Weekly Recommendation, Target Price, Earnings Forecast Changes

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This story features ALS LIMITED, and other companies.
For more info SHARE ANALYSIS: ALQ
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: Citi, Credit Suisse, Deutsche Bank, Macquarie, Morgan Stanley, Morgans, Ord Minnett 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 October 3 to Friday October 7, 2016
Total Upgrades: 4
Total Downgrades: 2
Net Ratings Breakdown: Buy 41.27%; Hold 43.52%; Sell 15.21%

Four upgrades versus two downgrades. Half of all upgrades didn't go further than Neutral, while only one of the downgrades moved to Sell. Such was the full harvest in stockbroker recommendation changes for the week ending Friday, 7th October 2016.

Needless to say, it wasn't a particularly busy week. Troubled aged care provider Estia Heath was the sole recipient of a fresh Sell rating (though it's labeled "Underweight" in the Morgan Stanley universe).

Only one stock rates a mention for positive adjustments to price targets; ALS ltd, formerly known as Campbell Bros. There isn't much to talk about on the negative side either.

Resources stocks continue to dominate changes in earnings estimates, and this guarantees fireworks on both sides of the ledger. Nickel miner Western Areas stands on top of the positive table, enjoying a boost of no less than +172%, followed by Whitehaven Coal on +23% and South32 on +12%.

On the negative side, Karoon Gas is taking a blow of -146%, followed by AWE Ltd on -144% and Orocobre on -105%. Never a dull day on the ASX with such movements on display.

The local calendar this week consists of more AGMs and quarterly production reports.

Upgrade

ALS LIMITED ((ALQ)) Upgrade to Outperform from Underperform by Macquarie .B/H/S: 1/3/2

With the minerals exploration cycle in the throes of a typical 3-year recovery Macquarie takes a more positive view on ALS. The broker upgrades to Outperform from Underperform despite the stock appearing expansive on near-term multiples.

Macquarie suspects the company may consider the sale or closure options for its oil & gas business in the event of ongoing losses and ALS remains on an acquisition footing in food. Target is raised to $6.70 from $5.20.

BLUE SKY ALTERNATIVE INVESTMENTS LIMITED ((BLA)) Upgrade to Add from Hold by Morgans .B/H/S: 1/1/0

Assets under management reached $2.4bn in the September quarter, up 14% over the quarter. The company has made a solid start to FY17, Morgans observes and upgrades estimate by 6% over the forecast period.

Fund divestments and capital recycling continue to be a catalyst. The broker considers the stock a more attractive proposition after its recent share price decline and upgrades to Add from Hold. Target rises to $8.70 from $8.50.

OCEANAGOLD CORPORATION ((OGC)) Upgrade to Hold from Sell by Deutsche Bank .B/H/S: 0/1/1

Deutsche Bank has upgraded commodity price forecasts by an average 3% in 2016 and 6% in 2017. Of the larger upgrades, iron ore forecasts for 2017 are upgraded 7%, coking coal 25%, Newcastle thermal coal 27%, zinc 22% and manganese 37%.

The gold sector appears expensive to the broker based on a US$1,300-1,420/oz flat gold deck and weakening Australian dollar profile.

Deutsche Bank upgrades OceanaGold to Hold from Sell on valuation. Target is raised to $4.30 from $3.90.

SIMS METAL MANAGEMENT LIMITED ((SGM)) Upgrade to Hold from Sell by Deutsche Bank .B/H/S: 2/4/1

Deutsche Bank increases iron ore price expectations significantly and now expects scrap prices to rise in FY17 Accordingly, the company should be able to achieve volume and price rises in FY17 and FY18, leading to margin expansion.

The broker notes the company has continued to cut costs as quickly as possible in order to smooth earnings and the sale or closure of the 13 identified facilities will provide further benefit in FY17.

Rating is upgraded to Hold from Sell and the target is raised to $9.33 from $8.02.

Downgrade

ESTIA HEALTH LIMITED ((EHE)) Downgrade to Underweight from Equal-weight by Morgan Stanley .B/H/S: 1/1/1

Estia has downgraded earnings guidance by 14-18%. Despite the contribution of acquisitions, guidance now points to an earnings decline of 3.0-7.3%, Morgan Stanley calculates.

This suggests to the broker a lower sustainable margin and less of an ability to cope with the regulatory changes announced in the federal budget. Downgrade to Underweight.

NINE ENTERTAINMENT CO. HOLDINGS LIMITED ((NEC)) Downgrade to Neutral from Buy by UBS .B/H/S: 1/3/2

UBS strategists ponder whether the growth trade is becoming vulnerable with a backdrop of negative earnings revisions and a potential lift in bond yields. TV is qualitatively the broker's least preferred media with audience declines still outpacing revenues.

UBS reduces TV forecasts because of the soft ad market outlook for FY17, cutting Nine's earnings per share estimates by 27% and by 26% for FY18.

The broker downgrades to Neutral from Buy given the structural concerns. Valuation appears reasonable but UBS believes the risk to earnings is skewed to the downside. Target is lowered to 90c from $1.30.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

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