Weekly Recommendation, Target Price, Earnings Forecast Changes

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            [1] => ((AAD))
            [2] => ((ARI))
            [3] => ((CSR))
            [4] => ((SFR))
            [5] => ((TSE))
            [6] => ((WDC))
            [7] => ((AQG))
            [8] => ((ERA))
            [9] => ((GBG))
            [10] => ((LEI))
            [11] => ((LYC))
            [12] => ((TRS))
            [13] => ((WES))
            [14] => ((WRT))
            [15] => ((WDC))
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            [3] => CSR
            [4] => SFR
            [5] => TSE
            [6] => WDC
            [7] => AQG
            [8] => ERA
            [9] => GBG
            [10] => LEI
            [11] => LYC
            [12] => TRS
            [13] => WES
            [14] => WRT
            [15] => WDC
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This story features ARIKA RESOURCES LIMITED, and other companies.
For more info SHARE ANALYSIS: ARI

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.

Period: Monday March 3 to Monday March 7, 2013
Total Upgrades: 7
Total Downgrades: 9
Net Ratings Breakdown: Buy 38.72%; Hold 44.06%; Sell 17.22%

Changes in stockbroker ratings for individual stocks remain limited post an unusually active February reporting season. For the week ending on Friday, March 14th, FNArena registered 7 upgrades and 9 downgrades. Without exception, all changes were of specific, individual character. Most active was gold producer Alacer Gold which attracted one upgrade and two downgrades following its market update. Apart from company specific valuation and risk angles, stockbrokers continue to differ on views about the medium to longer term outlook for the price of gold bullion.

Remarkable is that overall changes to valuations and price targets continue to have a positive skew. The table below containing the week's negative adjustments to price targets only comprises of three inclusions for the week, of which one resources company and one mining services provider. Equally important, overall changes are minimal.

There's been more action in forward estimates, but here too, negative adjustments are predominantly related to resources stocks (always volatile given the operational leverage) and their troubled cousins at this point of the cycle; mining services providers. On the positive side we find companies such as G8 Education, Fletcher Building, Brambles and CSL; where strong share price performances continue to be supported by ongoing increases to future estimates.
 

Upgrades

Alacer Gold ((AQG)) upgraded to Neutral from Underperform by Macquarie. B/H/S: 1/3/2

Alacer's result showed strong cash generation from continuing operations at Copler although a loss was booked due to the discontinuation of Australian operations. A 2c dividend was nevertheless paid. The broker is now more positive on the upcoming sulphide definitive feasibility study and while awaiting the outcome, has decided risk is to the upside. Upgrade to Neutral. Target rises to $2.75 from $2.10.

See also AQG downgrades.

Ardent Leisure ((AAD)) upgraded to Buy from Hold by Deutsche Bank. B/H/S: 4/1/0

Deutsche Bank has decided Ardent is a strategic way to play the macro theme in the US economic recovery, as well as the depreciating Australian dollar and improving Australian leisure market. The rating is upgraded to Buy from Hold. The price target is raised to $2.85 from $2.20, reflecting the upgrades to Main Event earnings over the medium term, partly offset by higher capex.

Arrium ((ARI)) upgraded to Neutral from Underweight by JP Morgan. B/H/S: 1/3/3

The share price has been dragged down recently by weakening iron ore prices, highlighting the sensitivity of the stock, and JP Morgan observes it is now below the target – unchanged at $1.40. The rating is upgraded to Neutral from Underweight but the broker retains the view that there are few positive catalysts on the horizon.

CSR ((CSR)) upgraded to Buy from Hold by Deutsche Bank. B/H/S: 3/2/2

Deutsche Bank considers the significant leverage in the building products business, combined with potential pricing power, suggests consensus expectations for FY15 and FY16 are too low. The broker believes the March price increases in plasterboard, bricks, insulation and glass are more likely to stick, with the current recovery in the housing market. Hence, the broker is upgrading to Buy from Hold, envisaging 15% upside potential to the current share price. The price target is raised to $3.68 from $2.98 on the roll forward to FY15.

Sandfire Resources ((SFR)) upgraded to Hold from Reduce by CIMB Securities. B/H/S: 3/3/1

A site visit to DeGrussa has left the broker feeling confident the underground mine and copper concentrator are operating close to plan. But where to from here? Sandfire is under no cash pressure and thus is in no rush, but it will need exploration success to prompt any re-rating, the broker suggests. The recent share price fall takes the stock to about fair value against the broker's forecasts which evokes an upgrade back to Hold. Target unchanged at $5.90.

Transfield Services ((TSE)) upgraded to Neutral from Underweight by JP Morgan. B/H/S: 0/4/1

The company is facing a number of headwinds – competitive pressure and elevated gearing – but JP Morgan notes there's good progress on securing cost reductions and winning work. The stock is trading broadly in line with the 80c price target, reduced from 82c. The rating is upgraded to Neutral from Underweight as the broker envisages further growth opportunities, with benefits to come from the re-focused strategy.

Westfield ((WDC)) upgraded to Buy from Neutral by BA-Merrill Lynch. B/H/S: 4/1/0

Merrills has decided to upgrade to Buy from Neutral because of the underperformance of the share price since the restructure proposal and expected valuation re-rating on the back of a higher growth profile. The stock is the broker's highest conviction Buy call in the REIT space.  After restructure, the geographic exposure will be 71% US and 29% UK/Europe and the broker thinks the higher income growth profiles in these markets and the development opportunities will drive a re-rating.The price target is unchanged at $11.80.

Downgrades

Alacer Gold ((AQG)) downgraded to Sell from Hold by Deutsche Bank and to Neutral from Buy by UBS. B/H/S: 1/3/2

On an underlying basis, Alacer's reported result surprised to the upside and this gold producer remains debt free, Deutsche Bank analysts acknowledge. It's the price they have a problem with. Given the declining production profile from the oxide project on top of ongoing uncertainty around sulphide development parameters the stock appears overvalued. Deutsche Bank has retained a $2.20 price target but pulled back the rating to Sell from Hold. The stockbroker does acknowledge there are upside risks. For example, at current spot price for gold the valuation increases to $2.95. The full year pre-tax profit was in line with UBS. Alacer declared a US2c final dividend which UBS did not expect. The company reiterated 2014 production guidance. UBS is reducing the rating to Neutral from Buy following a 45% rally in the share price since the beginning of 2014. Despite this the stock is one of the broker's preferred gold exposures for low-cost production and a strong balance sheet.

See also AQG upgrade.

Energy Resources of Australia ((ERA)) downgraded to Underweight from Neutral by JP Morgan. B/H/S: 1/1/1

The longer-term fundamentals are positive for price appreciation but the broker notes spot uranium prices are still weak, with the pace of Japanese reactor re-starts still slow, amid supply that remains resilient so far. While the broker has lowered uranium price forecasts for the short term given inventory overhang, demand is expected to recover in time, with China continuing to import large quantities and Japan reiterating its commitment to nuclear power. The stock's valuation looks stretched and JP Morgan is downgrading the rating to Underweight from Neutral. The target is $1.35, up from $1.20.

Gindalbie Metals ((GBG)) downgraded to Sell from Neutral by UBS. B/H/S: 0/1/3

First half profit was $2.9m. UBS notes the funding shortfall expected for Karara JV in 2014 of $308m. Ansteel is in discussions with the Chinese banking syndicate for additional funding. The broker is downgrading to Sell from Neutral on the basis that Gindalbie may not be able to recover the carrying value of its investment in Karara or the carrying value of other assets should the JV be called to repay all loans. It's a level of uncertainty the broker thinks shareholders should not take lightly. The price target is reduced to 2c from 13c.

Leighton Holdings ((LEI)) downgraded to Underperform from Neutral by Macquarie. B/H/S: 0/3/4

The broker has downgraded Leighton to Underperform on the strength of the Hochtief offer to increase its shareholding to over 74%. The offer realises value in the short term, the broker notes, while $5bn in receivables are still in question, the credit rating will be at risk under Hochtief control and while LEI will remain ASX listed, it will no longer be included in an index at less than 30% free float.

Lynas Corp ((LYC)) downgraded to Underperform from Neutral by UBS. B/H/S: 0/3/1

Lynas' interim loss of $60m was in line with the previous half but better than the broker's $100m loss forecast on lower costs. Falling cash has meant gearing has risen to 42% and LYC has indicated it will require additional funding despite production meeting targets. With the outlook for rare earths unclear the broker has elected to cut production expectations and mark forecast  prices to spot. The broker fears a deep-discount raising and has downgraded to Underperform.Target falls to 20c from 39c.

The Reject Shop ((TRS)) downgraded to Sell from Neutral by UBS. B/H/S: 0/2/1

The managing director has resigned and will leave in June. UBS thinks the store roll-out could come to an end in coming months with new management likely to move the focus to network optimisation. The share price may have underperformed in recent months but UBS has downgraded the rating to Sell from Neutral. There is a risk that during the leadership vacuum the company becomes a takeover target. The price target is reduced to $9.25 from $11.00.

Wesfarmers ((WES)) downgraded to Underperform from Buy by BA-Merrill Lynch. B/H/S: 0/4/3

Merrills has revised earnings forecasts, taking into account a more subdued outlook for the industrial businesses such as coal, industrial supply, chemicals and Target. The forecast for FY14 is reduced by 5% and FY15 by 7%.The broker thinks Wesfarmers currently faces a challenge in that it has four businesses, out of eight, where earnings are either going backwards or underachieving relative to recent investment. The rating is downgraded to Underperform from Buy and the target to $38.00 from $48.50.

Westfield Retail ((WRT)) downgraded to Underperform from Buy by BA-Merrill Lynch. B/H/S: 2/2/1

The rating has been downgraded to Underperform from Buy with the target reduced to $3.05 from $3.46. Merrills notes the stock has rallied since the announcement of the merger proposal and there is now a large valuation disparity with Westfield ((WDC)). Buying WDC and selling WRT creates a cheaper entry point into the Westfield UK and US operations and eliminates the Australasian exposure, in Merrills' view.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

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