Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

This story features ROCKETBOOTS LIMITED, and other companies. For more info SHARE ANALYSIS: ROC

By Chris Shaw

Brokers have displayed some caution leading into the profit reporting season this month, the FNArena database showing the eight brokers providing coverage on Australian stocks have upgraded only eight ratings over the past week compared to 13 downgrades. This brings total Buy recommendations to 55.45%.

A solid quarterly update from Aston Resources ((AZT)) was enough for UBS to upgrade to a Buy rating, the broker noting progress at the Maules Creek project continues to be solid. Valuation has also improved in UBS's view given recent share price weakness.

For Automotive Holdings ((AHE) it was an acquisition that expands the group's presence in the Victorian market that was enough to spark an upgrade to a Buy rating from RBS Australia. An attractive valuation adds weight to the broker's rating.

Fletcher Building ((FBU)) was also upgraded to a Buy by RBS, this reflecting the view the outlook for a gradual improvement in conditions in the construction market should favour the value plays into the second half of this year. 

Opinions on GWA ((GWA)) remain divided, as while Deutsche Bank suggests the current tough market conditions are priced in and so the stock offers value at current levels sufficient to justify an upgrade to a Buy, Credit Suisse disagrees. The latter has downgraded to Neutral from Outperform, this reflecting the view the current downturn will probably be deeper and last longer than has been expected up until now.

Deutsche also upgraded Mesoblast ((MSB)) to Buy from Hold as the company has received approval to advance to Phase II trials of its diabetes treatment. Further good news is expected in coming weeks from approval for Phase II trials of a congestive heart failure treatment.

Solid mask sales and stronger margins in the second quarter were enough for Deutsche to upgrade ResMed ((RMD)) to Buy from Hold, while both Roc Oil ((ROC)) and Tabcorp ((TAH)) scored upgrades primarily on valuation grounds. The former saw JP Morgan move to Overweight from Underweight, while the latter had Macquarie upgrade to a Neutral recommendation.

Among the downgrades the most common was Energy Resources of Australia ((ERA)), which is fast becoming an exploration company with potential projects threatened by bad weather. Concern over the future at Ranger Deeps and the lack of any potential catalysts for outperformance were behind downgrades to Sell ratings by both UBS and Credit Suisse.

A weak quarterly production report from Aquarius ((AQP)) and the expectation of at least one more quarter of the same level was enough for Citi to downgrade to a Neutral rating. The change reflects the lack of potential share price upside medium-term and valuation issues at current levels.

The lack of shorter-term catalysts were also enough for BA-Merrill Lynch to downgrade Asciano ((AIO)) to Neutral from Buy, especially given rival QR National ((QRN)) appears to have more shorter-term growth options.

Earnings headwinds across the IT sector have seen RBS cut its earnings estimates for ASG Group ((ASZ)), the prevailing headwinds enough to see the broker move to a Hold rating. It is a similar story over at Bank of Queensland ((BOQ)), where Deutsche has downgraded to a Hold rating to reflect the current lack of asset growth being achieved.

Reduced expectations for the Melbourne and Sydney office markets are behind Macquarie downgrading to an Underperform rating on Commonwealth Property Office ((CPA)), the broker also downgrading to a Neutral rating on Dexus for similar reasons.

A weak result and a resultant lowering in forecasts and confidence in coming years is enough for RBS to downgrade to sell from Buy on CSG ((CSV)). Upcoming commissioning risks at the Boseto project are enough for Deutsche to move to a Neutral rating on Discovery Metals ((DML)), while valuation issues and tough market conditions have prompted downgrades for James Hardie ((JHX)) and Regis Resources ((RRL)).

Outside of ERA the most significant change in price targets was in Alesco ((ALS)), as tough market conditions continue to outweigh any operational improvements the group is achieving. Mirabela ((MBN)) saw both its target and earnings estimates reduced after a disappointing quarterly report, while post somewhat disappointing quarterly reports from Gloucester Coal ((GCL)), Alacer Gold ((AQG)), Panoramic Resources ((PAN)) and Atlas Iron ((AGO)) brokers responded by lowering earnings estimates. 

Total Recommendations	Recommendation Changes
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