Australian Broker Call

UBS rates BSL as Buy (1) -

China's efforts to reduce steel capacity, industry consolidation in India and Europe, robust steel demand outside of China and no sign of tariff-based demand destruction in the US have brought about the "best industry structure in ten years," BluseScope's CEO told brokers at a round table yesterday.

Resultant balance sheet strength puts the company in the right position to explore organic growth options while still retaining ample capacity for capital management, the broker notes. Buy and $21.30 target retained.

Target price is $21.00 Current Price is $17.38 Difference: $3.62
If BSL meets the UBS target it will return approximately 21% (excluding dividends, fees and charges).

Current consensus price target is $20.43, suggesting upside of 17.6% (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

Credit Suisse rates EVN as Upgrade to Neutral from Underperform (3) -

Credit Suisse believes the emerging high-grade underground opportunity supports the company's aspirations to increase Cowal's production to 300,000 ounces per year for 20 years.

The broker also believes Evolution Mining's disciplined business development continues to improve average asset quality. Credit Suisse upgrades to Neutral from Underperform. Target is $2.65.

Target price is $2.65 Current Price is $2.86 Difference: minus $0.21 (current price is over target).
If EVN meets the Credit Suisse target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.00, suggesting upside of 5.0% (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

Macquarie rates EVN as Upgrade to Outperform from Neutral (1) -

The company appears set to commit to the underground development of Cowal. Along with plant plant extensions and upgrades this should deliver on the long-term goal of a sustainable 300,000 ounces per annum run rate, Macquarie expects.

Macquarie upgrades FY19 and FY20 earnings estimates by 8% and 3% respectively. The broker believes the company is well-positioned to execute on organic as well as acquisition opportunities.

Rating is upgraded to Outperform from Neutral. Target is raised to $3.30 from $3.20.

Target price is $3.30 Current Price is $2.86 Difference: $0.44
If EVN meets the Macquarie target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $3.00, suggesting upside of 5.0% (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 EVN as Hold (3) -

The analysts have returned from the gold miner's Investor Day with ongoing confidence Evolution Mining should be able to maintain present performance into the years ahead ("medium term").

Capital guidance of $175m for the three years ahead proved higher than anticipated, but is seen as necessary support for the production profile longer term.

All in all, the analysts retain the view this is a high-quality company with strong cash margins, a healthy balance sheet and a sustainable production profile. Hold rating retained alongside $3 price target.

Target price is $3.00 Current Price is $2.86 Difference: $0.14
If EVN meets the Ord Minnett target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $3.00, suggesting upside of 5.0% (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

UBS rates EVN as Neutral (3) -

At its strategy day, Evolution outlined three-year production, capex and cost guidance and aspirational longer term guidance for its Cowal and Mungari mines.

The broker suggests the miner is a well-run gold company boasting high margins and steady cash flow. Investors looking for gold exposure, high cash generation and low operational risk could do worse than to consider Evolution. However the stock is seen as fairly priced. Neutral and $2.90.

Target price is $2.90 Current Price is $2.86 Difference: $0.04
If EVN meets the UBS target it will return approximately 1% (excluding dividends, fees and charges).

Current consensus price target is $3.00, suggesting upside of 5.0% (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

Macquarie rates KLL as Outperform (1) -

The company has upgraded resources at Beyondie by around 3%, with measured and indicated resources rising 150%. The upgraded confidence should deliver a material increase in brine reserves, Macquarie believes.

The broker has already factored in a doubling of the current reserves in its mining inventory and adds a further 11%. The bankable feasibility study in September presents the next catalyst. Outperform rating and target raised to $0.65 from $0.60.

Target price is $0.65 Current Price is $0.47 Difference: $0.18
If KLL meets the Macquarie target it will return approximately 38% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 1.0

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

Citi rates NUF as Buy (1) -

The company's shares are slowly recovering from the recent lows of early August, Citi observes. The Brazilian court has overturned the ban on glyphosate which ensures Nufarm can continue to sell glyphosate for use in the forthcoming soybean planting season.

The next catalyst is the company's FY18 results, due September 26, and a weak result has been guided because of the Australian drought. Buy rating and $9 target.

Target price is $9.00 Current Price is $7.10 Difference: $1.9
If NUF meets the Citi target it will return approximately 27% (excluding dividends, fees and charges).

Current consensus price target is $8.96, suggesting upside of 26.2% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.7

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

Morgan Stanley rates NUF as Overweight (1) -

A Brazilian court has overturned the proposed ban on products containing glyphosate. The ban was due to come into effect on September 3. Morgan Stanley believes there will be limited, if any, disruption to Nufarm's business in Brazil, consistent with prior expectations.

Overweight rating. Price target $10.65. Industry view: Cautious.

Target price is $10.65 Current Price is $7.10 Difference: $3.55
If NUF meets the Morgan Stanley target it will return approximately 50% (excluding dividends, fees and charges).

Current consensus price target is $8.96, suggesting upside of 26.2% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.7

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

UBS rates ORA as Neutral (3) -

UBS last reported on Orora a year ago and then went quiet, but the broker is back covering the stock and has reopened with a Neutral rating and $3.74 target.

The broker suggests M&A in the US provides the key near term value driver for the company given lack of further opportunity domestically. Packaging is highly fragmented in the US. At its core Orora will nevertheless remain a defensive domestic proposition, leveraged to GDP growth.

Target price is $3.74 Current Price is $3.55 Difference: $0.19
If ORA meets the UBS target it will return approximately 5% (excluding dividends, fees and charges).

Current consensus price target is $3.59, suggesting upside of 1.0% (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 ORE as Buy (1) -

Citi notes the company has gone into trading halt pending an update on the proposed Argentinian export taxes. The broker is still seeking confirmation of the classification for lithium.

The proposed taxes are four Argentinian pesos for every US dollar for primary industries and three pesos for non-primary industries. The only potential positive offset to the tax for Orocobre is the ongoing devaluation of the Argentinian currency.

Citi suspects the imposition of the tax and turmoil in Argentina will make investment in a number of lithium projects potentially less likely and that could be a positive for the overall market. Buy rating and $6.50 target maintained.

Target price is $6.50 Current Price is $4.16 Difference: $2.34
If ORE meets the Citi target it will return approximately 56% (excluding dividends, fees and charges).

Current consensus price target is $6.17, suggesting upside of 48.4% (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

Credit Suisse rates ORE as Outperform (1) -

Reports are circulating that the Argentinian President has announced an emergency austerity program to address a rapid depreciation in the currency and escalating inflation. The proposals include tax on the export of primary products. This would be in addition to the existing royalty arrangements.

Credit Suisse believes the tax highlights the risk of operating in South America versus the hard rock mining mecca of Western Australia.

The broker does not believe the announcement will affect the company's decision to progress with Olaroz stage 2, which is fully funded and well advanced, but it may have implications for other brine producing aspirants in Argentina.

Outperform rating and $5.70 target maintained.

Target price is $5.70 Current Price is $4.16 Difference: $1.54
If ORE meets the Credit Suisse target it will return approximately 37% (excluding dividends, fees and charges).

Current consensus price target is $6.17, suggesting upside of 48.4% (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

Macquarie rates OZL as Outperform (1) -

The company now has three projects which should underpin growth in copper equivalent production of 13% over the next 3-5 years, Macquarie suggests.

Study work on West Musgrave is advancing and, if scoping study economics can be confirmed, this could add nickel to the production mix within five years.

Prominent Hill and Carrapateena remains the key drivers of earnings, accounting for around 75% of five-year EBITDA and around 75% of Macquarie's valuation. Outperform rating. Target lifted to $12.20 from $11.30.

Target price is $12.20 Current Price is $8.73 Difference: $3.47
If OZL meets the Macquarie target it will return approximately 40% (excluding dividends, fees and charges).

Current consensus price target is $10.74, suggesting upside of 23.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.7

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

Deutsche Bank rates SUN as Hold (3) -

The company has signed a share sale deed for its Australian life assets for $725m with TAL Dai-Ichi Life Australia.
SunCorp will continue to distribute Suncorp branded life products that are underwritten by TAL for at least the next 20 years.

Around $600m of capital will be returned to shareholders following completion of the transaction at the end of the year. The broker maintains a Hold rating and $15.10 target.

Target price is $15.10 Current Price is $15.32 Difference: minus $0.22 (current price is over target).
If SUN meets the Deutsche Bank target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $15.31, suggesting downside of -0.1% (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

Macquarie rates SYR as Outperform (1) -

Syrah Resources has launched a placement and share purchase plan to raise $108m. Funds will be used to support Balama's ramp up. Macquarie adds the capital raising to its modelling while removing the US$25m in debt it previously assumed would be drawn.

Production metrics at the Balama mine continue to improve and the development of the customer base also appears to be moving in the right direction, the broker suggests. Outperform maintained. Target falls to $3.90 from $4.40.

Target price is $3.90 Current Price is $2.29 Difference: $1.61
If SYR meets the Macquarie target it will return approximately 70% (excluding dividends, fees and charges).

Current consensus price target is $4.23, suggesting upside of 84.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.8

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

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

Morgan Stanley was surprised by the capital raising announcement, not because of the need for extra capital but largely because of the choice of discounted equity over debt.

The company will make a fully underwritten placement of 42.2m new shares at $2.23 a share. An additional purchase plan will be offered to eligible shareholders.

The capital raising should ease any further requirements for Balama. Morgan Stanley continues to believe downstream is the key area for profits and value in the graphite chain. Equal-weight retained. Target is $3.05. Industry view is In-Line.

Target price is $3.05 Current Price is $2.29 Difference: $0.76
If SYR meets the Morgan Stanley target it will return approximately 33% (excluding dividends, fees and charges).

Current consensus price target is $4.23, suggesting upside of 84.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.8

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

UBS rates SYR as Buy (1) -

The broker was not surprised by Syrah's announcement yesterday of a $94m institutional placement at $2.23 to fund the ramping up of the Balama graphite project in Mozambique through to positive cash flow, expected by late this year. It will also progress the company's battery strategy to the end of 2019 and fund evaluation of the vanadium opportunity at the site.

While the placement is dilutive, significant upside is on offer if Syrah can get it right, the broker believes. Buy retained, target falls to $3.40 from $3.75 on dilution.

Target price is $3.40 Current Price is $2.29 Difference: $1.11
If SYR meets the UBS target it will return approximately 48% (excluding dividends, fees and charges).

Current consensus price target is $4.23, suggesting upside of 84.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.8

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

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

Westpac has agreed to settle with ASIC regarding responsible lending contraventions. Morgan Stanley observes the $35m penalty is immaterial to earnings and the bank did not admit the loans were unsuitable for customers.

The broker considers this a positive outcome as the penalty equates to around 1.1% of the balances of loans that should not have been approved, based on its estimates. Still, the broker considers an ongoing focus on responsible lending as well as fines or partial loan forgiveness remain as risks.

Equal-weight. Target is $27.50. Industry view: In Line.

Target price is $27.50 Current Price is $28.18 Difference: minus $0.68 (current price is over target).
If WBC meets the Morgan Stanley target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $30.50, suggesting upside of 8.2% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY18:

Forecast for FY19:

Market Sentiment: 0.2

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

Macquarie rates WOW as Underperform (5) -

Macquarie evaluates the impact of AASB 16 (lease accounting) on Woolworths and expects pre-tax profit to decline. The broker also considers a potential sale of the drinks/hotels business would not provide any strategic or financial merit at current pricing.

The essence of changes in accounting is for operating leases to be capitalised on the balance sheet as debt. Woolworths has identified a $14-15bn lease liability.

Macquarie maintains an Underperform rating and $27.91 target.

Target price is $27.91 Current Price is $28.44 Difference: minus $0.53 (current price is over target).
If WOW meets the Macquarie target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $28.53, suggesting upside of 0.3% (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