Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

This story features COCHLEAR LIMITED, and other companies. For more info SHARE ANALYSIS: COH

By Chris Shaw

Changes in broker ratings were weighted to the downside over the past week, brokers in the FNArena database making 11 downgrades in ratings compared to just five upgrades. Total Buy ratings have again dipped under the 50% level and now stand at 49.9%.

AWE Limited ((AWE)) enjoyed an upgrade from BA Merrill Lynch, the broker moving to a Neutral rating from Sell previously given the upcoming catalyst of drilling at some of the company's shale oil prospects. The price target was trimmed at the same time.

BA-ML was also active on the industrial side of the market, upgrading ratings for Cochlear ((COH)), DuluxGroup ((DLX)) and Stockland ((SGP)). For Cochlear the move to a Neutral rating from Sell previously is based on the view negatives such as volume weakness are now factored into the market, meaning no new catalyst to drive further underperformance.

Increased top line growth expectations for Dulux are enough for BA-ML to lift earnings forecasts and its price target for the stock. The changes suggest a good enough outlook to justify a move to a Buy rating.

Reduced risk assumptions for the Australian REIT sector has boosted BA-ML's valuations and price targets, while on company specific news the confirmation residential lot sales are holding up in a tough market was also viewed positively. BA-ML upgrades Stockland to Buy from Neutral.

Back on the resources side, UBS has upgraded Mincor ((MCR)) to Neutral from Sell given a positive view on management's ability to deliver some upside for the stock. Minor changes to forecasts follow Mincor's quarterly production report.

On the downgrade side, Deutsche Bank has lowered its rating on Commonwealth Bank ((CBA)) to Neutral from Buy given the view value is no longer compelling at current levels. As well, Deutsche suggests while CBA's upcoming profit result should be solid there is unlikely to be enough upside to justify the current premium to peers.

CBA was not the only bank to be downgraded, as Citi cut its rating on National Australia Bank ((NAB)) to Hold from Buy. The call is a valuation one as the share price has moved beyond Citi's target, leading the broker to suggest there is better relative value in Westpac ((WBC)) at present.

Property-related stocks also saw a number of downgrades, with Credit Suisse cutting its rating on both Commonwealth Property Office ((CPA)) and Investa Office ((IOF)) to Underperform ratings from Neutral previously.

The changes reflect the fact office REITs have enjoyed strong gains over the past two years, so closing the gap between valuation and book value. An exit from European assets remains a catalyst for Investa but in both cases Credit Suisse suggests there is not enough total return on offer to justify a higher rating.

BA-ML has also been active in downgrading ratings in the property sector, cutting GPT ((GPT)), Goodman Group ((GMG)) and Lend Lease ((LLC)) to Sell ratings from Hold previously. While its adjusted risk assumptions generate price target increases in each case, relative valuations drive the changes in ratings.

Citi has also gotten in on the act, downgrading Westfield Retail Trust ((WRT)) to Hold from Buy. The change reflects recent share price gains, while the broker makes no changes to earnings forecasts or price target.

Telstra ((TLS)) has also been downgraded by BA-ML to Sell from Hold, as the broker sees limited valuation upside following a recent share price rally. Once differences in earnings per share payout ratios have been factored in, the broker also suggests the yield on Telstra is in-line with the All Industrials average.

Among resource stocks, Macquarie has downgraded Northern Iron ((NFE)) to Neutral from Outperform post the company's quarterly production report. The report itself led to modest cuts to earnings forecasts, while recent share price gains have the stock within 10% of the broker's price target.

Saracen Minerals ((SAR)) was downgraded by BA-ML to Hold from Buy given lowered full year production guidance accompanying the June quarter production report. With the Red October development now likely to take longer than previously expected, earnings forecasts and price target have also been cut.

In terms of changes to price targets the only significant increase over the week was in Investa Office, While the largest cuts in targets were in Pharmaxis ((PXS)) and Boart Longyear ((BLY)). Changes to earnings forecasts on the upside were led by Investa and Australian Infrastructure ((AIX)), while TPG Telecom ((TPM)) and Kathmandu ((KMD)) enjoyed solid increases.

Cuts to earnings forecasts were largest for Lynas ((LYC)) and Brandrill ((BDR)), while estimates for Newcrest ((NCM)) and Beach ((BPT)) were also lowered significantly over the week.

Total Recommendations	Recommendation Changes
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