Weekly Recommendation, Target Price, Earnings Forecast Changes

Array
(
    [0] => Array
        (
            [0] => ((BEN))
            [1] => ((BOQ))
            [2] => ((EHL))
            [3] => ((PBG))
            [4] => ((SMX))
            [5] => ((SUL))
            [6] => ((AGO))
            [7] => ((BKN))
            [8] => ((FGE))
            [9] => ((LLC))
            [10] => ((MML))
            [11] => ((MGR))
            [12] => ((MOC))
            [13] => ((ORG))
            [14] => ((AGK))
            [15] => ((PBG))
        )

    [1] => Array
        (
            [0] => BEN
            [1] => BOQ
            [2] => EHL
            [3] => PBG
            [4] => SMX
            [5] => SUL
            [6] => AGO
            [7] => BKN
            [8] => FGE
            [9] => LLC
            [10] => MML
            [11] => MGR
            [12] => MOC
            [13] => ORG
            [14] => AGK
            [15] => PBG
        )

)

This story features BENDIGO & ADELAIDE BANK LIMITED, and other companies.
For more info SHARE ANALYSIS: BEN
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

By Rudi Filapek-Vandyck, Editor FNArena

Guide:

The FNArena database tabulates the views of eight major Australian and international stock brokers: BA-Merrill Lynch, CIMB, Citi, Credit Suisse, Deutsche Bank, JP Morgan, Macquarie and UBS.

Ratings, consensus target price and forecast earnings tables are published at the bottom of this report.

Summary

Period: Monday October 14 to Friday October 18, 2013
Total Upgrades: 5
Total Downgrades: 9
Net Ratings Breakdown: Buy 36.98%; Hold 43.93%; Sell 19.09%

It shouldn't surprise anyone that while upward momentum continues to dominate on the Australian share market; broker ratings for individual stocks remain skewed towards more downgrades. The week past delivered a 5:9 balance in favour of more downgrades. Mining services providers, property developers and retailers figured prominently.

And iron ore producers, of course. Since the long awaited price decline doesn't seem to belong to the current calendar year, securities analysts have been forced to lift their forecasts and companies such as Fortescue Metals, BC Iron and BHP Billiton have benefited through higher profit estimates and higher valuations and price targets.

Last week saw some hefty changes. Fortescue's consensus target rose by nearly 10%. Atlas Iron's profit forecast for this year jumped by 26%. BHP Billiton's consensus forecast added some 4%.

Other notable changes outside the iron space included Challenger's price target rising over 9% while profit forecasts for Ten Network and Qantas were slashed by 171% and 75% respectively.

Upgrades

Bendigo & Adelaide Bank ((BEN)) upgraded to Neutral from Underperform by CIMB Securities. B/H/S: 0/8/0

The shares have lagged peers in 2013 but CIMB thinks the gap should begin closing. The bank is now the cheapest in the sector, on the broker's estimates, trading at a price/earnings discount of 6% to Bank of Queensland ((BOQ)). The stock is considered good value and a re-rating is likely as concerns about legal risks from the Great Southern Plantations dispute abate and the path to Advanced IRB status builds momentum.

Emeco Holdings ((EHL)) upgraded to Outperform from Neutral by CIMB Securities. B/H/S: 1/5/0

The broker is not anticipating an improvement in Emeco's operating environment anytime soon, but has upgraded the stock to Outperform. The stock is being priced in expectation of a necessary equity raising, the broker notes, yet as management's update has confirmed, the company is generating strong cashflow which provides sufficient interest cover and debt amortisation. Emeco's debt covenants have been amended. The stock is trading at a 65% discount to net tangible asset valuation on perceived debt issues, the broker notes. Target rises to 38c from 20c.

Pacific Brands ((PBG)) upgraded to Neutral from Underperform by Credit Suisse. B/H/S: 2/3/2

The trading update from the AGM was disappointing. Sales are down year to date and a material improvement is some way off. Credit Suisse has altered first half sales expectations to a contraction of 4% from a former forecast for a flat result. Despite this the broker thinks the company may be at the low point in earnings. A recovery in retail sales presents upside risk to FY15 forecasts. Beyond this the potential is for solid growth in Bond and Sheridan, the higher margin brands. The stock appears to be good value and the broker's rating is raised to Neutral from Underperform. The price target is steady at 75c.

See also PBG downgrade.

SMS Management & Technology ((SMX)) upgraded to Neutral from Underperform by CIMB Securities. B/H/S: 0/2/2

At its AGM, SMS announced one-off costs and profit guidance down 20-25% for the half and 50% for the year. Discounting the one-offs leaves guidance in line with the broker's forecast.Early FY14 signs are positive for new contracts but not for earnings given weaker margins, the broker notes. The broker has lifted forecast earnings by 4-9% in FY14-15 to reflect the Birchman acquisition, offset by lower organic growth expectations.Target rises to $4.80 from $4.30 and the rating is lifted back to Neutral.

Super Retail ((SUL)) upgraded to Buy from Neutral by UBS. B/H/S: 3/1/3

At the first quarter update guidance for FY14 was unchanged and management has flagged plans to spend $110m in FY14 to accelerate a large portion of a three-year capex program. The broker supports the intention of leveraging solid trading to reinvest in the business. The rating is upgraded to Buy from Neutral to reflect a quality bias, given the consistent track record and the propensity to invest ahead into the core business. UBS believes Super Retail is well placed for growth, driven by multi-channel development and supply chain capex. Moreover, the temporary pull back in the share price provides an opportunity. The price target is raised to $14.80 from $12.95.

Downgrades

Atlas Iron ((AGO)) downgraded to Underperform from Neutral by CIMB Securities and to Neutral from Outperform by Credit Suisse. B/H/S: 1/4/3

The company has reiterated FY14 sales guidance for 9.8-10.3 million tonnes. This will be dependent on the ramp up of Abydos and sales from Mount Webber commencing by the June quarter. CIMB believes the stock is likely to outperform while the iron ore price is around US$130/t but the risk over the next 12 months is to the downside. Hence the rating is downgraded to Underperform from Neutral following the recent strength in the share price. Atlas delivered strong earnings for the quarter on a solid iron ore price, but all the money went into port and mine capex, Credit Suisse notes. While Atlas is in an expansionary phase, a rail solution is needed to unlock potential. Management is confident but the broker has not yet included a rail deal in its numbers, otherwise suggesting a key catalyst.

Bradken ((BKN)) downgraded to Neutral from Outperform by Macquarie. B/H/S: 1/5/1

The mining outlook (80% of Bradken revenue) continues to weaken but oil & gas (10%) remains strong, the broker notes. FY14 guidance remains comparable to FY13. While the broker sees earnings skewed to the second half and believes the dividend yield can be sustained, it has downgraded to Neutral on valuation.

Forge Group ((FGE)) downgraded to Neutral from Outperform by Macquarie. B/H/S: 2/1/0

Forge has been winning some big contracts of late which have proven positive for the share price. However a number of these projects have seen slippage in their timetables, the broker notes. FY14 has thus become relatively more sensitive to the timing of Roy Hill. The result is 7% cuts to FY14-15 earnings forecasts. Target falls to $5.34 from $6.74.

Lend Lease ((LLC)) downgraded to Neutral from Buy by Citi. B/H/S: 7/1/0

Lend Lease's update suggests to the broker the company's value drivers are intact. Aust engineering is expected to face margin pressure in FY14 but a number of road and rail projects should underpin earnings. Meanwhile the development business is well-positioned, and Lend Lease is looking for projects in Asia and the US to expand growth beyond the local pipeline. But this will take time. Target rises to $11.80 from $11.23, but a rally in the share price has taken the multiple beyond compelling, the broker suggests.

Medusa Mining ((MML)) downgraded to Sell from Hold by Deutsche Bank. B/H/S: 1/0/2

Another delay to the Co-O mill is impacting on both Medusa's production guidance and balance sheet, the broker notes. MML has arranged an overdraft facility but the broker remains cautious ahead of clear evidence of progress.Target falls to $2.00 from $2.30. Downgrade to Sell.

Mirvac ((MGR)) downgraded to Neutral from Buy by BA-Merrill Lynch. B/H/S: 2/5/0

The broker has downgraded the stock to Neutral from Buy after a 14% price rise since June. Mirvac is now trading in line with the broker's $1.85 valuation. The original decision to rate it a Buy was based on an expected turnaround in the development return on investment capital to at least 10% in FY14 from 4% in FY11. This has been re-affirmed by management at the quarterly update and is now fully reflected in the share price.

Mortgage Choice ((MOC)) downgraded to Neutral from Outperform by CIMB Securities. B/H/S: 0/3/0

The broker is confident of a strong FY14 result but feels the valuation now captures the improved backdrop and the stock's growth trajectory versus the small industrials is less compelling. Potential catalysts that could drive a re-rating are a stronger gain in market share, execution of the financial planning path to profitability and stronger approvals activity. For now it's a downgrade to Neutral from Outperform. The price target is raised to $2.68 from $2.60.

Origin Energy ((ORG)) downgraded to Neutral from Overweight by JP Morgan. B/H/S: 3/5/0

Having looked at the Victorian retail market, the broker finds AGL ((AGK)) is the only provider who appears to have eased off on discounting while Origin has actually increased discounts, suggesting the competition war will continue into 2014. The broker has cut earnings forecasts for both AGL and Origin as a result. Target falls to $14.10 from $14.20.

Pacific Brands ((PBG)) downgraded to Underperform from Buy by BA-Merrill Lynch. B/H/S: 2/3/2

The business is currently underperforming and the broker notes the company is relying on a sharp turnaround in second quarter sales to avoid a large earnings decline for FY14. Merrills thinks such a turnaround is unlikely. FY14 and FY15 earnings forecasts have been cut by 17% and 30% respectively. The broker thinks the weaker sales environment and margin erosion in FY15 from a lower Australian dollar will cause double digit earnings declines over the next two years. Hence, the rating is downgraded to Underperform from Buy and the price target is reduced to 63c from $1.05.

See also PBG upgrade.
 

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Click to view our Glossary of Financial Terms