Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

This story features ARISTOCRAT LEISURE LIMITED, and other companies. For more info SHARE ANALYSIS: ALL

By Chris Shaw

Changes in ratings among the eight brokers in the FNArena database were almost evenly split over the pat week, with 11 recommendation upgrades compared to nine downgrades. One stock, Aristocrat Leisure ((ALL)), was responsible for the difference. Total Buy ratings now stand at 49.76%.

Aristocrat Leisure received three of the upgrades for the week, as Citi, Macquarie and Deutsche Bank have all lifted recommendations on the stock, Macquarie and Deutsche to Neutral from Sell and Citi to Buy from Hold.

The changes come on the back of updated earnings guidance from company management, which has flowed through to changes in earnings forecasts and price targets. Valuation also improved. The Aristocrat share price has fallen 24% since April.

UBS has upgraded Ansell ((ANN)) to Neutral from Sell on valuation grounds given recent share price weakness. At the same time the broker adjusted its model to reflect underlying latex, cotton and chemical prices, which resulted in a slight cut in price target. Macquarie went the other way on Ansell and downgraded to Neutral from Outperform, which is largely a valuation call given current market conditions suggest some medium-term earnings challenges.

A marking-to-market of assumptions for Australian wealth management plays has resulted in Credit Suisse upgrading BT Investment Management ((BTT)) to Buy from Hold. Relative valuation has improved recently in the broker's view, enough to offset a minor cut in price target on the back of changes to earnings estimates.

The changes made to models by Credit Suisse worked against IOOF Holdings ((IFL)), as the broker downgraded its rating to Hold from Buy on relative valuation grounds. Despite minor changes to its model, Credit Suisse left its price target for IOOF unchanged.

Deutsche Bank upgraded David Jones ((DJS)) to Neutral from Sell as the share price reacted to supposed interest from a mystery UK bidder, at the same time lifting its price target. According to general market opinion, the corporate interest highlighted the fact there is some value in David Jones thanks largely to its property holdings.

Valuation was the main driver of JP Morgan's upgrade to an Overweight rating from Neutral previously on Mount Gibson ((MGX)). The change follows the broker's review of the mid-tier Australian iron ore plays under coverage and was accompanied by a downgrade for Gindalbie ((GBG)) to Neutral from Outperform.

While the UK assets of National Australia Bank ((NAB)) have concerned brokers for some time, Macquarie suggests these negatives could turn around in coming months. To reflect this and some re-pricing the broker has adjusted earnings estimates and price target, while moving to a Buy rating from Hold previously.

Lower thermal coal prices and delays to greenfields projects have contributed to cuts to forecasts and price target for New Hope Corporation ((NHC)) by RBS Australia. At the same time, the broker has upgraded to a Buy rating from Hold given its revised forecasts suggest a share price trading at a 40% discount to valuation.

Operational issues have impacted on Newcrest ((NCM)) in recent months but BA Merrill Lynch suggests the market has overreacted as the problems are largely shorter-term in nature. This overreaction implies an improved valuation and sees BA-ML upgrade to Buy from Neutral.

Deutsche Bank has revised commodity price and currency forecasts and the changes have impacted on Sandfire Resources ((SFR)), as the broker has upgraded to a Buy rating from Hold. The increase in rating comes alongside a minor cut in price target.

The changes to Deutsche's forecasts have also impacted on OZ Minerals ((OZL)) and Paladin ((PDN)), as in both cases the broker has downgraded to a Neutral rating. Earnings estimates and price targets have also been adjusted.

Australian Infrastructure Fund ((AIX)) has indicated plans to internalise management and while Macquarie sees this as something of a positive, the investment banker has downgraded to a Neutral rating from Outperform. This is largely a valuation call as the share price is broadly in line with the price target.

The Macquarie Group ((MQG)) share price has been solid of late but this is not the best news for shareholders in the view of JP Morgan as it means the share buyback has been halted. With global market conditions still uncertain there is downside risk in the broker's view, enough for a ratings cut to Sell from Neutral.

Deutsche Bank has downgraded Monadelphous ((MND)) to Hold from Buy as changes to currency forecasts across the engineering and contractors sector has driven changes to earnings estimates and price target. The downgrade in rating also reflects the fact Monadelphous is trading close to Deutsche's revised target.

Tatts Group ((TTS)) has also been downgraded to a Hold from Buy by Deutsche, which is equally a valuation call given recent share price outperformance. Along with the downgrade are minor changes to earnings and price target given recent solid performance from the core operations.

Increases to price targets for the week were modest at best but cuts to targets were more significant for Santos ((STO)) and QRxPharma ((QRX)), the latter reflecting the decision by the US FDA to not approve the MoxDuo-IR compound as expected.

With respect to increases to earnings forecasts, the most significant included Independence Group ((IGO)), Sims Metal ((SGM)), Specialty Fashion ((SFH)) and and Regis Resources ((RRL)), which stem from changes to commodity and forex assumptions across the market.

The largest cuts to earnings forecasts were for Tabcorp ((TAH)), CSG Limited ((CSV)), Whitehaven ((WHC)) and Evolution Mining ((EVN)).

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

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