Weekly Recommendation, Target Price, Earnings Forecast Changes

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            [4] => ((KMD))
            [5] => ((PBG))
            [6] => ((RHC))
            [7] => ((RMD))
            [8] => ((AGK))
            [9] => ((ALQ))
            [10] => ((DOW))
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This story features ORORA LIMITED, and other companies.
For more info SHARE ANALYSIS: ORA
The company is included in 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.

For the purpose of broker rating correlation, Outperform and Overweight ratings are grouped as Buy, Neutral is grouped with Hold and Underperform and Underweight are grouped as Sell to provide a Buy/Hold/Sell (B/H/S) ratio.

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

Summary

Period: Monday June 9 to Friday June 13, 2014
Total Upgrades: 7
Total Downgrades: 9
Net Ratings Breakdown: Buy 39.30%; Hold 44.14%; Sell 16.56%

Broker revisions of ratings, targets and earnings forecasts for individually listed companies in Australia were heavily impacted by a series of profit warnings during the week ending on Friday, June 13. This becomes in particular apparent in the tables below for negative changes to targets and to earnings estimates.

No surprise thus, FNArena registered nine downgrades against seven upgrades with Downer EDI on its own responsible for three of the downgrades. Outside of these profit warnings, however, there clearly remains a positive undercurrent, as witnessed by some hefty positive revisions for the likes of Newcrest, Aristocrat Leisure and Oil Search.

All in all it would appear the Australian share market remains heavily polarised and FNArena's records for the week past certainly support this.

Upgrades

Drillsearch ((DLS)) upgraded to Buy from Hold by UBS. B/H/S: 2/1/1

Drillsearch has released its bidder's statement for Ambassador O&G ((AQO)) but the offer is unchanged, despite Magnum Hunter's subsequent 19% over-bid. Drillsearch has five days to match, the broker notes, or pull out and take a $200,000 break fee, unless it sells its 19.9% AQO stake to Magnum. Market concern over the AQO bid has sent DLS shares down 11% these past couple of months despite an interim increase in DLS' own reserves, which is more than AQO's net asset value, the broker notes. Hence the broker upgrades to Buy, retaining a $1.75 target.

Orora ((ORA)) upgraded to Buy from Neutral by Citi. B/H/S: 7/0/0

A combination of earnings stability, limited capex and strong cash flow should allow the stock's leverage ratio to fall sharply, in Citi's view. As the longer term agenda is yet to be determined the broker thinks this should provide an ideal opportunity for capital management. The broker upgrades to Buy from Neutral and raises the target to $1.60 from $1.40. Citi has reduced FY14 and FY15 profit forecasts and adjusted risks, leaving open the potential for an upside surprise.

Invocare ((IVC)) upgraded to Neutral from Sell by Citi. B/H/S: 1/5/0

Over the past 12 months the stock has declined 17% in absolute terms and underperformed the S&P/ASX200 Healthcare Index by 21%. Citi expects, after a weak FY13, the number of deaths will revert to trend in FY14 and earnings growth should improve accordingly. The broker takes this opportunity to upgrade the rating to Neutral from Sell. The target is raised to $9.95 from $9.61.

Kathmandu ((KMD)) upgraded to Outperform from Underperform by Credit Suisse. B/H/S: 3/0/0

Credit Suisse has revisited the outlook for Kathmandu, which suggests that the company is benefiting from the resilience of the outdoor sector and increasingly emphasising brand, ranges and quality. These supporting factors lend more confidence to the broker's view and the rating is upgraded to Outperform from Underperform, taking into account the recent fall in the share price. The target is revised up to NZ$3.90 from NZ$3.75.

Pacific Brands ((PBG)) upgraded to Buy from Neutral by Citi. B/H/S: 1/3/3

The company has issued a profit downgrade for FY14 and, based on Citi's revised forecasts, earnings will fall 25%, despite sales growth. The broker believes that despite the difficult outlook, the core brands will hold value for others and places a 25% probability on a break-up of the company. This potential for a break-up, which could achieve a valuation of 74c per share, drives the broker's upgrade to Buy from Neutral. The target is lowered to 60c from 67c, based on the probability of a takeover compared with a go-it-alone approach. A resolution to the issue is expected by the end of the year.

Ramsay Health Care ((RHC)) upgraded to Outperform from Neutral by Credit Suisse. B/H/S: 2/5/1

Ramsay Health Care has provided more details about the acquisition of 83.43% of Generale de Sante. Credit Suisse thinks the metrics are reasonable and, strategically, the acquisition provides longer term exposure to a hospital system with a number of attractions such as universal health care coverage and choice between public and private. The acquisition's earnings accretion of 4-5% increases the broker's target to $52.50 from $50.75 and the rating is upgraded to Outperform from Neutral.

See also RHC downgrade.

ResMed ((RMD)) upgraded to Overweight from Neutral by JP Morgan. B/H/S: 6/2/0

The broker attended the Minneapolis Sleep Conference and was surprised by the issue of bundling, which appears more benign than first thought. Discounting remains rife and this leaves brand, product launches, credit terms and systems capability as the potential drivers of market share, in the broker's view. While discounting is a concern, the reduced risk around bundling will go a long way to destabilising the short interest in the stock, in JP Morgan's opinion. As a result, the broker upgrades to Overweight from Neutral and raises the target to $5.89 from $5.49.

Downgrades

AGL Energy ((AGK)) downgraded to Neutral from Outperform by Macquarie. B/H/S: 2/4/1

Warmer than usual weather is dampening the outlook. Macquarie notes AGL relies on one month of winter and a cooler autumn to lift gas demand and electricity usage. Macquarie has also deferred timing of both the Diamantina power station and QCLNG gas demand in refining the outlook for the company. The broker thinks there is some premium attached to a potential MacGen acquisition and upside for investors centres on realisation of the 50% interest in ATP1103. Still, the risk of softness in electricity prices and reduced profitability in base load generation contributes to a lowering of the recommendation to Neutral from Outperform. The target is lowered to $16.00 from $16.24.

ALS Ltd ((ALQ)) downgraded to Sell from Hold by Deutsche Bank. B/H/S: 0/1/5

The FY14 result revealed improving organic revenue growth but Deutsche Bank believes this is more than reflected in the share price. There is also the risk of disappointment in management's expected recovery of geochemistry volumes.The broker downgrades to Sell from Hold on valuation grounds. The target is steady at $7.05.

Downer EDI ((DOW)) downgraded to Neutral from Buy by Citi, to Underperform from Neutral by Credit Suisse and to Neutral from Buy by UBS. B/H/S: 5/2/1

BHP-Mitsubishi's early termination of Downer's Goonyella coal contract not only wipes out 7% of mining work in hand and 2% of group earnings but Citi notes it brings into question the future of the company's contract at the similarly sized Blackwater mine. The broker has cut forecast earnings by 6% and 9% in FY14-15. The broker still likes the prospects as it moves into net cash in FY15 but for now has pulled back to Neutral given ongoing contract risk. In the absence of a material recovery in the coal price, Credit Suisse suspects the trend to in-house operations and a reduction in pre-stripping could become more broadly based, which implies ongoing risk to Downer's contract mining. The broker expects further share price weakness and downgrades the rating to Underperform from Neutral. While accepting that Downer has executed strongly in a difficult environment and there are opportunities inherent in a strengthening balance sheet, UBS thinks the trend of taking jobs in-house and scope reductions will continue. The broker is downgrading the rating to Neutral from Buy.

Papillon Resources ((PIR)) downgraded to Neutral from Buy by UBS. B/H/S: 1/1/0

Papillon Resources has announced a merger agreement with B2Gold. UBS believes Australian investors are left short by the deal, as the proposal values Papillon at net present value, offering no control premium or exploration upside. The broker is downgrading to Neutral from Buy based on valuation, amid a low probability of a competing bid. Should Papillon fall to outsiders the broker observes quality, high-margin Australian equity plays will be few and far between in the gold sector. The target is raised to $1.70 from $1.68. UBS prefers Alacer Gold ((AQG)) as a low-cost producer in the sector.

Ramsay Health Care ((RHC)) downgraded to Neutral from Outperform by Macquarie. B/H/S: 2/5/1

Macquarie updates forecasts to include the acquisition of Generale de Sante. The acquisition increases Ramsay's presence in France to 113 hospitals from 38. The broker is confident in Ramsay's ability to deliver, but the French market is challenging and the ramping up of a presence in France will be a material headwind to growth. Hence, Macquarie's rating is downgraded to Neutral from Outperform and the target raised to $49.00 from $45.00.

See also RHC upgrade.

Skilled Group ((SKE)) downgraded to Neutral from Outperform by Credit Suisse. B/H/S: 2/2/0

The broker has reduced FY15 earnings estimates by 14%, based on a more cautious view on both workforce services and engineering & marine. Credit Suisse acknowledges the valuation is undemanding but remains torn between two views. These are "Buy, with time on your side" or "Hold on and wait for the upside". Current operating conditions mean the rating veers to the latter. Hence a downgrade to Neutral from Outperform. The target is lowered to $2.65 from $3.50.

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

The company has downgraded FY14 profit expectations by 15%, reflecting a downturn in sales at the end of May and beginning of June. Credit Suisse suspects the weakness in trading was felt across the industry and, as such, represents downside risk to other retailers. With a new CEO yet to be appointed and the product offering under review, the broker remains cautious on long-term sales growth assumptions. The rating is downgraded to Underperform from Neutral and the target is lowered to $8.20 from $11.30.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

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