FN Arena Broker Call Headlines - 1 Feb 2013

Reported by FN Arena
Friday, February 1, 2013
Topics in this article:
Cochlear,Energy Resources Of Australia,Origin Energy,Medusa Mining Limited,Pharmaxis Ltd,Rea Group Ltd,Webjet Limited

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- REA GROUP LIMITED

CIMB Securities rates as Neutral (3) - Price target raised to $17.15 from $14.50 to reflect higher forecast earnings as well as peer group multiples. CIMB will review its Neutral rating after reporting season.

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- WEBJET LIMITED

JP Morgan rates as Neutral - Initiation of coverage (3) - JP Morgan has initiated coverage on jet with the view that, yes, the acquisition of Zuji will be positive for the company, but it's already reflected in the share price.

In addition, say the analysts, while the integration of Zuji represents a lot of growth potential, there are also risks in case of failure. The analysts note competitive pressures are rising and the current share price is not taking into account any of the potential risks.

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- MEDUSA MINING LIMITED

Citi rates as Buy (1) - Target $6.75 (was $7.00). The broker thought it was a pretty tough quarter, with Typhoon Pablo playing havoc with mine development work. Production did come in ahead of Citi, but so did costs, with development work at the mine really slowing things down. The FY13 production guidance has been downgraded by 23%, with costs pushed US$40 higher to US$250/oz. 

The broker downgrades it earnings forecasts to reflect the production report, lower gold price assumptions and a higher AUD. However, production remains low cost and Citi also sees an attractive organic growth profile, so the Buy call is maintained.

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- ORIGIN ENERGY LIMITED

Deutsche Bank rates as Hold (3) - December quarter production from the group's E&P business fell 14% short of the broker and was down 11% on the previous quarter. A  miscalculation about the planned maintenance outages at Otway and Kupe caused the broker to fall short on its estimates.

However, with the E&P business only contributing around 5% of FY13 group revenue, the miss is fairly immaterial. Hold call maintained.

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- UGL LIMITED

UBS rates as Downgrade to Neutral from Buy (3) - UBS has trimmed earnings forecasts for FY13-15 by 3-6% taking into account a declining run rate in new project awards over recent months. Despite a number of positive fundamentals in the stock the recommendation has been downgraded to Neutral from Buy to take into account the reduced earnings expectations. The broker prefers Downer ((DOW)) on a risk/reward basis.

The price target is $11.50 from $13.65.

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- ENERGY RESOURCES OF AUSTRALIA

UBS rates as Buy (1) - The broker believes its cost assumptions have been too aggressive after looking at 's latest earnings report. This is despite the underlying loss of $151m meeting UBS' expectations.

Nevertheless, UBS retains a Buy rating, as negotiations with traditional owners continue and this improves the prospect of support for Ranger 3 Deeps. The price target edges down to $1.60 from $1.80.

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- COCHLEAR LIMITED

JP Morgan rates as Underweight (5) - Ahead of the company's interim report (scheduled for Feb 5) JP Morgan analysts are left with many key questions, such as what the CI500 will mean for Cochlear's margins and whether past comparables still apply into the future?

Cochlear shares are trading on elevated multiples and there's still the factor of a declining hedge book contribution to the financial numbers. JP Morgan thinks an Underweight rating seems but appropriate. Price target has risen to $63.18 (was $60.36).

EPS estimates have been slightly scaled back. On JP Morgan's projections, Cochlear now has a lower trending DPS profile.

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- PHARMAXIS LTD

Deutsche Bank rates as Downgrade to Sell from Hold (5) - Target $0.60 (was $1.35). After PADAC's unanimous negative opinion, the broker now fully expects the US FDA to reject the Bronchitol NDA and it also expects that further trails will be much harder to get green-lighted.

As such, the broker has gone from an 80% probability of eventual approval down to 40%. This sees a 15% risk discount slapped on the valuation and the recommendation downgraded to Sell from Hold.

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01/08/2014 03:34Sydney, Australia. 1 August,2014
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