estimate is 43.3, implying a prospective dividend yield of 2.2%.

Current consensus EPS estimate suggests the PER is 16.6.

Market Sentiment: 0.9

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

WES  WESFARMERS LIMITED

Food, Beverages & Tobacco

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Overnight Price: $45.52

UPDATED

Citi rates WES as Downgrade to Sell from Neutral (5) -

Wesfarmers has announced the sale of Bunnings UK & Ireland. The 24 Bunnings pilot stores will revert back to the Homebase brand following completion of the transaction.

Wesfarmers expects to recognise a -GBP200-230m loss on disposal in its FY18 results. While the acquisition was a poor one, Citi observes the costs of exit are much better than expected and remove a risk hanging over the stock, improving the balance sheet.

Following recent share price appreciation, Citi downgrades to Sell from Neutral. Target lifts to $41.50 from $40.10.

Target price is $41.50 Current Price is $45.52 Difference: minus $4.02 (current price is over target).
If WES meets the Citi target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $42.94, suggesting downside of -5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Citi forecasts a full year FY18 dividend of 225.00 cents and EPS of 245.10 cents.
At the last closing share price the estimated dividend yield is 4.94%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 18.57.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 228.1, implying annual growth of -10.4%.

Current consensus DPS estimate is 217.0, implying a prospective dividend yield of 4.8%.

Current consensus EPS estimate suggests the PER is 20.0.

Forecast for FY19:

Citi forecasts a full year FY19 dividend of 229.00 cents and EPS of 256.30 cents.
At the last closing share price the estimated dividend yield is 5.03%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 17.76.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 261.6, implying annual growth of 14.7%.

Current consensus DPS estimate is 228.7, implying a prospective dividend yield of 5.0%.

Current consensus EPS estimate suggests the PER is 17.4.

Market Sentiment: -0.1

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


Credit Suisse rates WES as Outperform (1) -

The plans to divest the Bunnings UK & Ireland business to Hilco is a better outcome than Credit Suisse had expected. With the sale, Wesfarmers retains a perpetual right to a 20% share of any future equity distribution from the Homebase business.

Target is raised to $47.36 from $45.20. Outperform retained.

Target price is $47.36 Current Price is $45.52 Difference: $1.84
If WES meets the Credit Suisse target it will return approximately 4% (excluding dividends, fees and charges).

Current consensus price target is $42.94, suggesting downside of -5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Credit Suisse forecasts a full year FY18 dividend of 205.00 cents and EPS of 248.00 cents.
At the last closing share price the estimated dividend yield is 4.50%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 18.35.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 228.1, implying annual growth of -10.4%.

Current consensus DPS estimate is 217.0, implying a prospective dividend yield of 4.8%.

Current consensus EPS estimate suggests the PER is 20.0.

Forecast for FY19:

Credit Suisse forecasts a full year FY19 dividend of 210.00 cents and EPS of 257.00 cents.
At the last closing share price the estimated dividend yield is 4.61%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 17.71.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 261.6, implying annual growth of 14.7%.

Current consensus DPS estimate is 228.7, implying a prospective dividend yield of 5.0%.

Current consensus EPS estimate suggests the PER is 17.4.

Market Sentiment: -0.1

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


Deutsche Bank rates WES as Hold (3) -

Wesfarmers has reached an agreement to divest the Homebase business in the UK for a nominal amount to Hilco Capital. The company is expected to incur a loss on disposal of -GBP200-230m.

The business was written down to GBP150m in February, which suggests to Deutsche Bank exit costs of GBP 50-80m.

Hold rating. Target is $42.

Target price is $42.00 Current Price is $45.52 Difference: minus $3.52 (current price is over target).
If WES meets the Deutsche Bank target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $42.94, suggesting downside of -5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Deutsche Bank forecasts a full year FY18 dividend of 223.00 cents and EPS of 247.00 cents.
At the last closing share price the estimated dividend yield is 4.90%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 18.43.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 228.1, implying annual growth of -10.4%.

Current consensus DPS estimate is 217.0, implying a prospective dividend yield of 4.8%.

Current consensus EPS estimate suggests the PER is 20.0.

Forecast for FY19:

Deutsche Bank forecasts a full year FY19 dividend of 225.00 cents and EPS of 252.00 cents.
At the last closing share price the estimated dividend yield is 4.94%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 18.06.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 261.6, implying annual growth of 14.7%.

Current consensus DPS estimate is 228.7, implying a prospective dividend yield of 5.0%.

Current consensus EPS estimate suggests the PER is 17.4.

Market Sentiment: -0.1

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


Macquarie rates WES as No Rating (-1) -

Wesfarmers has secured a buyer for the Bunnings UK & Ireland stores. Hilco will acquire all Homebase assets, including the brand, store network, freehold property, leases and inventory.

The 24 Bunnings pilot stores will convert to Homebase. Wesfarmers estimates a -GBP200-230m loss in the FY18 results.

Macquarie is restricted on providing a rating and target at this stage.

Current Price is $45.52. Target price not assessed.

Current consensus price target is $42.94, suggesting downside of -5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Macquarie forecasts a full year FY18 dividend of 216.50 cents and EPS of 250.30 cents.
At the last closing share price the estimated dividend yield is 4.76%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 18.19.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 228.1, implying annual growth of -10.4%.

Current consensus DPS estimate is 217.0, implying a prospective dividend yield of 4.8%.

Current consensus EPS estimate suggests the PER is 20.0.

Forecast for FY19:

Macquarie forecasts a full year FY19 dividend of 263.90 cents and EPS of 293.30 cents.
At the last closing share price the estimated dividend yield is 5.80%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 15.52.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 261.6, implying annual growth of 14.7%.

Current consensus DPS estimate is 228.7, implying a prospective dividend yield of 5.0%.

Current consensus EPS estimate suggests the PER is 17.4.

Market Sentiment: -0.1

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 sold its Homebase business to Hilco Capital for a nominal amount. A value share mechanism is included, with Wesfarmers entitled to 20% of the equity distributions indefinitely.

Morgan Stanley observes the deal should eliminate losses at the Bunnings UK & Ireland business from FY19 onwards.

Underweight rating retained. Industry view is Cautious. Target is $39.

Target price is $39.00 Current Price is $45.52 Difference: minus $6.52 (current price is over target).
If WES meets the Morgan Stanley target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $42.94, suggesting downside of -5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Morgan Stanley forecasts a full year FY18 dividend of 207.00 cents and EPS of 246.00 cents.
At the last closing share price the estimated dividend yield is 4.55%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 18.50.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 228.1, implying annual growth of -10.4%.

Current consensus DPS estimate is 217.0, implying a prospective dividend yield of 4.8%.

Current consensus EPS estimate suggests the PER is 20.0.

Forecast for FY19:

Morgan Stanley forecasts a full year FY19 dividend of 207.00 cents and EPS of 244.00 cents.
At the last closing share price the estimated dividend yield is 4.55%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 18.66.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 261.6, implying annual growth of 14.7%.

Current consensus DPS estimate is 228.7, implying a prospective dividend yield of 5.0%.

Current consensus EPS estimate suggests the PER is 17.4.

Market Sentiment: -0.1

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


UPDATED

Ord Minnett rates WES as Hold (3) -

Wesfarmers will sell its Bunnings UK & Ireland business and incur a loss on disposal of -GBP200-230m. Hilco Capital will pay a nominal amount for the business.

Ord Minnett considers the outlook somewhat mixed for Wesfarmers while a lack of valuation support remains evident. The broker maintains a Hold rating and raises the target to $43.00 from $42.50.

This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.

Target price is $43.00 Current Price is $45.52 Difference: minus $2.52 (current price is over target).
If WES meets the Ord Minnett target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $42.94, suggesting downside of -5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Ord Minnett forecasts a full year FY18 dividend of 225.00 cents and EPS of 88.00 cents.
At the last closing share price the estimated dividend yield is 4.94%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 51.73.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 228.1, implying annual growth of -10.4%.

Current consensus DPS estimate is 217.0, implying a prospective dividend yield of 4.8%.

Current consensus EPS estimate suggests the PER is 20.0.

Forecast for FY19:

Ord Minnett forecasts a full year FY19 dividend of 230.00 cents and EPS of 263.00 cents.
At the last closing share price the estimated dividend yield is 5.05%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 17.31.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 261.6, implying annual growth of 14.7%.

Current consensus DPS estimate is 228.7, implying a prospective dividend yield of 5.0%.

Current consensus EPS estimate suggests the PER is 17.4.

Market Sentiment: -0.1

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


UBS rates WES as Neutral (3) -

The divestment of Bunnings UK&I comes at a cost to Wesfarmers but is accretive to the broker's earnings forecasts given further losses were expected. FY19 forecast earnings rise by 3%.

The broker believes the company otherwise has a strong suite of businesses, but the short to medium term outlook is relatively muted. Neutral retained. The broker has not factored the planned Coles demerger into forecasts as yet.

Target rises to $43.00 from $41.30.

Target price is $43.00 Current Price is $45.52 Difference: minus $2.52 (current price is over target).
If WES meets the UBS target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $42.94, suggesting downside of -5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

UBS forecasts a full year FY18 dividend of 218.00 cents and EPS of 250.00 cents.
At the last closing share price the estimated dividend yield is 4.79%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 18.21.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 228.1, implying annual growth of -10.4%.

Current consensus DPS estimate is 217.0, implying a prospective dividend yield of 4.8%.

Current consensus EPS estimate suggests the PER is 20.0.

Forecast for FY19:

UBS forecasts a full year FY19 dividend of 219.00 cents and EPS of 254.00 cents.
At the last closing share price the estimated dividend yield is 4.81%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 17.92.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 261.6, implying annual growth of 14.7%.

Current consensus DPS estimate is 228.7, implying a prospective dividend yield of 5.0%.

Current consensus EPS estimate suggests the PER is 17.4.

Market Sentiment: -0.1

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

WOR  WORLEYPARSONS LIMITED

Energy Sector Contracting

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Overnight Price: $16.78

Macquarie rates WOR as Outperform (1) -

Macquarie observes contract announcements have picked up in the market and should back recovery prospects, notwithstanding the uncertainty regarding timing.

The broker's margin calculations over FY20-21 revert to long-term average levels. Macquarie maintains an Outperform rating and raises the target is $17.70 from $16.08.

Target price is $17.70 Current Price is $16.78 Difference: $0.92
If WOR meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $16.70, suggesting downside of -0.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY18:

Macquarie forecasts a full year FY18 dividend of 26.00 cents and EPS of 74.90 cents.
At the last closing share price the estimated dividend yield is 1.55%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 22.40.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 61.0, implying annual growth of 351.9%.

Current consensus DPS estimate is 21.8, implying a prospective dividend yield of 1.3%.

Current consensus EPS estimate suggests the PER is 27.5.

Forecast for FY19:

Macquarie forecasts a full year FY19 dividend of 38.10 cents and EPS of 83.50 cents.
At the last closing share price the estimated dividend yield is 2.27%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 20.10.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 79.3, implying annual growth of 30.0%.

Current consensus DPS estimate is 31.7, implying a prospective dividend yield of 1.9%.

Current consensus EPS estimate suggests the PER is 21.2.

Market Sentiment: 0.7

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

Summaries
ASL AUSDRILL Buy - Deutsche Bank Overnight Price $2.51
CHC CHARTER HALL Accumulate - Ord Minnett Overnight Price $6.40
EPW ERM POWER Downgrade to Underperform from Neutral - Macquarie Overnight Price $1.65
Downgrade to Hold from Add - Morgans Overnight Price $1.65
Downgrade to Hold from Buy - Ord Minnett Overnight Price $1.65
HIG HIGHLANDS PACIFIC Add - Morgans Overnight Price $0.13
LVT LIVETILES Buy - Citi Overnight Price $0.42
RIC RIDLEY CORP Neutral - Credit Suisse Overnight Price $1.45
RSG RESOLUTE MINING Buy - Citi Overnight Price $1.18
Outperform - Macquarie Overnight Price $1.18
SPK SPARK NEW ZEALAND Underperform - Credit Suisse Overnight Price $3.26
Upgrade to Neutral from Underperform - Macquarie Overnight Price $3.26
Overweight - Morgan Stanley Overnight Price $3.26
Neutral - UBS Overnight Price $3.26
SVW SEVEN GROUP Outperform - Macquarie Overnight Price $19.59
WES WESFARMERS Downgrade to Sell from Neutral - Citi Overnight Price $45.52
Outperform - Credit Suisse Overnight Price $45.52
Hold - Deutsche Bank Overnight Price $45.52
No Rating - Macquarie Overnight Price $45.52
Underweight - Morgan Stanley Overnight Price $45.52
Hold - Ord Minnett Overnight Price $45.52
Neutral - UBS Overnight Price $45.52
WOR WORLEYPARSONS Outperform - Macquarie Overnight Price $16.78
RATING SUMMARY
Rating No. Of Recommendations
1. Buy

9

2. Accumulate

1

3. Hold

8

5. Sell

4

Monday 28 May 2018

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Disclaimer:
The content of this information does in no way reflect the opinions of FNArena, or of its journalists. In fact we don't have any opinion about the stock market, its value, future direction or individual shares. FNArena solely reports about what the main experts in the market note, believe and comment on. By doing so we believe we provide intelligent investors with a valuable tool that helps them in making up their own minds, reading market trends and getting a feel for what is happening beneath the surface. This document is provided for informational purposes only. It does not constitute an offer to sell or a solicitation to buy any security or other financial instrument. FNArena employs very experienced journalists who base their work on information believed to be reliable and accurate, though no guarantee is given that the daily report is accurate or complete. Investors should contact their personal adviser before making any investment decision.