Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

This story features ORIGIN ENERGY LIMITED, and other companies. For more info SHARE ANALYSIS: ORG

By Andrew Nelson

Recommendation upgrades and downgrades by the eight brokers in the FNArena database were finely balanced last week. Nine stocks went up and nine went down. The net result was only a minor modification to Total Buy ratings in the FNArena database, which now stand at 44.76% versus 44.79% last week.

There were 2 stocks that boasted more than one upgrade over the period. Both Premier Investments ((PMV)) and WDS Limited ((WDS)) enjoyed two upgrades apiece. Premier was upgraded to Buy by both Citi and Deutsche Bank post its FY result last week, with both brokers positive about the cost cutting work the company has achieved.

WDS is covered by only two brokers in the FNArena database and both of them lifted their recommendation to Buy last week. One upgrade was from Neutral and the other from a Sell call on news the company has won a new contract with Origin Energy's ((ORG)) Asia-Pacific LNG project (APLNG).

Sticking with the upgrades, Aquarius Platinum ((AQP)) was upgraded to Buy by Citi, with the broker noting additional upside to come from a lift in it platinum group metals forecasts. Interestingly, the stock was downgraded to Underperform by BA-Merrill Lynch the week prior with the broker noting that with Marikana and Everest now on care and maintenance, the company is reliant upon only 2 operating assets. Still, the stock remains positively regarded, boasting three Buys, one Hold and one Sell in the FNArena database.

G8 Education ((GEM)) was upgraded to Buy from Neutral by BA-Merrill Lynch last week, the broker upbeat about the accretive upside from the purchase of another 16 childcare centres.

Orica ((ORI)) was upgraded to Buy from Neutral by JP Morgan on news rival Incitec Pivot ((IPL)) had decided to defer the feasibility study for Kooragang Island, basically shelving its Australian East Coast ammonium nitrate plant ambitions for at least two years. The news reduces the risk of AN oversupply in the East Coast market, which is good pricing and margin news for Orica.

PanAust ((PNA)) and Perseus Mining ((PRU)) were both lifted to Neutral from Sell by BA-Merrill Lynch last week on the back of revisions to commodity price forecasts. Both remain positively regarded in the FNArena database.

Looking at the downgrade ledger in alphabetical order starts us off with Ampella Mining ((AMC)), which was downgraded on BA-ML’s view that in the current environment, investors are likely to be increasingly less interested in the type of long-dated developments the company is sitting on. The downgrade leaves the stock with one Buy, one Hold and one Sell in the FNArena database.

JP Morgan cut Bank of Queensland ((BOQ)) from Neutral to Sell after the share price ran a little too high for the broker’s comfort and after forecasts and price targets were adjusted across the banking sector. The stock remains positively regarded in the FNArena database, with five Buys, two Neutrals and the new Sell call.

Drillsearch Energy ((DLS)) was downgraded to Neutral by UBS on the back of strong share price outperformance and on cuts to the broker’s FY13-15 EPS forecasts to account for the inclusion of the share placement plan in its model. The stock now has one Buy and one Neutral recorded in the FNArena database.

BA-Merrill Lynch downgraded Gindalbie Metals ((GBG)) to Sell from Buy after cutting the price target to $0.40 from $0.68 on new commodity price assumptions. Citi cut the stock to Neutral earlier in the month on the same rationale. The stock maintains a slightly positive rating in the FNArena database, with three Buys, one Neutral and now two Sells recorded.

GWA Group ((GWA)) saw Deutsche Bank lower its recommendation to Sell from Hold on more subdued housing start forecasts, while Newcrest ((NCM)) was cut to Neutral by JP Morgan, who cited the mounting number of production issues being experienced. The latter stock is now almost Neutrally regarded on the FNArena database, with two Buys, five Neutrals and one sell recorded.

Nufarm ((NUF)) saw Macquarie downgrade its recommendation to Sell from Neutral last week, with the broker concerned about a flat outlook for the group’s Australasian business. The stock moves a little deeper into negative territory in the FNArena database, with just two Buys offset by four Sells and two Neutrals.

OZ Minerals ((OZL)) was another one of the victims of BA-Merrill Lynch’s commodity price revisions, with the stock cut to Sell from Neutral. The broker also cited production risk in 2013-14 as a concern. Three Buys, three Sells and two Neutrals keep the stock at a 0.0 reading on the FNArena Sentiment Indicator.

Lastly, Citi downgraded its recommendation on Rio Tinto ((RIO)) to Neutral from Buy last week on the broker’s belief that the upside for iron ore prices now remains "capped". The new Neutral call is the company’s only blemish in the FNArena database, as it balances against seven Buy calls. 

Regarding major price target moves, there wasn’t a single stock under coverage that saw its target adjusted by 10% or more. There were, however, far more 3%+ decreases to price targets than there were increases.

Fortescue Metals’ ((FMG)) price target was cut by 7.28% on the cost of the company’s intention to settle its ongoing litigation with Leucadia, While the price target may have been lowered, brokers were still positive on the news.

Gindalbie’s average price target pulled back 7.12% on the issues mentioned above, while Jetset’s ((JET)) average price target dropped 7.09%.

On the upside, PanAust’s average price target was up 3.66% on the above mentioned upgrade from BA-Merrill Lynch, while BlueScope’s ((BSL)) target was lifted by 3.38%.

Total Recommendations	Recommendation Changes
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