Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

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            [5] => ((CPU))
            [6] => ((IGO))
            [7] => ((FWD))
            [8] => ((NHF))
            [9] => ((IIN))
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This story features CSL LIMITED, and other companies.
For more info SHARE ANALYSIS: CSL
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Andrew Nelson

With companies winding down activity ahead of the holidays, especially the type of activity that results in recommendation upgrades and downgrades, analysts are also continuing to relax a little ahead of the holidays and the year end. Last week saw just four stock recommendations downgraded, while six were upgraded. The overall tally now indicates 45.05% of ASX listed shares are rated as Buy, a light increase on last week, while 43.42% were at Hold and 13.53% as Sell.

The downgrade side was evenly split, with two stocks down to Sell from Neutral, while two more were cuts from Buy to Neutral. The upgrades were from Neutral to Buy in five out of six cases, with the remaining one stock bumped up to Neutral from Sell. The one stock lifted up to  Neutral was the ASX ((ASX)), with Citi noting that while volumes are falling and market velocity is down significantly over the last 12 months to levels not seen over the last 20 years – including post GFC trading – the broker still thinks newly announced volume rebates should help stem the tide. The stock remains negatively regarded in the FNArena Database, with five Holds and three Sells recorded.

CSL ((CSL)) was upgraded to Buy from Neutral by Credit Suisse, who was among a number of brokers to give the company positive marks after what was a fairly well received R&D briefing. Current year earnings were lifted pretty much across the board, with the stock otherwise remaining positively regarded in the FNArena Database on five Buys, two Holds and a Sell.

Credit Suisse also pushed Metcash ((MTS)) up to Buy from Neutral despite what was a fairly lackluster 1H result in terms of consensus commentary. It seems the main takeaway was that it could have been worse, with Credit Suisse of the opinion the share price has now sunk too low. The stock moves into positive territory in the database with the upgrade and now sits on two Buys, one Sell and five Holds, with 7% upside to the consensus target.

Macquarie also chimed in with an upgrade last week, lifting Qube Logistics ((QUB)) from Neutral to Buy. Post site tours across Melbourne and Sydney, the broker has formed the opinion that acquisitions are starting to pay off in the form of road share gains, with FY13 earnings likely to be helped along by the recent MIST acquisition. The broker also sees potential for the company to improve margins further at existing sites, while the development of Moorebank in Sydney, and Somerton, Altona and Lyndhurst in Victoria could also offer better margins and some market share gains. The database now shows four Buys versus just two Holds, with shares trading at a 17% discount to the consensus price target.

The last two upgrades are back with Credit Suisse, who boosted Tabcorp ((TAH)) to Buy from Neutral on the belief the investment case for Tabcorp should become less complicated in the years ahead. The broker explains court cases will soon have run their course and expiring licenses will no longer cloud the outlook. In the meantime, CS sees profit growth resuming in FY14 and even accelerating in FY15 and this is what forms the basis of the upgrade. The upgrade moves the stock just into positive sentiment territory in the database, with two Buys, five Holds and a Sell call recorded.

The last upgrade of mention was in the favour of Ten Network ((TEN)), with Credit Suisse lifting to Buy on news the company will look to raise $230m via an underwritten entitlement offer. While the near-term earnings outlook certainly doesn’t improve on the news, the broker notes at least the move will remove the financial risk overhanging the stock, while the operational risks that remain seem to already be in the price. The broker stands alone with its Buy call, with the database otherwise showing three Holds and four Sells on top of Credit Suisse’s new Buy call. The main problem noted by most brokers is not earnings visibility, but rather earnings invisibility.

We’ll start off the downgrades list with Computershare ((CPU)), which was cut to Neutral from Buy by CIMB on the back of waning M&A activity. The broker also pointed out that the current low interest rate environment is also applying additional downward pressure on margins and income. Despite the downgrade, the stock remains in positive territory in the database, with there still being four Buys versus two Holds and a Sell.  

Next on the downgrade list is Independence Group ((IGO)), also cut to Neutral from Buy, but this time by Deutsche Bank. While the broker remains a firm supporter of Independence Group, citing continued positive developments, especially at 30% owned Tropicana, the share price has simply run to high, in the broker’s view. Once the valuation picture improves it’s easy to see Deutsche moving back up to Buy given its view net profits should shoot to the stars in the years ahead.

Fleetwood Corp ((FWD)) was one of the two stocks cut to Sell last week, with the decision in this case being made by JPMorgan on the view that with the company’s manufactured accommodation business continuing to take a beating, consensus estimates are now probably too high. In at least the near-term, the broker expects weaker demand for modular buildings and weaker margins from increased supply/competition entering the market will see earnings go nowhere. The downgrade pushed the stock a little further into negative territory in the database, with just one Buy, two Holds and two Sells on record.

Our last downgrade was booked by NIB Holdings ((NHF)), with BA-Merrill Lynch downgrading to Sell after completing a thorough review of its model. While FY13 earnings were lifted by 3%, with 6-7% increases to out years, the broker thinks the stock has simply become too expensive. The Sell call stands in contrast to the two Buy calls and one Restricted also recorded in the database.

In terms of changes to average target prices, not only were there were no increases of more than 5% posted last week, there was just one increase in excess of 2%. That increase was booked by iiNet ((IIN)), whose average price target moved 4.8% higher. The boost came from just one broker, Citi, who initiated coverage last week with a Buy call and $5.01 price target, seeing significant near-term and longer term drivers for the stock.

There was also only one significant downgrade to consensus price target over the course of last week, with Ten’s target down 8.41% after undertaking the aforementioned capital raising last week.

There weren’t many sizable increases to consensus earnings forecasts, with NIB Holding lifted by 5.04% being the only significant mention to the upside.

There was a bit more action on the downside, with Whitehaven Coal ((WHC)), NRW Holdings ((NWH)), Western Areas ((WSA)) and FKP Property ((FKP)) all seeing their consensus earnings forecasts trimmed between 6-9% last week.

Note: The FNArena database is a great place to start if you want more insight into any of the changes mentioned above, or even if you’re just looking to find out a little bit more about what Australian brokers think about a particular company.
 

Total Recommendations	Recommendation Changes
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