Weekly Recommendation, Target Price, Earnings Forecast Changes

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This story features BAPCOR LIMITED, and other companies.
For more info SHARE ANALYSIS: BAP
The company is included in 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: Citi, Credit Suisse, Deutsche Bank, JP Morgan, Macquarie, Morgan Stanley, Morgans 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 March 9 to Friday March 13, 2015
Total Upgrades: 9
Total Downgrades: 7
Net Ratings Breakdown: Buy 40.28%; Hold 41.69%; Sell 18.03%

Stockbroking analysts are taking a break or at the very least they are publishing a lot less research than they did in the first ten weeks of the calendar year. No surprise, maybe, this deceleration in research activity has seen rating upgrades finally outnumber downgrades for the week ending Friday, 13 March 2015.

It has to be pointed out though, if it wasn't for Regis Resources which triggered three upgrades, the scores would still have remained in balance. FNArena registered nine upgrades and seven downgrades for the week.

With the exception of three small cap resources stocks – including Regis Resources- the small number of changes to price targets would have been hardly worth mentioning. On the positive side, APN News & Media, Burson Group and Medusa Mining continue enjoying positive contributions from analysts' valuation revisions.

There was more excitement in changes to profit forecasts but, again, negative adjustments are predominantly reserved for resources stocks, with iron ore producers leading the pack. The positive side shows but moderate increases with Australian Pharmaceutical Industries leading the table with an increase of 2.29%. It would have hardly registered only two weeks ago.

Upgrades

Burson Group ((BAP)) upgraded to Overweight from Equal-weight by Morgan Stanley. B/H/S: 2/1/0

Morgan Stanley reassesses the valuation of Burson Group with a new analyst taking over coverage. The company beat expectations in the first half while many, particularly consumer-facing companies, underperformed. Earnings growth is expected to continue over the long term for Burson and the broker envisages further upside from recent initiatives. The broker concludes that the share price will be higher in 12 months time and upgrades to Overweight from Equal-weight. Target is raised to $3.15 from $2.50. Industry view In-Line.

Regis Resources ((RRL)) upgraded to Outperform from Neutral by Credit Suisse, to Hold from Sell by Deutsche Bank and to Outperform from Neutral by Macquarie. B/H/S: 3/4/1

Continuing operational challenges and grade issues have been exacerbated by wet weather and this has reduced the company's production guidance for FY15. Credit Suisse observes most of the trouble is again at the Garden Well operation while Moolart Well remains the company's most consistent and robust mine. The broker upgrades to Outperform from Neutral on the back of the share price decline. Target is lowered to $1.57 from $1.75. The production data for January and February underwhelmed Deutsche Bank. Some issues appear to be short term but the biggest concern is, again, grades at Garden Well. Deutsche Bank notes, outside of operations, Regis Resources enjoys tailwinds from the Australian dollar gold price, safety from hedging and exposure to the falling diesel price. Despite the issues the broker upgrades to Hold from Sell on valuation. Target is reduced to $1.45 from $1.70. The company believes guidance is still achievable but Macquarie has cut its production forecast for Duketon due to lower grades. This leads to lower earnings forecasts but the broker believes the share price hit on the announcement was overdone. Target falls to $1.70 from $1.90 but rating upgraded to Outperform on valuation.

Downer EDI ((DOW)) upgraded to Hold from Sell by Deutsche Bank. B/H/S: 4/3/1

The earnings season underscored Deutsche Bank's conservative stance on engineering contractors. The broker expects 2015 to remain challenging as mining capex reduces, oil & gas capex begins to slow and re-priced contracts start to affect earnings. Deutsche Bank upgrades Downer EDI to Hold from Sell on valuation grounds but retains a $4.06 target.

iiNet ((IIN)) upgraded to Add from Hold by Morgans. B/H/S: 3/3/2

Morgans has taken a closer look at the telco and expects margin expansion and subscriber additions will lead to a re-rating in the second half. For contrarian investors the broker considers current share price weakness represents an opportunity to buy a quality company on undemanding metrics. Rating is upgraded to Add from Hold. Target is raised to $7.52 from $6.65.

Mineral Resources ((MIN)) upgraded to Neutral from Sell by UBS. B/H/S: 1/3/1

The broker has lowered 2015 iron ore price forecasts to US$59/t from US$66/t. Earnings forecasts for Mineral Resources are subsequently lowered, although falling cash costs, driven by factors such as lower energy prices, provide a buffer. The broker expects the company to be marginally loss making in FY16 on iron ore price forecasts but profitable in FY17 as cash costs continue to fall. The company is well place for long term production growth but hampered in the near term by price weakness. On share price weakness, the broker has upgraded to Neutral.

Sirtex Medical ((SRX)) upgraded to Buy from Neutral by UBS. B/H/S: 1/1/1

The company is about to release its key results on the SIRFLOX study, which is designed to determine whether SIR-Spheres can be elevated to a first line therapy in liver cancer. Other data in the lead-up to the study has been positive and UBS is encouraged by its review of previous trial findings. The broker's rating is raised to Buy from Neutral. Target is raised to $50.40 from $34.00, capturing future potential cash flows and assuming a 72% probability of SIRFLOX being successful.

Westpac Banking ((WBC)) upgraded to Neutral from Underperform by Macquarie. B/H/S: 2/4/2

Macquarie considers new technologies could enable the major banks to grow small-medium enterprise banking. This opportunity should offset mortgage regulatory pressures for Westpac. Macquarie upgrades the rating to Neutral from Underperform on the basis that the bank has an opportunity to increase its penetration in SME banking. Target is steady at $35.43.

Downgrades

Ardent Leisure ((AAD)) downgraded to Reduce from Hold by Morgans. B/H/S: 0/4/1

The retirement of the company's highly respected CEO surprised the broker. The timing of leadership change is considered less than ideal, with a major change in strategy underway in health clubs. Morgans notes the CEO replacement, board member Deborah Thomas, has a lack of operational leisure experience which engenders a cautious response, although acknowledges her wealth of marketing and event management expertise. The change at the top, an elevated price/earnings ratio, and a new health club strategy which is questionable in the broker's view, means a downgrade to Reduce from Hold. Target is reduced to $2.29 from $2.61.

BC Iron ((BCI)) downgraded to Sell from Neutral by UBS. B/H/S: 0/2/2

The broker has lowered its iron ore price forecasts to US$59 and US$58/t in 2015-16 from US$65 and US$66/t previously. BCI's price target is lowered to 36c from 54c and rating downgraded to Sell.

Boral ((BLD)) downgraded to Equal-weight from Overweight by Morgan Stanley. B/H/S: 3/5/0

Morgan Stanley is downgrading its industry view to In-Line from Attractive and its rating on Boral to Equal-weight from Overweight. The broker believes positive drivers in Australian building materials and steel with regard volume and price remain intact but these are reflected in valuations. Construction materials pricing is likely to result in margin improvement in FY16 but the broker considers this reflected in the price. Target is steady at $5.88.

Capitol Health ((CAJ)) downgraded to Hold from Add by Morgans. B/H/S: 0/1/0

Morgans observes the company has had a strong run since its capital raising and subsequent acquisitions. The move into the NSW radiology market is considered a logical expansion. As the share price is within 10% of the target at $1.11 the broker brings its recommendation back to Hold from Add.

Crown Resorts ((CWN)) downgraded to Hold from Buy by Deutsche Bank. B/H/S: 4/3/1

Deutsche Bank has reduced earnings forecasts again to reflect a lower contribution from the Melco JV. The broker now expects the Macau market to decline by 30% in 2015 following a weaker-than-expected Chinese New Year. There has also been an adverse mix change with low end players replacing the high end. Deutsche Bank downgrades to Hold from Buy and reduces the target to $15.50 from $17.50.

Intrepid Mines ((IAU)) downgraded to Neutral from Buy by UBS. B/H/S: 0/1/0

The company is seeking shareholder approval to undertake an on-market buy-back of up to 20% of the ordinary shares. Intrepid is taking the action following a review of the budget for Kitumba, amid a decision to stage progress on the project. UBS believes buy-backs are simply an alternative to dividends and that a profit must be first generated to consider payment of either. UBS suspects that staging the progress of Kitumba means it may not be as robust as originally thought. The broker disagrees with the use of the company's cash for a buy-back and believes it should be held for future opportunities. Rating is downgraded to Neutral from Buy and the target to 13c from 31c.

Scentre Group ((SCG)) downgraded to Underweight from Overweight by Morgan Stanley. B/H/S: 1/3/3

Morgan Stanley has, sneakingly, used a tactical trading idea to announce it has downgraded the rating for Scentre Group to Underweight from Overweight. The stockbrokers is of the view lower funds from operations (FFO) and Net Asset Value (NAV) growth will drive a gradual de-rating for the securities.
 

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

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