Australian Broker Call

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

ALS will report its FY17 result next week. Morgans believes the stock offers high quality exposure to the minerals recovery underway, but warns it will likely not happen as fast as the market expects. It will come down to the company's FY18 outlook.

The market is pricing in a 33% lift in FY18 following a flat FY17, the broker calculates, which would require a resolution of the problems in Life Sciences, ongoing momentum in commodities and a clean exit from oil & gas. A sale of oil & gas at anywhere near book value would be a big positive, the broker suggests, but ALS may talk down expectations.

Ahead of the result, Morgans pulls back to Hold. Target falls to $6.95 from $7.08.

Target price is $6.95 Current Price is $6.23 Difference: $0.72
If ALQ meets the Morgans target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $5.97, suggesting downside of -4.2% (ex-dividends)

The company's fiscal year ends in March.

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 CYB as Lighten (4) -

Ord Minnett reduces FY17 adjusted earnings per share estimates by around -3% because of a slightly weaker revenue outlook. FY18 and FY19 estimates are increased by 5% and 1%, respectively, on a higher net interest margin forecast.

The broker maintains a Lighten rating and $4.75 target.

Target price is $4.75 Current Price is $4.87 Difference: minus $0.12 (current price is over target).
If CYB meets the Ord Minnett target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $4.80, suggesting downside of -1.4% (ex-dividends)

The company's fiscal year ends in September.

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

Citi rates DLX as Neutral (3) -

Citi analysts have been long time admirers of the paint business' resilience and this time is no different. Post what is deemed yet another solid performance, the analysts note the mix shift to premium products continues alongside what they label as "effective price control" across 60% of the company's trade channel.

While EPS growth forecasts might be lower than for peer industrials, the reliability of profits is higher through the cycle, counter Citi analysts. On a relative comparison, the share price is not seen as demanding. Target $6.64 (-4c). Neutral.

Target price is $6.64 Current Price is $6.78 Difference: minus $0.14 (current price is over target).
If DLX meets the Citi target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.16, suggesting downside of -9.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.6

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

Deutsche Bank rates DLX as Sell (5) -

The first half result was above expectations but Deutsche Bank believes it was boosted by lower expenses and minorities.The company has also signalled that the margins in Australasian paints would be flat for the year because of the impact of higher raw material costs and plant commissioning.

The broker believes the risks will persist in FY18. Sell rating retained as the stock is trading at a premium to the revised valuation. Target is raised to $5.40 from $5.20..

Target price is $5.40 Current Price is $6.78 Difference: minus $1.38 (current price is over target).
If DLX meets the Deutsche Bank target it will return approximately minus 20% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.16, suggesting downside of -9.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.6

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

Macquarie rates DLX as Neutral (3) -

First half results were in line with Macquarie's expectations. The broker does not envisage a catalyst for the stock to move meaningfully, and sustainably, from this point.

The earnings outlook is considered lacklustre and the global consolidation that continues in the background provides support for elevated valuations in the near term. Nevertheless, the broker suspects the defensive nature of the stock should protect the downside.

Neutral maintained. Target rises to $6.76 from $6.70.

Target price is $6.76 Current Price is $6.78 Difference: minus $0.02 (current price is over target).
If DLX meets the Macquarie target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.16, suggesting downside of -9.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.6

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

Morgans rates DLX as Hold (3) -

Dulux' result beat the broker, led by the core A&NZ paint business but with most other divisions also growing earnings. The negative was a big all in Other businesses, given planned investments in the UK and weaker Chinese earnings.

The broker has lifted forecast earnings on a strong net performance and its target to $6.88 from $6.34. The long term remains positive but in the short term the broker sees the stock as well valued. Hold retained.

Target price is $6.34 Current Price is $6.78 Difference: minus $0.44 (current price is over target).
If DLX meets the Morgans target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.16, suggesting downside of -9.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.6

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

Ord Minnett rates DLX as Downgrade to Lighten from Hold (4) -

First half net profit was ahead of Ord Minnett's estimates. The broker believes macro support for the stock is fading, because of easing activity in new construction and renovations.

As such, the broker suspects earnings growth will struggle to match the performance of recent years. However, this is not reflected in the elevated trading multiples and the broker downgrades to Lighten from Hold. Target is raised to $6.20 from $6.05.

Target price is $6.20 Current Price is $6.78 Difference: minus $0.58 (current price is over target).
If DLX 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 $6.16, suggesting downside of -9.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.6

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

UBS rates DLX as Sell (5) -

The company delivered 8% growth in EBIT the first half, ahead of UBS estimates. The broker expects a tougher second half in paints, with guidance for FY17 margins to be in line with FY16 because of higher raw materials and plant commissioning costs.

The broker recognises the company's dominant position in the Australian paint and decorative market but envisages limited scope for outperformance over the medium term. Sell rating and $6.10 target retained..

Target price is $6.10 Current Price is $6.78 Difference: minus $0.68 (current price is over target).
If DLX meets the UBS target it will return approximately minus 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $6.16, suggesting downside of -9.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: -0.6

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

Deutsche Bank rates FPH as Hold (3) -

ResMed ((RMD)) has terminated its request for an investigation into alleged patent infringement by Fisher & Paykel Healthcare. Deutsche Bank believes this is a clear positive for FPH.

In preliminary deliberations the International Trade Commission has ruled that certain evidence emitted by ResMed is inadmissible. The broker notes ResMed has to opted to terminate the current application but may re-file.

The broker believes the risks from the court processes are manageable, given the low proportion of patent cases that go to a decision in the US and the typically long tim eframe for litigation. Also, FPH is counter suing.

Hold rating retained. Target is raised to NZ$11.15 from NZ$10.07.

Current Price is $9.53. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in March.

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

UBS rates FPH as Neutral (3) -

ResMed ((RMD)) has filed a motion to terminate its International Trade Commission case against Fisher & Paykel Healthcare.

While UBS makes no call on the outcome of patent infringement disputes between the two companies, analysis of previous OSA patent infringement cases suggests material damages rarely occur.

Neutral rating retained. Target is NZ$9.85.

Current Price is $9.53. Target price not assessed.

Current consensus price target is N/A

The company's fiscal year ends in March.

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

Citi rates GXY as Initiation of coverage with Neutral (3) -

A cautious Citi has initiated coverage on Galaxy Resources with a Neutral/High Risk recommendation, alongside a maiden target price of $0.55.

While demand growth is expected to remain strong for lithium, a significant spike in price last year has now also triggered a significant response on the supply side, note the analysts.

Exactly as to how emerging producers like Galaxy Resources shall fare in this global race will depend, among other factors, on the execution of their plans, the analysts caution.

Target price is $0.55 Current Price is $0.46 Difference: $0.09
If GXY meets the Citi target it will return approximately 20% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Market Sentiment: 0.0

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

Macquarie rates IRE as Neutral (3) -

Macquarie adjusts forecasts to include the recently-announced dividend reinvestment plan and increased non-operating expense estimates.

Management has signalled that momentum in the UK should translate to strong revenue growth for the full year.

Neutral rating retained. Target is $12.08.

Target price is $12.08 Current Price is $12.16 Difference: minus $0.08 (current price is over target).
If IRE 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 $12.52, suggesting upside of 3.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY17:

Forecast for FY18:

Market Sentiment: 0.6

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

Morgans rates MPL as Reduce (5) -

March quarter private health insurance stat show an uptick in total benefits paid, the broker notes. For the first time since June 2014, annualised benefit growth, which is a cost to Medibank, rose at a faster pace than revenue.

One quarter does not a trend make, hence the broker has left forecasts unchanged for now. Reduce nevertheless maintained, with a $2.40 target.

Target price is $2.40 Current Price is $2.81 Difference: minus $0.41 (current price is over target).
If MPL meets the Morgans target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $2.71, suggesting downside of -3.7% (ex-dividends)

The company's fiscal year ends in June.

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

Morgans rates MQA as Add (1) -

Movements in the euro and US dollar against the Aussie are providing a tailwind for the broker's Macquarie Atlas valuation, given assets in France and the US. Further upside is available were the new presidents of France and the US to succeed with their corporate tax reduction policies.

There is also upside offered from refinancing debt on APRR/Eifarrie at lower current European interest rates. The broker retains Add, target rises to $6.05 from $5.74.

Target price is $6.05 Current Price is $5.57 Difference: $0.48
If MQA meets the Morgans target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $5.54, suggesting downside of -0.5% (ex-dividends)

The company's fiscal year ends in December.

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

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

Citi analysts have downgraded to Sell from Neutral on the belief the share price has run ahead of fundamentals. They suggest "very low claims inflation" which helped the insurer achieving a bumper performance in H1 is reversing.

Medibank Private ((MPL)) is the broker's preferred exposure to the health insurance sector.

Current Price is $5.54. Target price not assessed.

Current consensus price target is $5.32, suggesting downside of -3.9% (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

Macquarie rates ORA as Outperform (1) -

Macquarie observes the stock is back near a market multiple on FY18/19 earnings and has de-coupled from the traditional share price/earnings per share correlation.

The broker observes the company has resilient earnings and a solid growth outlook. Outperform rating maintained. Target is reduced to $3.22 from $3.28. FY18 forecasts for earnings per share are reduced by -2% because of the impact of higher NSW electricity prices.

Target price is $3.22 Current Price is $2.83 Difference: $0.39
If ORA meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $3.20, suggesting upside of 12.9% (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

Citi rates ORL as Neutral (3) -

Post yet another -grave- profit warning, Citi analysts have kept their Neutral rating intact, alongside a $1.14 price target (versus $1.65 at the end of March).

The analysts note the JV with GAP simply doesn't seem to be working. They suggest GAP is on the way out (option in 2019). In addition, they have slapped a "High Risk" rating on the stock.

Target price is $1.14 Current Price is $1.09 Difference: $0.055
If ORL meets the Citi target it will return approximately 5% (excluding dividends, fees and charges).

The company's fiscal year ends in July.

Market Sentiment: 0.0

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

Citi rates PLS as Initiation of coverage with Buy (1) -

A cautious Citi has initiated coverage on Pilbara Minerals with a Buy/High Risk recommendation, alongside a maiden target price of $0.65.

While demand growth is expected to remain strong for lithium, a significant spike in price last year has now also triggered a significant response on the supply side, note the analysts.

Exactly as to how emerging producers like Pilbara Minerals shall fare in this global race will depend, among other factors, on the execution of their plans, the analysts caution.

Target price is $0.65 Current Price is $0.40 Difference: $0.255
If PLS meets the Citi target it will return approximately 65% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Market Sentiment: 0.0

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

Morgans rates RHL as Hold (3) -

Ruralco's strong first half result beat the broker. A 20% increase in underlying profit was driven by sales growth in Rural Supplies, higher livestock prices, improved real estate, acquisitions and cost controls.

The company has recently bought a portfolio of highly accretive assets, setting it up for a strong second half, the broker suggests. Better seasonal conditions should help drive earnings growth. Otherwise the broker sees the stock as well priced and thus prefers Elders ((ELD)) in the space.

Target price is $3.10 Current Price is $3.11 Difference: minus $0.01 (current price is over target).
If RHL meets the Morgans target it will return approximately minus 0% (excluding dividends, fees and charges - negative figures indicate an expected loss).

The company's fiscal year ends in September.

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 rates VTG as Hold (3) -

Telstra ((TLS)) has told Vita it will reduce retail remuneration by 10% in each of FY18,19 and 20. There remains a heightened degree of earnings uncertainty, the broker suggests, over the period. The broker's assumption is management can mitigate the changes.

The broker retains Hold while warning it cannot fundamentally recommend the stock to other than to high risk tolerance investors. The broker still sees rationale in a longer term investment proposition. Target falls to $1.30 from $1.67.

Target price is $1.30 Current Price is $0.90 Difference: $0.4
If VTG meets the Morgans target it will return approximately 44% (excluding dividends, fees and charges).

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

Citi rates WPL as Neutral (3) -

Citi analysts report Woodside is hosting a 2017 Investor Briefing Day on the 23rd May and the event will be live streamed via the company's website.

In between last year's event and this year's, the analysts note management has successfully changed the market's perception about it being non-growth. Citi analysts estimate this has added $4.33 to the share price in terms of growth optionality.

But now what? Citi has slightly lifted its price target to $32.20 (was $31.82). The analysts see plenty of risks for potential share price headwinds ahead. Neutral rating retained. Estimates have been slightly raised.

Target price is $32.20 Current Price is $32.42 Difference: minus $0.22 (current price is over target).
If WPL meets the Citi target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $32.38, suggesting downside of -0.1% (ex-dividends)

The company's fiscal year ends in December.

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: 0.2

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