Australian Broker Call

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

Ord Minnett has upgraded to Accumulate from Hold on the premise that there remains a risk of electricity shortages through next summer, which implies wholesale prices for electricity are to remain elevated while retail prices have to date surprised on the upside.

The stockbroker, clearly, is not convinced that any measures attempted to address the issues in the National Electricity Market (NEM) by the Federal and state governments are sufficient. All else, for the time being, is but a distraction, argue the analysts. Price target lifts by 20c to $28.20.

Target price is $28.20 Current Price is $25.83 Difference: $2.37
If AGL meets the Ord Minnett target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $27.23, suggesting upside of 2.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.1

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

Macquarie rates AMC as Outperform (1) -

Amcor's North American tour confirms the company strong position in rigid plastics, Macquarie observes, with solid earnings growth and options on acquisitions in diversified products and closures.

The broker observes the PET market has significantly consolidated over the last decade and is a better industry now and Amcor has significant scale and a diverse geographic footprint that is hard to replicate.

Outperform rating on $17.17 target retained.

Target price is $17.17 Current Price is $16.70 Difference: $0.47
If AMC meets the Macquarie target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $16.10, suggesting downside of -2.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

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

Market Sentiment: 0.4

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

Ord Minnett rates AMC as Hold (3) -

Amcor's US Investor Tour appears to have further reinforced Ord Minnett's belief that Amcor can continue to leverage its established R&D capabilities to improve manufacturing performance, increase market share, plus convert customer products from glass and aluminium to plastic.

And there will be strategic acquisitions. The analysts point towards "Specialty Containers" as management's most likely focus. Hold rating retained. Target price $15.20 (unchanged).

Target price is $15.20 Current Price is $16.70 Difference: minus $1.5 (current price is over target).
If AMC meets the Ord Minnett target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $16.10, suggesting downside of -2.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

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

Market Sentiment: 0.4

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

UBS rates AMC as Neutral (3) -

UBS is more confident after the North American investor tour in terms of the sustainability of returns and associated operating benefits of the company's scale.

Nevertheless, near-term forecasts are unchanged as good growth in North America is offset by challenges in Latin America. The broker retains a Neutral rating and raises the target to $16.40 from $16.00.

Target price is $16.40 Current Price is $16.70 Difference: minus $0.3 (current price is over target).
If AMC meets the UBS target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $16.10, suggesting downside of -2.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

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

Market Sentiment: 0.4

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

Credit Suisse rates AZJ as Underperform (5) -

Credit Suisse notes both Adani and Aurizon are seeking funding from the NAIF for their particular rail projects. An Adani rail line could compete with the Aurizon network in future.

The broker notes Aurizon's rail link to the Galilee Basin would automatically be regulated by the Queensland regulator, while if Adani builds a standard gauge line this would not be regulated. The broker believes the NAIF is unlikely to fund Adani's project and is also unlikely to consider Aurizon's request unless it has a take-all-pay agreement with Adani.

In sum, the broker suspects there is a good chance the Aurizon network will obtain a competitor. Underperform retained. Target rises to $5.10 from $4.75.

Target price is $5.10 Current Price is $5.37 Difference: minus $0.27 (current price is over target).
If AZJ meets the Credit Suisse target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.88, suggesting downside of -10.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.5

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

Ord Minnett rates CMW as Sell (5) -

Ord Minnett believes the company's earnings growth outlook has "moderated" over the last six months. This conclusions is based upon the sale of two high yielding assets, as well as the resetting of rents to lower normalised levels at several lease expiries.

As a result, estimates have been reduced to -8% below FY17 company guidance (implying a profit warning is to follow at some stage). Sell rating retained. Target price 87c.

The analysts do acknowledge, the outlook can potentially improve materially if the RBA decides to sit on 1.50% for a prolonged time and possibly also depending on reinvestment of the current stake in Investa Office Fund ((IOF)).

Target price is $0.87 Current Price is $1.02 Difference: minus $0.155 (current price is over target).
If CMW meets the Ord Minnett target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $0.95, suggesting downside of -5.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.8

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

UBS rates COH as Sell (5) -

The company has confirmed its new Nucleus 7 processor has gained US FDA approval, although the release date has not been announced. UBS expects this will be the first "made-for-iPhone" cochlear implant processor.

The early release of N7 is expected to benefit from being a first to market, and the company may also enjoy some early pulling through of system upgrades of earlier processors. UBS retains a Sell rating on valuation. Target is raised to $130 from $125.

Target price is $130.00 Current Price is $154.43 Difference: minus $24.43 (current price is over target).
If COH meets the UBS target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $128.77, suggesting downside of -19.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.3

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

Ord Minnett rates CQR as Hold (3) -

Ord Minnett has updated its modeling for Charter Hall Retail REIT to account for the recent acquisitions of Salamander Bay Centre and Highfields Shopping Centre, as well as the sale of Gladstone Square.

In addition, rental growth projections have been lowered on top of anticipated $115m in further asset divestments in FY18. The net result, report the analysts, is for a small rise in FY18 Funds from Operations (FFO) estimate to 32.4c. Hold rating retained, while target price rises to $4.30 from $4.20.

Target price is $4.30 Current Price is $4.42 Difference: minus $0.12 (current price is over target).
If CQR meets the Ord Minnett target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.31, suggesting downside of -0.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.2

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

Citi rates CTX as Buy (1) -

The realised margin of US$9.94/bbl in May was weaker than April and Citi observes lower regional spreads as refineries in Asia returned to service.

Yet, there was no deterioration in regional refining fundamentals beyond the broker's expectations. Citi retains a Buy rating. Target is $36.74.

Target price is $36.74 Current Price is $31.66 Difference: $5.08
If CTX meets the Citi target it will return approximately 16% (excluding dividends, fees and charges).

Current consensus price target is $33.14, suggesting upside of 6.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.4

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

Deutsche Bank rates CTX as Buy (1) -

Caltex' refiner margin fell to US$9.94/bbl in May, down from US$15.32 in April but above the broker's US$9.74 forecast. The company's BHU project was the reason behind higher production of lower margin gasoline. The weighted average margin was down only modestly.

The broker has nevertheless adjusted its currency input, taking its target down to $35.40 from $35.55. Buy retained.

Target price is $35.40 Current Price is $31.66 Difference: $3.74
If CTX meets the Deutsche Bank target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $33.14, suggesting upside of 6.3% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.4

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

Morgan Stanley rates IAG as Overweight (1) -

Morgan Stanley believes the company offers the best exposure to the small-medium enterprise cycle, with a 25% market share. Better-than-expected pricing momentum suggests over 360 basis points of margin expansion in business lines by FY20.

Within the market the company is focused on partnering with broker platforms and traditionally underwritten intermediated business is less prominent, the broker notes. Overweight retained. Target rises to $7.00 from $6.80. Industry view is In-Line.

Target price is $7.00 Current Price is $6.50 Difference: $0.5
If IAG meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $6.21, suggesting downside of -3.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.1

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

Macquarie rates JHG as Outperform (1) -

Macquarie updates valuation, assumptions and sensitivities after the merger. The broker's model is based on historical pro forma disclosures provided by  the group.

The target price of $49.89 implies the group currently trades at a -4% discount to global fund manager peer comparables in FY18. Rating is set at Outperform.

Target price is $49.89 Current Price is $43.86 Difference: $6.03
If JHG meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

This company reports in GBP. 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

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

Ord Minnett believes the market has become too excited/too optimistic about the performance of Magellan’s Global Fund. The result is that a welcome spike in performance fees is not going to stick.

Downgrade to Hold from Buy. Price target rises to $28.13 from $27.47. Part of the conviction behind the move is the observation that June is proving a softer month already. Valuation has become a problem, suggest the analysts.

Target price is $28.13 Current Price is $28.25 Difference: minus $0.12 (current price is over target).
If MFG meets the Ord Minnett target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $26.91, suggesting downside of -2.5% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.7

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

Morgans rates NHC as Hold (3) -

Acland stage III now faces a more uncertain future following the adverse finding in the Queensland Land Court.

Morgans observes the ongoing risk to the company's Queensland coal business is reflected in a revised valuation, which now conservatively assumes the worst case and Acland's closure in FY20.

While there is value in the depressed share price the broker suspects the ongoing uncertainty will weigh on sentiment. Hold rating retained and the target is lowered to $1.66 from $1.95.

Target price is $1.66 Current Price is $1.55 Difference: $0.115
If NHC meets the Morgans target it will return approximately 7% (excluding dividends, fees and charges).

Current consensus price target is $1.85, suggesting upside of 23.6% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.3

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

Deutsche Bank rates SEK as Hold (3) -

Seek will receive a special dividend from Zhaopin amounting to 24cps, assuming the privatisation is completed. The cash makes little difference to valuation but does reduce the company's debt ratio, the broker notes. Hold and $15.30 target retained.

Target price is $15.30 Current Price is $16.87 Difference: minus $1.57 (current price is over target).
If SEK meets the Deutsche Bank target it will return approximately minus 9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $15.92, suggesting downside of -5.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

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

Macquarie rates SYD as Neutral (3) -

The company reported May 2017 traffic growth of 4.5% and year-to-date growth of 3.1%. While this is positive, Macquarie believes the uplift to expectations is only marginal and more than offset by a declining second half growth outlook for capacity.

The principal driver of lower capacity is the Emirates withdrawal of an A380 service to Auckland, only slightly offset by additional A330 services by Qantas ((QAN)).

Macquarie believes the stock's valuation is stretched and traffic growth in international appears to be nearing a peak. Neutral rating and $7.15 target retained.

Target price is $7.15 Current Price is $7.45 Difference: minus $0.3 (current price is over target).
If SYD meets the Macquarie target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.87, suggesting downside of -6.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

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

Morgan Stanley rates SYD as Overweight (1) -

Morgan Stanley observes rolling 12-month international passenger growth was around 8.0% and domestic passenger growth up 1.9% in May.

The broker retains an Overweight rating, $7.32 target and Cautious industry view.

Target price is $7.32 Current Price is $7.45 Difference: minus $0.13 (current price is over target).
If SYD 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 $6.87, suggesting downside of -6.9% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

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

Citi rates TAH as Sell (5) -

The Australian Competition Tribunal has approved the proposed merger with Tatts ((TTS)) on the condition that Tabcorp divests its Odyssey gaming business, which Citi observes is consistent with the ACCC's initial response.

Separately, the broker lowers FY17-19 EBITDA for Tabcorp by -6-9% on the back of lower wagering growth assumptions and larger losses at Sun Bet. The merger is now seen as 5-8% accretive for Tabcorp on re-based earnings per share.

Citi retains a Sell rating, reflecting the premium valuation. Target is reduced to $4.00 from $4.05.

Target price is $4.00 Current Price is $4.65 Difference: minus $0.65 (current price is over target).
If TAH meets the Citi target it will return approximately minus 14% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.64, suggesting upside of 0.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

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

Deutsche Bank rates TAH as Buy (1) -

Tabcorp provided a slightly weaker trading update yesterday but this was lost in the news the Australian Competition Tribunal has approved the merger with Tatts ((TTS)), subject to Tabcorp selling its Qld gaming machine monitoring business. Tabcorp has agreed to this condition.

The broker has increased its valuation by 11% as a result and lifted its target to $5.35 from $4.80. Buy retained.

Target price is $5.35 Current Price is $4.65 Difference: $0.7
If TAH meets the Deutsche Bank target it will return approximately 15% (excluding dividends, fees and charges).

Current consensus price target is $4.64, suggesting upside of 0.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

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

Macquarie rates TAH as No Rating (-1) -

The Australian Competition Tribunal has granted authorisation for the proposed merger with Tatts ((TTS)). Macquarie updates forecasts to reflect the company's commentary that the transaction should deliver at least $130m per annum of operating earnings from synergies and business improvements in the first year following integration.

The company forecasts FY17 EBITDA of $500-510m. The fledgling UK venture Sun Bets will report a second half loss of -$24m. The company expects to declare a fully franked final dividend of 12.5c.

Macquarie downgrades FY17 and FY18 in forecasts for earnings per share by -13% and -17% respectively. Macquarie is currently restricted on ratings and target.

Current Price is $4.65. Target price not assessed.

Current consensus price target is $4.64, suggesting upside of 0.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

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

Morgan Stanley - Cessation of coverage

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

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

Morgans - Cessation of coverage

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

Ord Minnett rates TTS as Lighten (4) -

While the merger between Tabcorp ((TAH)) and Tatts Group has now received the green light from the Australian Competition Tribunal, contingent on the sale of Odyssey Gaming Services, Ord Minnett zooms in on the rather poor operational dynamics for Tatts.

Proposed merger partners are aiming for synergies, but the analysts see obstacles and they have cut EPS estimates by -2.1% and -5.5% respectively for FY17/FY18.

Target price is $4.10 Current Price is $4.32 Difference: minus $0.22 (current price is over target).
If TTS meets the Ord Minnett target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.28, suggesting upside of 0.3% (ex-dividends)

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

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

Ord Minnett rates VRL as Hold (3) -

It is the analysts' view the sale of 50% equity in the Singapore-based Golden Village cinema circuit comes as a welcome relief for a balance sheet under duress, but it's going to bite in terms of losses to future profits.

Ord Minnett has struck -18% off the FY18 EPS forecast and now finds the shares are probably fairly valued. Hold rating retained. Target price rises to $3.76 from $3.53.

Target price is $3.76 Current Price is $3.95 Difference: minus $0.19 (current price is over target).
If VRL meets the Ord Minnett target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $3.72, suggesting downside of -6.9% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.0

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

Macquarie rates WBC as Neutral (3) -

The bank has announced further re-pricing of interest-only loans by 34 basis points while reducing owner occupied Principal & Interest loans by -8 basis points.

Macquarie estimates that, in aggregate, the changes will result in an uplift of around five basis points to margins and 3.5% to earnings. Nevertheless, the broker suspects the benefits will be partly eroded, as customers begin switching to lower-margin P&I product.

Neutral rating and $33 target retained.

Target price is $33.00 Current Price is $30.31 Difference: $2.69
If WBC meets the Macquarie target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $33.08, suggesting upside of 10.4% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.1

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