Weekly Recommendation, Target Price, Earnings Forecast Changes

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This story features BEACH ENERGY LIMITED, and other companies.
For more info SHARE ANALYSIS: BPT
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: CIMB, Citi, Credit Suisse, Deutsche Bank, JP Morgan, Macquarie, Morgan Stanley 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 November 3 to Friday November 7, 2014
Total Upgrades: 9
Total Downgrades: 5
Net Ratings Breakdown: Buy 43.07%; Hold 40.00%; Sell 16.93%

FNArena continues to register more recommendation upgrades than downgrades for individual stocks, and the week ending Friday, November 7, was no exception.

However, when it comes to changes to price targets/valuations and profit estimates, the balance remains firmly in the negative. This should come as no surprise as lower prices are still filtering through stockbroker forecasts. There were a few non-resources related industrials that also ran on the negative side last week; UGL, Spark Infrastructure and Crown Resorts (while there are plenty on the positive side).

Also remarkable is that ANZ Bank's FY14 report saw EPS estimates climb, but the bank is nowhere to be seen when it comes to changes to price targets.

Upgrades

Beach Energy ((BPT)) upgraded to Outperform from Neutral by Credit Suisse. B/H/S: 1/5/0

A new analyst takes over Cooper Basin stocks and preferences are updated. Beach Energy appears to have fewer clear growth options outside the SACB joint venture but the broker envisages value at current levels. Rating is upgraded to Outperform from Neutral and the target is lowered to $1.30 from $1.59.

Crown Resorts ((CWN)) upgraded to Neutral from Underperform by Credit Suisse. B/H/S: 6/2/0

The broker suspects a "cost wave" will engulf Macau operators over the next three years. Around 10% mass market revenue growth is required to maintain industry earnings. Having downgraded Crown on a reduction in expected associate income, the broker is upgrading the stock back to Neutral after share price weakness. Target downgrade to $15.20 from $16.30 reflects the earnings downgrade.

Henderson Group ((HGG)) upgraded to Buy from Neutral by Citi. B/H/S: 5/1/0

Henderson is now at an attractive entry price in the broker's view. The investment performance in the September quarter was consistent and Citi lifts its rating to Buy from Neutral. The company is predicting the December quarter will be tougher but even so, the broker notes flows are still positive and the company has demonstrated its ability to outperform. Target is lowered to $4.00 from $4.45.

OceanaGold ((OGC)) upgraded to Add from Hold by CIMB and to Buy from Neutral by Citi. B/H/S: 5/0/0

September quarter production puts the company on track to meet or exceed guidance. CIMB expects the December quarter will also be strong and fine tunes December forecasts following the release of the detailed mine plan for Didipio. Rating is upgraded to Add from Hold and the target is lowered to $2.60 from $2.90. The September quarter was stronger than Citi expected. The broker considers the stock is oversold at current levels, being a high quality gold producer with low cash costs. Rating is upgraded to Buy from Neutral. Target is reduced to $2.43 from $2.60, as earnings forecasts are trimmed on revised expectations of a faster ramp down in New Zealand along with earlier construction of Didipio underground than previously modelled.

Recall ((REC)) upgraded to Neutral from Underperform by Macquarie. B/H/S: 2/4/1

The broker believes a takeover by US rival Iron Mountain would deliver synergy benefits of some $90m, suggesting IRM could lift its bid to $9.00 from the current $7.45 implied at the top end of the offer range. The broker also believes a REIT conversion for Recall is achievable, adding around $1.40 to valuation. IRM's quarterly result saw prices increasing for the first time in three quarters. The broker is not factoring in either a REIT conversion or takeover into its valuation but suggests downside is now limited. Target rises to $5.44 from $4.47 and rating upgraded to Neutral.

Regis Resources ((RRL)) upgraded to Buy from Neutral by Citi, to Buy from Hold by Deutsche Bank and to Buy from Neutral by UBS. B/H/S: 4/3/0

The September quarter revealed gold operations have returned to full production. Garden Well lags because of patchy grades but both Moolart Well and Rosemont compensate. Citi upgrades to Buy from Neutral based on valuation. Target is reduced to $1.81 from $1.89. Deutsche Bank re-bases expectations and, on the back of improved production and use of hedging, upgrades the rating to Buy from Hold. Target is steady at $1.60. September quarter production was strong and beat UBS' expectations. Operations were mixed with Moolart Well and Rosemont ahead of forecasts but Garden Well materially below. UBS upgrades to Buy from Neutral on valuation. The broker believes FY15 will be a quiet time for the company as management rebuilds confidence and delivers on guidance. The broker is more confident this will be the case. Target is reduced to $1.70 from $1.80.

Downgrades

CSR ((CSR)) downgraded to Neutral from Outperform by Credit Suisse and to Sell from Neutral by Citi. B/H/S: 2/5/1

Despite the strong first half Credit Suisse downgrades to Neutral from Outperform. The story is about delivering on expectations, capitalising on growth opportunities and leverage to the cycle. There are reasons to remain constructive but the broker believes these are factored into the share price and would be a buyer of the stock on any material pull back. Target of $3.90 is unchanged. Citi downgrades to Sell from Neutral and raises the target to $3.30 from $3.20. The broker considers there is short-term optimism reflected in the share price which cannot be justified on fundamentals. As leading indicators of residential activity appear to be peaking and aluminium earnings face pressure from the second half of FY17 the broker concludes the downside risk weighs more heavily.

Origin Energy ((ORG)) downgraded to Underperform from Neutral by Credit Suisse. B/H/S: 5/2/1

Credit Suisse had called for more clarity on capex ahead of the APLNG site tour and acknowledges some has been provided, with guidance that the cash call would be a net $3bn in FY15. This does not end the confusion but the broker believes, be it project or non project, more capex means value lost. As the uncertainty lingers, Credit Suisse downgrades to Underperform from Neutral and lowers the target to $13.50 from $15.00.

Senex Energy ((SXY)) downgraded to Neutral from Outperform by Credit Suisse. B/H/S: 4/2/0

Credit Suisse believes much of the growth is priced in for Senex Energy and while it has the largest acreage and gas resources, commerciality is uncertain. A new analyst assumes coverage of Cooper Basin stocks and preferences are updated. The broker downgrades to Neutral from Outperform and reduces the target to 53c from 65c.

Transfield Services ((TSE)) downgraded to Reduce from Hold by CIMB Securities. B/H/S: 2/2/2

The upgrade to FY15 earnings guidance was not a surprise to CIMB and it upgrades estimates accordingly. Still, CIMB believes the primary driver of the share price in the near term will be the prospective bid from Ferrovial. The broker considers the risk of a further bid eventuating is diminishing and the prospect of the original bid being withdrawn is increasing. CIMB has therefore withdrawn the bid premium from valuation. Rating is downgraded to Reduce from Hold and the target falls to $1.25 from $1.85.

UGL ((UGL)) downgraded to Hold from Buy by Deutsche Bank. B/H/S: 0/3/4

The company has announced a cost blow-out on the Ichthys power project and there is a risk of write downs with the 50:50 JV partner announcing a US$85m provision. Deutsche Bank has become more cautious on potential issues with other contracts and believes management will be unlikely to regain investor confidence within a 12-month horizon. Rating is downgraded to Hold from Buy and the target to $7.07 from $8.28.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

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