Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

This story features FLEETWOOD LIMITED, and other companies. For more info SHARE ANALYSIS: FWD

By Andrew Nelson

Just when we thought it was safe to draw in a big breath of pre-holiday relief and ready ourselves to down tools for a couple of weeks of brain-off respite, analysts across Australia decide to upgrade and downgrade the heck out of stocks last week. After the previous week’s rather sedate showing of just ten upgrades and downgrades combined, last week’s heightened activity gives us some 22 stocks to discuss in our report.

We’ll start off this week’s report with upgrades and go through them in alphabetical order. Analysts at Macquarie upgraded CFS Retail Property Trust ((CFX)) to Buy from Neutral given recent share price underperformance since the FY result in August. While the broker admits the risks still remain to the downside at Emporium and there is the likelihood of more negative newsflow over the year ahead, the valuation still looks pretty stable, said Macquarie. Deutsche Bank upgraded its call to Buy last month, but it was a sector relative move. The upgrade has pushed the stock into positive sentiment territory in the FNArena Database, now with two Buys, four Holds and a Sell.

JP Morgan upgraded Coca-Cola Amatil ((CCL)) to Neutral from Sell on shares that have consistently underperformed over the past six months. The broker noted the company has gone through a pretty intensive capex spend in the years past, but the end result is a more defendable earnings base, argue the analysts. Deutsche Bank also changed its recommendation to Neutral last week, but in this case it was a downgrade from Buy, noting the company's latest trading update just wasn't good enough. The stock remains just in negative sentiment territory in the database, with one Buy, two Sells and five Holds.

CIMB upgraded its call for Fleetwood Corp ((FWD)) to Buy from Neutral on news the company has inked a deal with Rio Tinto ((RIO)) to house up to 660 of Rio’s workforce in Searipple for 12 months. Analysts concluded the deal should help Fleetwood provide a bit of transparency into Searipple occupancy over the medium term and will therefore help support the share price. The stock remains a flat neutral in the database, with two Buys, one Hold and two Sells.

Macmahon Holdings ((MAH)) is next on the list, upgraded to Neutral from Sell by UBS on news the company has decided to sell its construction businesses and raise an extra $80.7m in fresh capital. While forecasts were savaged and growth for the years ahead is expected to remain subdued, the broker still feels a bit more comfortable with the balance sheet now in a much better position. The stock rates four Holds in the database and is currently trading at a 51% discount to the consensus price target.

STW Communications ((SGN)) was bumped up to Buy by our friends at Macquarie, making for a perfect score of straight Buy calls in the database. Macquarie had been on restriction on the stock and came off saying current multiples look undemanding, while also noting the nice looking yield should support the stock at around current levels. Credit Suisse re-initiated coverage two weeks back at a Buy call as well, citing significant growth opportunities for the group in the SE Asian region.

BA-Merrill Lynch upgraded its call on Woodside ((WPL)) to Neutral from Sell last week, turning more positive on a higher than anticipated negotiated exit price for BHP Billiton ((BHP)) from the Browse JV. BA-ML is also enthusiastic about the recent farm-in agreement for offshore Israel, with the broker noting overall risk is declining and believing this could mark a turning point for Woodside. The upgrade leaves the stock well into positive sentiment territory in the database, with four Buys and four Holds recorded.

WorleyParsons ((WOR)) went up a bit then down a bit on the sentiment index last week, with Deutsche Bank upgrading its recommendation to Neutral from Sell, while Macquarie downgraded its call from Buy to Neutral. Deutsche's upgrade was pretty much a valuation call, the broker noting the share price has declined 18% and has underperformed the ASX100 by 19% since the middle of October and now better reflects the earnings outlook of the company. On the flipside, Macquarie analysts believe WorleyParsons will find it increasingly tough to achieve guidance for the year, as the overall context for some of the group's operations continues to toughen. While Macquarie continues to like the stock on a medium to longer term basis, the broker suspects the bias is now skewed towards disappointment, at least in the short term. Two Buys, two Sells and four Holds keep the stock at a flat Neutral in the database.

Now we move across to the downside column of the ledger, which is headed up by Acrux ((ACR)). Analysts at Macquarie downgraded to Sell from Neutral last week, noting the US testosterone market growth slowing and the broker also thinks the company's ability to grow share is diminished, given increased marketing efforts by peers and the prospect of new entrants into the market. The broker is also of the view the company's FY13 Axiron guidance will be difficult to achieve and thus also cut its FY13-14 net profit forecasts by 25%, 6% and 11%. The stock is neutrally regarded in the database, with one Buy and now One Sell recorded.

APN News & Media ((APN)) lost its last Buy call last week and now sits well into negative sentiment territory in the FNArena Database. CIMB made the move on yet another profit warning, which the broker noted brings up an important question: what about APN's debt covenants? CIMB analysts believe there will be no breach, but it is getting close. Because of the high debt, the stockbroker doesn't believe the shares will re-rate anytime soon, despite the shares being cheaply priced.

CIMB also took the knife to Aristocrat ((ALL)), downgrading their call to Neutral from Buy on valuation grounds. The broker admits further upside is possible, but thinks we're unlikely to see any of it until at least the tail end of FY13. In the meantime, the analysts recommend a reduction in holdings until more info is provided with the interim result in May. Despite the downgrade, sentiment still remains generally positive, with three Buys, one Sell and four Holds on show in the database.

Australand Property Group ((ALZ)) was the only stock to suffer two downgrades last week, with both UBS and Macquarie downgrading from Buy to Neutral on the back of a conditional offer for its non-residential assets from GPT ((GPT)). Both brokers moved to Neutral given the stock is now in play and noting the share price will likely track the ups and downs of the corporate process, rather than fundamentals. The stock has maintained a positive rating despite the downgrades, with three Buys and four Neutrals on record.

Next on our list is Brambles ((BXB)), with BA-Merrill Lynch lowering its call to Neutral from Buy on a combination of valuation and slowing US data. Other than that, the broker is fairly happy with the way things are running, it's just that it doesn't see any chance of catalysts to push the price higher any time soon. Three Buys and four Holds remain on show in the database, with the stock maintaining its positive regard, just a little diminished.

Macquarie downgraded David Jones ((DJS)) to Neutral from Buy after cutting its FY13-15 EPS forecasts by 14.1%, 10.9% and 12.1% to reflect a reduction in store sales forecasts and to account for the increased costs associated with further online development. 

Energy Resources of Australia ((ERA)) follows next, also downgraded to Neutral from Buy, this time by BA-Merrill Lynch, who has finally buckled under the weight of a persistently weak uranium price. The broker is also concerned about currency headwinds and a delay in securing a deal with traditional indigenous landowners over the mine life extension.  Both stocks are negatively regarded in the FNArena Database.

Iluka ((ILU)) was downgraded to Sell from Neutral by Deutsche Bank on the expectation that weak zircon/titanium pricing in combination with weak sales volumes are likely to persist for another six months. The stockbroker also lowered its price forecasts for both key products for Iluka by some 30% for the next two years seeing the FY13 EPS estimate slashed by no less than 80%. Still, the positive sentiment for the stock remains, given five Buy calls, one Hold and two Sells in the database.

Analysts at Macquarie had some fun in insurance, downgrading both Insurance Australia Group ((IAG)) and Suncorp ((SUN)) as part of a review of the sector. IAG was dropped to Neutral from Buy, with the broker saying that despite some clear positives for the stock, they simply cannot justify retaining the Outperform rating. The stock rates a flat neutral sentiment read. The broker also cut Suncorp from Neutral to Sell, preferring a cautious sector view. The latter stock remains well regarded in the database, with Macquarie’s Sell and a Neutral from Credit Suisse the only blemishes.

The last two downgrades were pushed through by analysts at UBS, with both Lend Lease ((LLC))  and Wesfarmers ((WES)) going from Buy to Neutral. Despite Lend Lease having further increased its project pipeline with the development of the Sydney Convention Centre plus the development of an adjacent site, UBS elected to downgrade the stock on recent share price appreciation. Meanwhile, Wesfarmers is lower on coal price cuts to 2013 assumptions, with the broker noting its longer term price projections are well below market consensus. Earnings estimates were also scaled back in single digits as a result. Sentiment for Lend Lease remains positive post the downgrade, with five Buys, two Holds and a Sell, while Wesfarmers sits in negative territory on just one Buy, two Sells and five Holds.

There were two significant consensus price target increases over the week, with Australand and STW Communications seeing their target pushed up 4.88% and 4.2% respectively. The downside saw three big price target adjustments, with APN down 21.33%, Ten Network ((TEN)) coming off 12.62% as the company looks to raise $230m via an equity issue at 20c per share. Lastly, Iluka is down 11.5% on an ever deteriorating price and demand outlook for its products.

There were also some quite significant changes to earnings forecasts over the course of last week, with OceanaGold’s ((OGC)) consensus earnings increased by more than 28% on the back of a resumption of coverage by Macquarie. The broker re-initiated at Buy. Meanwhile, earnings forecasts for BlueScope ((BSL)) were bumped up 25.59% after the company sold 50% of its ASEAN, US and India Building Products businesses to Nippon Steel for US$540m.

The biggest move was in APN News & Media, its consensus earnings forecasts taking a 53.37% beating, with the downgrade by CIMB obviously taking a toll.

Total Recommendations	Recommendation Changes
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