Weekly Recommendation, Target Price, Earnings Forecast Changes

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This story features ANSELL LIMITED, and other companies.
For more info SHARE ANALYSIS: ANN
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 November 14 to Friday November 18, 2016
Total Upgrades: 20
Total Downgrades: 15
Net Ratings Breakdown: Buy 43.02%; Hold 41.83%; Sell 15.15%

AGM season is proving an extremely busy period for the stockbroking fraternity this year. For the week ending Friday, 18th November 2016, FNArena registered no less than 20 upgrades for individual stocks versus 15 downgrades. This also means the trends towards more upgrades and towards more Buy ratings among the eight stockbrokers monitored daily both continue.

On FNArena's count, the eight stockbrokers combined now carry 43.02% Buy or equivalent ratings against 41.83% Hold/Neutral ratings. The remainder sits at Sell.

Stocks receiving upgrades includes miners such as Alumina Ltd and OZ Minerals (twice), high PE stocks such as Carsales.com and CSL and beaten down market darlings such as Premier Investments (twice) and Sealink Travel Group, as well as bond proxies Goodman Group and Spark Infrastructure.

The downgrade side contains many more bond proxies, alongside industrial companies post a disappointing market update, including Automotive Holdings, James Hardie and Platinum Asset Management. Sydney Airport was the sole recipient of two downgrades during the week.

Quite a number of stocks enjoyed a sizeable boost to analysts' price targets/valuations during the week, with Mineral Resources (+9.15%) topping the list, followed by Webjet (+5.7%) and Aristocrat Leisure (+5.4%). However, downward adjustments were plentiful and on average larger. AP Eagers suffered a blow of -9% taking the wooden spoon for the week. Village Roadshow (-8%) was not far behind. Neither was SG Fleet (-7%).

Nobody managed to beat Graincorp when it comes to triggering upgrades to earnings estimates. Graincorp enjoyed a boost of no less than 75%, almost 76% if you really want to be precise about it. Syrah Resources saw its forecasts improve by 20%. For Mineral Resources the week's boost ceased at 12%.

All in all, positive adjustments to earnings estimates turned out higher than reductions throughout the week, which is a marked difference with the preceding weeks. Village Roadshow's estimates dived by -16.8%. AusNet suffered a blow of -8.2%. A disappointing trading update from James Hardie caused reductions to the tune of -3.9%.

AGM season 2016 is definitely not shaping up as a casual walk through the park. Turns out, there are land mines and booby traps everywhere.

Upgrade

ANSELL LIMITED ((ANN)) Upgrade to Buy from Hold by Ord Minnett .B/H/S: 2/4/1

Ord Minnett observes the company has made a solid start to FY17 and is a potential beneficiary of the economic stimulus that may emerge from the incoming Donald Trump administration in the US.

The strong US dollar provides valuation support although it may be a future headwind. The broker expects a good first half result against a weak comparable period and upgrades to Buy from Hold. Target is raised to $25.00 from $24.70.

AUSNET SERVICES ((AST)) Upgrade to Overweight from Underweight by Morgan Stanley .B/H/S: 3/4/0

Morgan Stanley anticipates regulated utilities will outperform contracted utilities, expecting a continued rotation away from bond proxies. The broker estimates a large opportunity for Australian energy infrastructure.

The broker expects more detail on the efficiency and growth targets when the company reports on November 18.

Morgan Stanley upgrades to Overweight from Underweight on relative valuation. Cautious industry view. Target is reduced to $1.55 from $1.63.

ALUMINA LIMITED ((AWC)) Upgrade to Neutral from Underperform by Macquarie .B/H/S: 1/5/1

Macquarie upgrades near-term price forecasts for alumina, although remains bearish over the medium term. The broker forecasts Chinese market deficits for alumina in 2017 and 2018, and the gap to be filled by international market.

The broker upgrades to Neutral from Underperform on the back of increased estimates. Target is raised to $1.50 from $1.00.

On the broker's estimates the stock offers an attractive dividend yield but this collapses to around 1% after 2018, as Macquarie believes new refinery capacity will displace merchant alumina in the seaborne market.

CARSALES.COM LIMITED ((CAR)) Upgrade to Buy from Hold by Ord Minnett .B/H/S: 5/1/1

After the share price fell, as the company signalled that the first half revenue and EBITDA would be substantially below FY16 for the Stratton business, Ord Minnett suggests investors have over-reacted.

Management has indicated the issue is unique to the lender involved and not related to the wider industry. The broker upgrades to Buy from Hold, envisaging quality in the core business and options in the international investments. The target falls to $12.06 from  $12.11.

CHARTER HALL RETAIL REIT ((CQR)) Upgrade to Neutral from Sell by UBS .B/H/S: 0/2/4

After a challenging reporting season, in which the stock underperformed the sector, UBS anticipates that the presence of Shopping Centres of Australasia ((SCP)) provides some downside protection.

Combined with the current valuation after a sector wide pull-back, the broker can no longer justify a Sell rating and upgrades to Neutral. Target is reduced to $4.29 from $4.37.

CSL LIMITED ((CSL)) Upgrade to Buy from Neutral by UBS .B/H/S: 3/3/1

CSL's (potential) new heart drug is basically a "pipe cleaner for the arteries", UBS notes, intended to reduce the risk of a second cardiac event following a heart attack. Phase 2 trials suggested the drug was safe but the time-to-next heart attack factor was unclear.

A successful drug offers material upside and failure does not, UBS notes. Meanwhile CSL's core businesses offer a strong outlook and on the recent heart drug-related price pullback, the broker upgrades to Buy. Target rises to $113.20 from $112.50.

GOODMAN GROUP ((GMG)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 3/3/0

Credit Suisse is upgrading to Outperform from Neutral as the stock is trading some 14% below its target price of $7.37. The stock now looks oversold to the broker.

The broker already allows for a decline of around 200 basis points in development margins from FY17-20 in its forecasts.

If cap rates soften, driven by bonds, the broker suspects this could procure downside to development profit assumptions but this should be more than offset  by the company ceasing its asset disposal program in such a scenario.

MINERAL RESOURCES LIMITED ((MIN)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 2/2/0

The company has announced that EBITDA is now expected to be $380-420m, an increase on guidance provided in August. The guidance also assumes the proportional consolidation of the company's 43.1% stake in the Mt Marion project.

Macquarie upgrades to Outperform from Neutral believing the stock has a large number of opportunities available.Target is raised to $13.37 from $11.70.

NATIONAL STORAGE REIT ((NSR)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 2/1/1

The company's decision to increase upfront rent concessions  and introduce modest rental discounts to stimulate growth in occupancy should not be a negative for revenue, Ord Minnett believes.

If managed well, the company should be able to recover the decrease in average rental rate, recorded since June, over the next two years. As a result of the fall in the share price, Ord Minnett raises its recommendation to Accumulate from Hold and the price target to $1.49 from $1.48.

OZFOREX GROUP LIMITED ((OFX)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 2/0/0

First half underlying profit was down 22%. Macquarie does not believe the business model is broken but that there is clearly lots of work to do to get it back on track.

The current valuation, post the sell-off, already appears to be discounting the prospect of achieving anything like revised FY17 guidance, in the brokers opinion, which would then provide an improved trajectory in the second half into FY18.

Macquarie believes the company's active and lapsed client base, technology, licences and banking relationships should appeal to trade and financial buyers well above current levels. Rating is upgraded to Outperform from Neutral. Targets falls to $1.80 from $2.30.

OZ MINERALS LIMITED ((OZL)) Upgrade to Outperform from Neutral by Macquarie and Upgrade to Buy from Neutral by UBS .B/H/S: 3/3/2

Macquarie upgrades copper price forecast by 11-15% for the next four years and believes improving supply/demand fundamentals should provide some support for the recent rise in copper prices.

The broker incorporates the improved outlook, which drives material upgrades to earnings forecasts. The company is expected to swing back to profit in 2018. The rating is upgraded to Outperform from Neutral. Target is raised to $9.20 from $7.20.

The company has de-risked previously held views on Carrapateena and provided a resource update for Prominent Hill, which extends the underground mine life to 2028.

UBS expects interest in the company to build now it has a business that is supported by two long-life Australian domiciled copper assets that, together, are expected to deliver average production of around 100,000tpa over the next 10 or more years.

This represents a marked turnaround from a year ago, and the broker upgrades to Buy from Neutral. Target is raised to $8.60 from $6.41.

See also OZL downgrade.

PREMIER INVESTMENTS LIMITED ((PMV)) Upgrade to Neutral from Sell by Citi and Upgrade to Neutral from Underperform by Credit Suisse .B/H/S: 0/6/0

Citi analysts have upgraded to Neutral from Sell following share price weakness. The official explanation is that risks are now much more balanced.

They do anticipate weak sales in H1, in particular from womenswear, but Smiggle remains the all-important offset. Target retained at $13.80. The company is cycling a very strong Christmas 2015 too.

Following small adjustments to estimates, Citi is now positioned 6% below consensus for FY17 and 3% below consensus for FY18.

Improving commodity prices are positive for national income and, thus, should provide a more supportive backdrop to consumer spending in the medium term, Credit Suisse observes.

While there remains some downside risks to earnings because of softer market-wide trading conditions in the first half, Credit Suisse upgrades its rating to Neutral from Underperform following share price weakness.Target is reduced to $14.50 from $14.57.

PROGRAMMED MAINTENANCE SERVICES LIMITED ((PRG)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 4/0/0

Ord Minnett expects the company to report EBITDA of $36.9m for the first half, up 85% on a year ago given the full contribution from the Skilled Group acquisition.The broker also expects the company to retain its recently downgraded FY17 guidance for operating earnings of around $100m.

The earnings outlook may be far from certain, but the broker believes management has factored in much of the near-term risk in its guidance, with revenue opportunities in the development pipeline presenting potential upside.

Rating is upgraded to Accumulate from Hold. Target rises to $1.80 from $1.70.

SANDFIRE RESOURCES NL ((SFR)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 4/3/1

Macquarie upgrades copper price forecast by 11-15% for the next four years and believes improving supply/demand fundamentals should provide some support for the recent rise in copper prices.

The broker incorporates the improved outlook, which drives material upgrades to earnings forecasts and the rating is upgraded to Outperform from Neutral.Target is raised to $7.30 from $5.40.

SPARK INFRASTRUCTURE GROUP ((SKI)) Upgrade to Overweight from Equal-weight by Morgan Stanley .B/H/S: 4/2/0

Morgan Stanley anticipates regulated utilities will outperform contracted utilities, expecting a continued rotation away from bond proxies. The broker estimates a large opportunity for Australian energy infrastructure.

Spark Infra provides a good simple yield, in the broker's opinion, underpinned by high quality regulated assets. Rating is upgraded to Overweight from Equal-weight. Target is reduced to $2.21 from $2.50. Industry view is Cautious.

SEALINK TRAVEL GROUP LIMITED ((SLK)) Upgrade to Buy from Hold by Ord Minnett .B/H/S: 1/1/0

Sealink has highlighted its growth options in North Stradbroke, its contract security at Gladstone and the quality of its Bay Islands operation at its investor briefing.

Ord Minnett believes, with the stock 13% off its highs, acquisitions still on the table and a strong outlook, Sealink is deserving of an upgrade to Buy from Hold. Target is raised to $4.59 from $4.47.

WEBJET LIMITED ((WEB)) Upgrade to Buy from Neutral by UBS .B/H/S: 3/2/0

The company will sell the Zuji business in Hong Kong  and Singapore  for $56m. This compares with the purchase price of $30m. UBS notes the incoming cash for the deal will offset $36m cash upload for the recent Thomas Cook tie up.

The broker notes trading to date has been strong for FY17 and guidance for EBITDA from continuing operations is $60m. UBS upgrades forecasts by 1-2% for FY17-19.

The broker upgrades to Buy from Neutral. Target is raised to $10.72 from $9.85.

WOOLWORTHS LIMITED ((WOW)) Upgrade to Buy from Hold by Deutsche Bank .B/H/S: 1/2/3

Woolworths has made large investments to re-start growth and Deutsche Bank believes the turnaround is beginning. The broker's survey suggests shoppers are seeing improvements in price and execution and are buying more groceries.

Store location remains the main driver of shopper behaviour, which should provide the company with a long-term competitive advantage in the broker's opinion.

Deutsche Bank upgrades to Buy from Hold on the basis that competitors, such as Wesfarmers ((WES)) and Metcash ((MTS)) should experience erosion of growth as Woolworths improves. Target is raised to $27 from $24.

Downgrade

AUTOMOTIVE HOLDINGS GROUP LIMITED ((AHG)) Downgrade to Underweight from Equal-weight by Morgan Stanley .B/H/S: 5/1/1

Regulatory settings linked to the automotive market are set to change, Morgan Stanley contends, with ASIC reviewing commissions and financing practices at dealerships.

The broker believes the risks facing automotive dealerships are more likely to affect the near-term earnings for this company. This is because of a less favourable geographic exposure and a logistics business which has been hard to turn around.

Rating is downgraded to Underweight from Equal-weight. Sector view is In-Line. Target is reduced to $3.15 from $4.50.

APA GROUP ((APA)) Downgrade to Underweight from Overweight by Morgan Stanley .B/H/S: 2/3/2

Morgan Stanley anticipates regulated utilities will outperform contracted utilities, expecting a continued rotation away from bond proxies. The broker estimates a large opportunity for Australian energy infrastructure.

While expecting the final outcome of this year's gas market reviews will be benign for APA, the broker believes changes to the coverage test could take around 12 months to implement and this is unhelpful for share price sentiment and growth prospects in the near term.

The broker downgrades to Underweight from an Overweight rating. Cautious industry view retained. Target drops to $7.26 from $9.70.

BEACON LIGHTING GROUP LIMITED ((BLX)) Downgrade to Hold from Add by Morgans .B/H/S: 0/1/0

Morgans expects the first half result will be affected by soft like-for-like sales growth because of the aggressive clearance activity by Masters as it exits the market.

It will also be affected by lower gross margin in response to the lower Australian dollar/hedge rate and lower operating cost leverage.

This should be partially offset by the acquisition of three franchise stores in the first half. With the stock trading within 10% of the broker's new target, the rating is downgraded to Hold from Add. Target is reduced to $1.66 from $1.78..

DUET GROUP ((DUE)) Downgrade to Equal-weight from Overweight by Morgan Stanley .B/H/S: 2/3/2

Morgan Stanley anticipates regulated utilities will outperform contracted utilities, expecting a continued rotation away from bond proxies. The broker estimates a large opportunity for Australian energy infrastructure.

The stock remains the highest-yielding under coverage which the broker believes rewards investors for the manageable merchant and refinancing risk.

The broker downgrades to Equal-weight from Overweight as the downside risk is envisaged deepening with the valuation headwind. Target is lowered to $2.32 from $2.62 and Cautious industry view retained.

GRAINCORP LIMITED ((GNC)) Downgrade to Hold from Buy by Deutsche Bank .B/H/S: 2/4/0

Deutsche Bank considers the FY16 result a positive as it was ahead of expectations. The result highlights the diversification benefits from growth in the malt division and a return to earnings growth in storage and logistics.

Offsetting this was weaker-than-expected margins in oils. The broker downgrades to Hold from Buy as the stock is now trading at a 4% discount to valuation. Target is steady at $8.90.

JAMES HARDIE INDUSTRIES N.V. ((JHX)) Downgrade to Neutral from Buy by Citi .B/H/S: 4/3/0

Having previously nominated James Hardie as one to own post US presidential elections, Citi has now pulled back to Neutral from Buy. The reason lies with an appreciating share price.

James Hardie is struggling to meet demand due to capacity constraints in the US. Management is addressing the matter but it will weigh on margins in the short term. Citi notes management is confident these issues will have been addressed to support growth in FY18.

The analysts suggest investors should view the next 2-3 quarters as "work in progress". Target drops by 20c to $20.30. Estimates have been reduced.

MCMILLAN SHAKESPEARE LIMITED ((MMS)) Downgrade to Underweight from Overweight by Morgan Stanley .B/H/S: 1/2/1

Regulatory settings linked to the automotive market are set to change, Morgan Stanley contends, with ASIC reviewing commissions and financing practices at dealerships.

The broker does not discount the risk to fringe benefit tax/novated leasing, even if this seems stable for the time being. Moreover, Australia's housing-linked and debt-intensive growth over the last four years has provided a substantial tailwind which appears to be subsiding.

The broker downgrades to Underweight from Overweight. Target is reduced to $9.60 from $14.79. Sector view is In-Line.

MACQUARIE ATLAS ROADS GROUP ((MQA)) Downgrade to Hold from Buy by Deutsche Bank .B/H/S: 4/2/0

Deutsche Bank is downgrading its exposure to the Australian infrastructure sector as a whole. The broker concludes that, despite recent falls across the sector, it is only trading at fair value.

Despite growth options and solid operations as well as favourable longer-term trends, the broker believes the macro bond environment has swamped these issues.

Rating is downgraded to Hold from Buy. Target drops to $4.75 from $6.10.

METCASH LIMITED ((MTS)) Downgrade to Sell from Hold by Deutsche Bank .B/H/S: 4/1/2

Deutsche Bank believes the recent period of stabilising sales has been enabled by the loss of market share experienced by Woolworths ((WOW)).

Accordingly, as the sales trajectory improves for Woolworths so the broker expects independent supermarkets to come under increasing pressure.

Deutsche Bank downgrades to Sell from Hold. Target is lowered to $1.65 from $2.00.

OZ MINERALS LIMITED ((OZL)) Downgrade to Underperform from Neutral by Credit Suisse .B/H/S: 3/3/2

Credit Suisse found the cost accounting for the Carrapateena pre-feasibility study did not add up. Management has now reconciled some of the modelling.

The broker is still sceptical regarding some of the numbers but revises earnings and valuation to reflect the implementation of a revised model now that substantial differences have been explained.

There remain several unresolved risk factors regarding the project and Credit Suisse downgrades to Underperform from Neutral. Target is raised to $6.35 from $5.80.

See also OZL upgrade.

PLATINUM ASSET MANAGEMENT LIMITED ((PTM)) Downgrade to Underperform from Neutral by Credit Suisse .B/H/S: 0/2/2

The growth outlook remains weak, in Credit Suisse's view, with continued fund outflows. The broker finds little valuation support given the stock is trading at a 6% premium to peers.

Credit Suisse views the recent run in the share price as temporary and downgrades to Underperform from Neutral. Target is lowered to $5.10 from $5.25.

SG FLEET GROUP LIMITED ((SGF)) Downgrade to Equal-weight from Overweight by Morgan Stanley .B/H/S: 2/1/0

The AGM update signalled growth is slower than Morgan Stanley previously thought. Regulatory settings linked to the automotive market are set to change, the broker contends, with ASIC reviewing commissions and financing practices at dealerships.

The broker does not discount the risk to fringe benefit tax/novated leasing, even if this seems stable for the time being. Rating is downgraded to Equal-weight from Overweight. Target is reduced to $3.60 from $4.60. Industry view is In-Line.

SYDNEY AIRPORT HOLDINGS LIMITED ((SYD)) Downgrade to Hold from Buy by Deutsche Bank and Downgrade to Underperform from Neutral by Credit Suisse .B/H/S: 3/3/1

Deutsche Bank is downgrading its exposure to the Australian infrastructure sector as a whole. The broker concludes that, despite recent falls across the sector, it is only trading at fair value.

Despite growth options and solid operations as well as favourable longer-term trends, the broker believes the macro bond environment has swamped these issues.

Rating is downgraded to Hold from Buy. Target drops to $6.05 from $7.60.

Credit Suisse observes Sydney Airport has fixed rates of price escalation in its contracts with international airlines, Qantas domestic many other customers.

There is limited capacity to increase prices above agreed rates to offset higher inflation until contracts expire. The broker calculates 100 basis points of higher inflation over the life of the concession reduces the fair value estimate by 13%.

Credit Suisse reduces its rating to Underperform from Neutral and reduces the target to $6.00 from $6.60

VILLAGE ROADSHOW LIMITED ((VRL)) Downgrade to Hold from Buy by Ord Minnett .B/H/S: 1/3/0

Ord Minnett believes the outlook for Village Roadshow is uncertain across all three of its major divisions. Cinema is leading the pack but cycling strong content in December.

With gearing rising in FY17, and no clarity on asset sales at an offset, the broker finds it hard to envisage a re-rating in the short term, despite the valuation support.  Ord Minnett downgrades to Hold from Buy and reduces the target to $5.11 from $5.94.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

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