Tag Archives: Consumer Discretionary

article 3 months old

The Short Report

.ref1 {background-color:#B8E3F8;}

By Chris Shaw

Increases in short positions for Australian stocks were far more pronounced than decreases in the week from July 3, as while only two companies saw positions decline by more than one percentage point there were 10 increases in excess of 1.5 percentage points.

The largest increase in shorts was in Gunns ((GNS)), where positions rose to 8.9% from 3.6%. The increase came prior to news the company was disputing an amended tax assessment and before the sale of the Portland Woodchip Export facility.

Shorts in CSR ((CSR)) also rose for the week to 9.08% from 6.19%, the changes coming before the group's AGM, where earnings guidance was revised lower. The company is seeing reduced volumes in building products and aluminium earnings are also under pressure, while at least one broker has expressed concerns about balance sheet pressures for CSR given current tough market conditions.

Aluminium market issues have extended to Alumina ((AWC)), where brokers have been cutting earnings forecasts and price targets to reflect market weakness. The market has picked up on this, as shorts in Alumina increased in the week from July 3 to 7.1% from 4.59% previously.

Short positions in Alesco ((ALS)) have also risen, increasing to 2.39% from 0.13% the week before as the market continues to adopt a wait an see approach to the bid for the company from DuluxGroup ((DLX)).

Primary Health Care ((PRY)) experienced a jump in shorts from 0.87% to 3.08% for the week, the news during the period being the company increasing its stake in Vision Eye Institute in an attempt to capture additional opthalmic revenues that the company can't otherwise capture.

While there has been little in the way of announcements from Mortgage Choice ((MOC)) of late short positions in the company rose for the week to 1.86% from 0.01%, which may be tied into signs of further softening in the residential housing market.

Shorts in Dart Energy ((DTE)) rose to just over 4.6% from 2.77% previously in the week as the company updated on Dart International, where a public offering in Singapore had previously been deferred to later this year.

Both Downer EDI ((DOW)) and Nufarm ((NUF)) experienced an increase in short positions of 1.56 percentage points for the week. For Downer EDI the change in positions came after news the group would be re-locating its locomotive manufacturing facilities, while for Nufarm the change came despite no specific announcements from the company.

The largest fall in short positions in the week from July 3 was in Metcash ((MTS)), where total positions declined to 4.51% from 6.00%. The change came on the back of a full year earnings result that largely met expectations, while positions were also adjusted to reflect a capital raising announced with the profit result.

Cabcharge ((CAB)) enjoyed a fall in shorts to 1.2% from 2.38% previously, this coming despite recent news the Reserve Bank of Australia is considering looking at reforming the current surcharging system for card transactions.

With most of the significant changes in short positions occurring outside the top 20 positions this list remains largely unchanged, with discretionary retail exposures continuing to dominate. JB Hi-Fi ((JBH)), Carsales.com ((CRZ)), Harvey Norman ((HVN)) and Flight Centre ((FLT)) remain among the largest positions, along with the likes of Fairfax ((FXJ)), Cochlear ((COH)), Iluka ((ILU)), Paladin ((PDN)) and CSR.

Among monthly changes to positions for the period from June 8 the largest increase for a stock was experienced by Alumina, while the retailers including Myer, JB Hi-Fi and David Jones all saw short positions fall by more than three percentage points for the month.

Elsewhere, RBS Australia points out in recent weeks short positions in OZ Minerals ((OZL)) have risen by around 0.5 percentage points to just over 2.0%. Short mine life and acquisition risk continue to impact on the company in the broker's view and are likely to continue to overhang the share price as management looks for a significant transaction to deliver some growth.

RBS also notes an on-market share buyback has been completed, which removes some support for the stock shorter-term. Adding in ongoing cost pressures at the Carrapateena project leaves RBS with the view a re-rating for OZ Minerals is unlikely in coming weeks.

 

Top 20 Largest Short Positions

Rank Symbol Short Position Total Product %Short
1 JBH 20604482 98850643 20.84
2 FLT 13422790 100047288 13.42
3 FXJ 296270915 2351955725 12.60
4 CRZ 27003148 233689223 11.56
5 COH 6079087 56929432 10.68
6 LYC 181816905 1715029131 10.60
7 ISO 537351 5103165 10.53
8 ILU 41630980 418700517 9.94
9 HVN 99164903 1062316784 9.33
10 BBG 37888973 410969573 9.22
11 PDN 76443859 835645290 9.15
12 CSR 45952376 506000315 9.08
13 GNS 75476962 848401559 8.90
14 LNC 39758171 504487631 7.88
15 MYR 45595742 583384551 7.82
16 DJS 39663604 528655600 7.50
17 WTF 15133949 211736244 7.15
18 AWC 173253968 2440196187 7.10
19 TRS 1842956 26071170 7.07
20 MSB 18369445 284478361 6.46

To see the full Short Report, please go to this link

IMPORTANT INFORMATION ABOUT THIS REPORT

The above information is sourced from daily reports published by the Australian Investment & Securities Commission (ASIC) and is provided by FNArena unqualified as a service to subscribers. FNArena would like to make it very clear that immediate assumptions cannot be drawn from the numbers alone.

It is wrong to assume that short percentages published by ASIC simply imply negative market positions held by fund managers or others looking to profit from a fall in respective share prices. While all or part of certain short percentages may indeed imply such, there are also a myriad of other reasons why a short position might be held which does not render that position “naked” given offsetting positions held elsewhere. Whatever balance of percentages truly is a “short” position would suggest there are negative views on a stock held by some in the market and also would suggest that were the news flow on that stock to turn suddenly positive, “short covering” may spark a short, sharp rally in that share price. However short positions held as an offset against another position may prove merely benign.

Often large short positions can be attributable to a listed hybrid security on the same stock where traders look to “strip out” the option value of the hybrid with offsetting listed option and stock positions. Short positions may form part of a short stock portfolio offsetting a long share price index (SPI) futures portfolio – a popular trade which seeks to exploit windows of opportunity when the SPI price trades at an overextended discount to fair value. Short positions may be held as a hedge by a broking house providing dividend reinvestment plan (DRP) underwriting services or other similar services. Short positions will occasionally need to be adopted by market makers in listed equity exchange traded fund products (EFT). All of the above are just some of the reasons why a short position may be held in a stock but can be considered benign in share price direction terms due to offsets.

Market makers in stock and stock index options will also hedge their portfolios using short positions where necessary. These delta hedges often form the other side of a client's long stock-long put option protection trade, or perhaps long stock-short call option (“buy-write”) position. In a clear example of how published short percentages can be misleading, an options market maker may hold a short position below the implied delta hedge level and that actually implies a “long” position in that stock.

Another popular trading strategy is that of “pairs trading” in which one stock is held short against a long position in another stock. Such positions look to exploit perceived imbalances in the valuations of two stocks and imply a “net neutral” market position.

Aside from all the above reasons as to why it would be a potential misconception to draw simply conclusions on short percentages, there are even wider issues to consider. ASIC itself will admit that short position data is not an exact science given the onus on market participants to declare to their broker when positions truly are “short”. Without any suggestion of deceit, there are always participants who are ignorant of the regulations. Discrepancies can also arise when short positions are held by a large investment banking operation offering multiple stock market services as well as proprietary trading activities. Such activity can introduce the possibility of either non-counting or double-counting when custodians are involved and beneficial ownership issues become unclear.

Finally, a simple fact is that the Australian Securities Exchange also keeps its own register of short positions. The figures provided by ASIC and by the ASX at any point do not necessarily correlate.

FNArena has offered this qualified explanation of the vagaries of short stock positions as a warning to subscribers not to jump to any conclusions or to make investment decisions based solely on these unqualified numbers. FNArena strongly suggests investors seek advice from their stock broker or financial adviser before acting upon any of the information provided herein.

Technical limitations

If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

The past week has been balanced in terms of changes to ratings by brokers in the FNArena database. Total Buy ratings now stand at 50.12% following 13 ratings upgrades and 14 downgrades.

Citi upgraded both ANZ Banking Group ((ANZ)) and Commonwealth Bank ((CBA)) to Buy ratings from Neutral previously, in both cases attracted to the yields. Price targets have been increased for both stocks.

Beach Energy ((BPT)) enjoyed an upgrade to Buy from Sell by BA Merrill Lynch, as the broker took the view recent share price weakness has been excessive and the market is in fact overly pessimistic about the group's Cooper shale assets. BA-ML also upgraded Brambles ((BXB)) to Buy from Hold as part of a resumption of coverage given the combination of a defensive exposure, balance sheet flexibility and valuation support.

UBS continues to have a bias to leverage over safety with respect to Australian building material stocks and given this the broker has upgraded to a Buy rating on CSR ((CSR)) from Neutral previously. The change follows cuts to forecasts and price target to reflect soft housing numbers and a weak aluminium price.

Credit Suisse doesn't agree leverage is the key attribute for the sector and has downgraded CSR to Sell from Hold post the market update by the company. For Credit Suisse a positive rating simply does not seem justified given there remains downside earnings risk in the current environment.

Changes to commodity price forecasts have prompted Credit Suisse to upgrade Evolution Mining ((EVN)) to Buy from Hold. The upgrade is accompanied by adjustments to earnings estimates but the price target has remained unchanged.

It is a similar story for Western Areas ((WSA)), with Credit Suisse upgrading to a Buy recommendation from Hold previously following changes to commodity price and forex assumptions. Earnings estimates have also been revised, the result being a cut in price target.

As well, Credit Suisse has upgraded Incitec Pivot ((IPL)) to Buy from Hold given potential upside from the broker's view increased ammonium nitrate capacity should be absorbed by the market in coming years.

In contrast, Citi takes the view the earnings downgrade cycle for Incitec Pivot will continue as higher gas prices are increasing costs at the same time as ammonium nitrate volumes are falling. This is enough for Citi to cut its rating to Hold from Buy.

With Lend Lease ((LLC)) securing $2 billion in equity for the Barangaroo project, BA-ML sees far less risk with the project now than had been the case. Some changes to its model have resulted in an increase in price target and BA-ML has upgraded to Neutral from Sell on the stock.

Some contract wins by Matrix Composites and Engineering ((MCE)) have seen JP Morgan lift earnings forecasts and price target for the stock. With the shares now trading around the broker's estimate of fair value, the rating has been upgraded to Hold from Sell.

Factoring in acquisitions has seen UBS adjust its model for Stockland ((SGP)), as the deals should boost growth even without an improvement in market conditions. To reflect this, the rating has been upgraded to Buy from Neutral.

Tough operating conditions have caused RBS Australia to factor in lower growth assumptions for Ansell ((ANN)), which pushes down earnings assumptions and price target. The changes drive a change in rating to Hold from Buy.

RBS has similarly downgraded its rating on Ramsay Health Care ((RHC)) to Sell from Hold, this due to current earnings multiples being seen as unattractive and the stock trading above five-year averages. Changes to forecasts for Iluka ((ILU)) given lower sales forecasts and a deteriorating operating outlook have also prompted RBS to downgrade the stock to Neutral from Buy. Price target has been lowered on cuts to earnings estimates.

Credit Suisse has been active in downgrading ratings as well, cutting BHP Billiton ((BHP)) to Hold from Buy as changes to commodity price expectations have impacted on earnings assumptions. The price target for the stock went south as well. For a similar reason the broker has downgraded its rating on Caltex ((CTX)) to Hold from Buy, while moving to Sell from Hold on Sandfire ((SFR)) and to Hold from Buy on Santos ((STO)).

Domino's Pizza ((DMP)) continues to perform solidly and to reflect this Macquarie has lifted its earnings estimates and price target. At current levels valuation multiples are less attractive, leading the broker to cut its rating to Neutral from Outperform.

Ongoing weakness in European markets in particular and potential cuts to pathology fees may weigh on earnings for Sonic Healthcare ((SHL)) going forward in the view of RBS, which is enough for the broker to downgrade to a Hold rating from Buy. 

An increasingly competitive environment is enough for Deutsche Bank to cut its rating on Telecom New Zealand ((TEL)) to Hold from Buy. The change comes after the TelstraClear acquisition by Vodafone, which is seen as evidence of more aggressive action in the market.

Macquarie has cut earnings forecasts and price target for UGL ((UGL)), this reflecting a slowing domestic economy and an associated lag in resource related project work. The changes are enough for the broker to cut its rating to Neutral from Buy.

Changes to price targets have been relatively modest over the week, with the largest increase for Domino's Pizza at just over 4% and the largest cuts around 5% for both Western Areas and BHP.

Transurban ((TCL)) has enjoyed the largest increase in earnings estimates at a little more than 20% on the back of June quarter traffic numbers. Resource companies dominated the cuts to earnings forecasts, with the likes of Iluka, Panoramic ((PAN)), Paladin ((PDN)) and Mount Gibson ((MGX)) seeing forecasts fall by 10-40%.

 

Total Recommendations
 Recommendation Changes

 

Broker Recommendation Breakup
Suisse,Deutsche<*br*>Bank,JP<*br*>Morgan,Macquarie,RBS<*br*>Australia,UBS&b0=119,106,121,100,82,140,149,132&h0=77,104,81,123,94,89,143,107&s0=40,21,29,4,35,34,10,16" style="border-bottom: #000000 1px solid; border-left: #000000 1px solid; border-top: #000000 1px solid; border-right: #000000 1px solid" />

 

Broker Rating

Order Company Old Rating New Rating Broker
Upgrade
1 AUSTRALIA & NEW ZEALAND BANKING GROUP Neutral Buy Citi
2 BEACH ENERGY LIMITED Sell Buy BA-Merrill Lynch
3 BRAMBLES LIMITED Neutral Buy BA-Merrill Lynch
4 COMMONWEALTH BANK OF AUSTRALIA Neutral Buy Citi
5 CSR LIMITED Neutral Buy UBS
6 EVOLUTION MINING LIMITED Neutral Buy Credit Suisse
7 ILUKA RESOURCES LIMITED Neutral Buy UBS
8 INCITEC PIVOT LIMITED Neutral Buy Credit Suisse
9 LEND LEASE CORPORATION LIMITED Sell Neutral BA-Merrill Lynch
10 MATRIX COMPOSITES & ENGINEERING LIMITED Sell Neutral JP Morgan
11 NEWCREST MINING LIMITED Neutral Buy JP Morgan
12 STOCKLAND Neutral Buy UBS
13 WESTERN AREAS NL Neutral Buy Credit Suisse
Downgrade
14 ANSELL LIMITED Buy Neutral RBS Australia
15 BHP BILLITON LIMITED Buy Neutral Credit Suisse
16 CALTEX AUSTRALIA LIMITED Buy Neutral Credit Suisse
17 COMMONWEALTH BANK OF AUSTRALIA Buy Neutral JP Morgan
18 CSR LIMITED Neutral Sell Credit Suisse
19 Domino's Pizza Enterprises Limited Buy Neutral Macquarie
20 ILUKA RESOURCES LIMITED Buy Neutral RBS Australia
21 INCITEC PIVOT LIMITED Buy Neutral Citi
22 RAMSAY HEALTH CARE LIMITED Neutral Sell RBS Australia
23 SANDFIRE RESOURCES NL Neutral Sell Credit Suisse
24 SANTOS LIMITED Buy Neutral Credit Suisse
25 SONIC HEALTHCARE LIMITED Buy Neutral RBS Australia
26 TELECOM CORPORATION OF NEW ZEALAND LIMITED Neutral Neutral Deutsche Bank
27 UGL LIMITED Buy Neutral Macquarie
 

Recommendation

Positive Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 BPT - 20.0% 20.0% 40.0% 5
2 AUT - 20.0% 17.0% 37.0% 6
3 EVN 67.0% 100.0% 33.0% 3
4 AUB 50.0% 75.0% 25.0% 4
5 WSA 67.0% 83.0% 16.0% 6
6 BXB 71.0% 86.0% 15.0% 7
7 SGP 43.0% 57.0% 14.0% 7
8 NCM 75.0% 88.0% 13.0% 8
9 ANZ 25.0% 38.0% 13.0% 8
10 LLC 63.0% 75.0% 12.0% 8

Negative Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 CRF 67.0% 43.0% - 24.0% 7
2 DMP 50.0% 33.0% - 17.0% 6
3 ANN 29.0% 14.0% - 15.0% 7
4 UGL 86.0% 71.0% - 15.0% 7
5 SHL 63.0% 50.0% - 13.0% 8
6 STO 100.0% 88.0% - 12.0% 8
7 BHP 75.0% 63.0% - 12.0% 8
8 CQO - 25.0% - 33.0% - 8.0% 3
9 VBA 75.0% 67.0% - 8.0% 3
10 SFR 17.0% 14.0% - 3.0% 7
 

Target Price

Positive Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 DMP 8.332 8.675 4.12% 6
2 AUB 7.148 7.373 3.15% 4
3 VBA 0.440 0.447 1.59% 3
4 SGP 3.479 3.507 0.80% 7
5 LLC 8.926 8.986 0.67% 8
6 ANZ 24.256 24.319 0.26% 8

Negative Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 WSA 5.792 5.483 - 5.33% 6
2 BHP 43.865 41.824 - 4.65% 8
3 AUT 3.828 3.738 - 2.35% 6
4 ANN 14.977 14.639 - 2.26% 7
5 NCM 33.200 32.575 - 1.88% 8
6 CQO 3.478 3.420 - 1.67% 3
7 UGL 14.209 14.031 - 1.25% 7
8 BPT 1.376 1.362 - 1.02% 5
9 BXB 7.450 7.386 - 0.86% 7
10 CRF 2.070 2.060 - 0.48% 7
 

Earning Forecast

Positive Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 TCL 15.271 18.600 21.80% 7
2 BTT 15.500 16.180 4.39% 4
3 LLC 88.938 91.675 3.08% 8
4 WHG 10.400 10.650 2.40% 3
5 EVN 21.400 21.867 2.18% 3
6 FLT 211.713 216.000 2.02% 8
7 TEL 14.937 15.134 1.32% 8
8 CLO 8.100 8.167 0.83% 3
9 DMP 42.767 43.100 0.78% 6
10 NVT 23.714 23.857 0.60% 6

Negative Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 ILU 190.488 109.600 - 42.46% 8
2 PAN 9.275 5.350 - 42.32% 3
3 CSR 14.188 10.113 - 28.72% 8
4 PDN 2.260 1.847 - 18.27% 7
5 MGX 35.038 31.575 - 9.88% 8
6 IGO 18.720 16.940 - 9.51% 5
7 RIO 668.322 620.975 - 7.08% 8
8 WSA 31.683 29.550 - 6.73% 6
9 AUT 27.011 25.442 - 5.81% 6
10 OZL 67.338 63.438 - 5.79% 8
 

Technical limitations

If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Weekly Broker Wrap: Retail, China And A US Drought

By Andrew Nelson

It is again time for us to take our pick of a few important topics that local broker’s covered last week, but with a slight departure this time. Along with a skim of domestic sectors and economic trends, this week we also look at what could be an increasingly important topic, the onset of drought in the US.

Canadian industry newsletter Agriweek reports the proportion of the US experiencing what are deemed exceptional drought conditions by the US Drought Monitor system have reached the highest level in the history of the program.  The report notes that almost 20% of the entire land area of the lower 48 states has now been classified as being under extreme or exceptional drought. What’s worse is that 12% is in the exceptional category. 

Given the backdrop, last week’s monthly supply-demand report from the US Department of Agriculture was highly anticipated, especially given the deterioration in corn and soybean conditions in the high-production states that were previously holding their own. The report showed that American crops are now far into crop failure territory, with markets sitting on top of a new price plateau.

Corn yield and crop forecasts were cut by more than 10%, although cuts to demand and use forecasts means there will still be a crop carry-over in a season of a major crop disaster. 2012-13 price estimates were also lifted to a level that is hoped will adequately ration demand. Agriweek notes the projected 2012-13 prices add up to corn futures prices pushing past US$7 a bushel.

All up, the latest reports point to increasing supply tightness to near-shortage conditions for 2012-13. Agriweek points out that there is a strong tendency for successive USDA monthly yield estimates to continue to decline for the remainder of the growing season when an early trend to lower figures is established. Thus, prices will have to stay high or rise even higher to bring about the type of demand rationing that now seems required, especially given the chance of even worse conditions.

Back to closer shores, analysts at Morgan Stanley have lowered their outlook for Australian retailers on the back of signs of accelerating deflation last quarter. The broker expects both Woolworths ((WOW)) and Coles ((WES)) to report weaker 4Q like for like sales growth.

Woolworths boasted prices that were around 11% higher than Coles in the previous period. However, Morgan Stanley notes Woolworths prices were actually 5% lower than Coles across the 4Q11, so higher price deflation for Woolworths is expected to be seen in 4Q12.

The good news is the broker expects deflation to ease over the course of this year, with supermarkets to begin cycling over more normalised fresh food prices from next quarter onwards.

Citi also sees some issues for retailers' floor space issues. The broker notes that while retail share prices have in many cases halved, retailers are as yet to begin rationalising floor space. Citi expects a shakeout is likely over the next three years as cost growth continues to outpace sales growth.

What’s worse, the broker doesn’t expect to see stronger retail demand as being likely to fuel margin recovery any time soon, leaving Citi to think price deflation and online sales will continue to limit bricks and mortar growth. On the broker numbers, non-food retailers will need to cut floor space by 10% or more before margins can begin to recover. The broker thinks such a move would take 3-5 years to play out given lease terms. However, a backdrop of store rationalisation and margin pressure will continue to weigh on share prices amongst retailers.

Citi believes the stocks that are most vulnerable are Harvey Norman ((HVN)) and JB Hi-Fi ((JBH)) and thus downgraded them both to Sell last week. Few retailers escape the negative prognosis, although the broker points out that some value plays like Billabong ((BBG)) and Specialty Fashion ((SFH)) are already reflecting store rationalisation in their share price. 

Macquarie notes the Chinese government has started to take action to head off weakening conditions, but it wonders will it be enough to reinvigorate commodities demand?

The short answer is yes. The broker does think the demand for commodities from infrastructure will be stronger in the second half. Although, Macquarie cautions a broader based recovery will take time given confidence levels are low.

Thus Macquarie sees current issues as being about confidence as much as they are about GDP levels. In fact, the broker thinks forecasted GDP growth of  7.5% for this year will be easily achieved, even without a substantial improvement in economic activity. The broker notes that GDP growth is not an end in itself and that while some data are admittedly weak, there are others that have remained stable.

According to Macquarie, data on employment levels and wage growth actually indicate an economy in good health. Thus, stimulus from Beijing isn’t as urgent as many of us have begun to believe. The broker thinks policy will to continue to be aimed at addressing slowing growth rather than trying to bring about some sort of rapid turnaround in economic activity.

In such an environment, the broker likes copper better than iron ore over the next few months given copper is more leveraged to an increase in infrastructure spending, while there is also a distinct lack of copper scrap. That’s not to say Macquarie is turning bearish on iron ore, it simply sees few near term catalysts that could lead to a price breakout. At least not until confidence returns and a broader based recovery takes off.

Last week saw UBS reaffirm its preference a little towards risk in the materials sector given yield is emerging as a sector share price driver.

CSR ((CSR)) estimates were cut last week on soft aluminium spot price and weak Australian housing numbers, yet current estimates for Boral ((BLD)) and Fletcher Building ((FBU)) assume an unlikely improvement in end markets with a positive impact from cost cutting over the next two years.

Given an Australian housing recovery over the next two years is far from a given and the prospect of both US and NZ recoveries are at best debatable, the broker believes there is less earnings risk in the latter two stocks than in CSR. In fact, even allowing for a decline in the CSR dividend the broker expects a yield of 7.3%.

Otherwise, only Adelaide Brighton ((ABC)), Fletcher Building and James Hardie ((JHX)) are expected to boast FY14 yields of better than 5%. Boral is below, seeing the broker apply a 20% valuation discount, although keeping it at Buy. CSR and Fletcher are also at Buy, while James Hardie and Adelaide Brighton are at Hold. As you can see, this is far from a negative stance on the sector.

All in all, UBS’s notes its recommendations have tended to run opposite to share price performance over the past few years and reflect a bias towards leverage over safety. The sector stance remains risky, however, with Australian and US housing starts needing to improve.

RBS took a look at major healthcare stocks last week noting that while global uncertainties and FX tailwinds have  underpinned outperformance in the sector and will likely continue to lend support going forward, the broker expects to see moderating growth rates, increasing earnings pressure and underwhelming valuations sector wide.

The broker last week downgraded Sonic Healthcare ((SHL)) and Ansell ((ANN)) to Hold, given the above along with the risks associated with austerity measures in Europe and lacklustre valuations. However, Ramsay Healthcare ((RHC)) was upgraded to Hold given the belief current trading levels are discounting earnings risk from private health insurance means-testing by far too much.

RBS sees the most upside in Primary Healthcare ((PRY)) evidence of improving operational metrics and GP productivity, which it notes should help to allay concerns about GP acquisition costs and churn rates. Otherwise, given the risks of unstable global economic conditions, volatile FX and ongoing worldwide regulatory changes, the broker thinks it might be a good idea to opportunistically take profits on any sign of market stabilisation in stocks that have outperformed of late. Ramsay, Resmed ((RMD)) and CSL ((CSL)) are the first stocks that come to the broker’s mind.

 
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

The Short Report

By Chris Shaw

For the week from June 26 reductions in short positions far outweighed increases, with only three cases of short positions rising by more than one percentage points against 10 falls in positions of more than 1.5 percentage points.

Among the increases was St Barbara ((SBM)), where positions increased to 3.94% from 1.94% as the company moved to acquire Allied Gold ((ALD)). While the merger will increase shares on issue the deal would also add to the producing assets of the group, so alleviating some growth concerns in the view of brokers.

Shorts in the iShares High Dividend derivative also rose to 2.69% from 1.36% previously, while the iShares Small Ordinaries derivative saw shorts increases to 8.59% from 7.35%.

On the other side of the ledger, Gunns ((GNS)) experienced the largest decline in shorts for the week from June 26 as total positions fell to 3.6% from 8.89% previously. The change came as the company updated the market on its ongoing asset sale program and a proposed capital raising. Gunns now drops out of the top 20 short positions on the Australian market.

Others in the top 20 list where short positions fell by at least 1.5 percentage points include David Jones ((DJS)), Myer ((MYR)) and The Reject Shop ((TRS)). Myer shorts declined to 8.73% from 11.67%, for David Jones positions fell to 7.71% from 10.38% and for The Reject Shop shorts now stand at 6.03% against 8.18% previously.

While the changes for David Jones may have reflected the unsolicited approach from a mystery UK company, for The Reject Shop at least there was evidence of increased investor interest following the recent emergence of a new substantial shareholder on the register.

The declines in positions weren't enough to drop any of the discretionary retailers out of the top 20 list, this category continuing to dominate the short positions on the Australian market with JB Hi-Fi ((JBH)) leading the way with total shorts of 20.73%. This is also down modestly from the previous week and continues the trend of recent weeks of a decline in total short positions.

One stock to drop out of the top 20 was Echo Entertainment ((EGP)), as shorts fell in the week from June 26 to 4.18% from 6.09%. Investors in Echo continue to adjust short positions following the group's recent capital raising.

With DuluxGroup ((DLX)) extending its takeover offer for Alesco ((ALS)) by a few weeks short positions in the target have declined to 0.13% from 2.03% previously, while shorts in Primary Health Care ((PRY)) have also declined to 0.87% from 2.74% following some recent increases to earnings estimates for the company in the market.

Shorts in Mortgage Choice ((MOC)) have fallen to 0.01% from 1.86% as there are signs the company is winning some market share in the mortgage broker space, while Cochlear ((COH)) also saw shorts decline to 9.26% from 11.08% as there continues to be signs the failure rate for the CI512 implants is trending down.

Fairfax ((FXJ)) shorts fell to 12.95% from 14.62% in the week from June 26 as the company continues to deal with Gina Reinhart's recent interest in the company and as the market continues to assess recently announced restructuring initiatives.

Fairfax remains in the top 20 short positions list along with the likes of Billabong ((BBG)), Harvey Norman ((HVN)), Carsales.com ((CRZ)), Flight Centre ((FLT)), Lynas Corporation ((LYC)) and Paladin Energy ((PDN)). Stocks in the top 20 also dominated the list of top monthly changes in shorts for the period from June 1.

While not in the top 20 short positions, RBS Australia notes shorts in Boral ((BLD)) have continued to climb since the recent earnings downgrade from management. Total shorts have risen by 90 percentage points over the past month to 6.1%, the broker attributing this to increased investor concern about the potential for a capital raising given deteriorating debt metrics for the group.

 

Top 20 Largest Short Positions

Rank Symbol Short Position Total Product %Short
1 JBH 20488590 98850643 20.73
2 FXJ 304549013 2351955725 12.95
3 FLT 12596992 100039833 12.59
4 CRZ 27211082 233689223 11.64
5 LYC 176845148 1715029131 10.31
6 COH 5272228 56929432 9.26
7 PDN 74760296 835645290 8.95
8 MYR 50930646 583384551 8.73
9 HVN 91823401 1062316784 8.64
10 ILU 36070349 418700517 8.61
11 ISO 490032 5703165 8.59
12 BBG 34903322 410969573 8.49
13 DJS 40767847 528655600 7.71
14 LNC 37992740 504487631 7.53
15 WTF 14999615 211736244 7.08
16 CSR 31311564 506000315 6.19
17 TRS 1573254 26071170 6.03
18 MTS 46300352 771345864 6.00
19 MSB 16882426 284478361 5.93
20 GWA 17313253 302005514 5.73

To see the full Short Report, please go to this link

IMPORTANT INFORMATION ABOUT THIS REPORT

The above information is sourced from daily reports published by the Australian Investment & Securities Commission (ASIC) and is provided by FNArena unqualified as a service to subscribers. FNArena would like to make it very clear that immediate assumptions cannot be drawn from the numbers alone.

It is wrong to assume that short percentages published by ASIC simply imply negative market positions held by fund managers or others looking to profit from a fall in respective share prices. While all or part of certain short percentages may indeed imply such, there are also a myriad of other reasons why a short position might be held which does not render that position “naked” given offsetting positions held elsewhere. Whatever balance of percentages truly is a “short” position would suggest there are negative views on a stock held by some in the market and also would suggest that were the news flow on that stock to turn suddenly positive, “short covering” may spark a short, sharp rally in that share price. However short positions held as an offset against another position may prove merely benign.

Often large short positions can be attributable to a listed hybrid security on the same stock where traders look to “strip out” the option value of the hybrid with offsetting listed option and stock positions. Short positions may form part of a short stock portfolio offsetting a long share price index (SPI) futures portfolio – a popular trade which seeks to exploit windows of opportunity when the SPI price trades at an overextended discount to fair value. Short positions may be held as a hedge by a broking house providing dividend reinvestment plan (DRP) underwriting services or other similar services. Short positions will occasionally need to be adopted by market makers in listed equity exchange traded fund products (EFT). All of the above are just some of the reasons why a short position may be held in a stock but can be considered benign in share price direction terms due to offsets.

Market makers in stock and stock index options will also hedge their portfolios using short positions where necessary. These delta hedges often form the other side of a client's long stock-long put option protection trade, or perhaps long stock-short call option (“buy-write”) position. In a clear example of how published short percentages can be misleading, an options market maker may hold a short position below the implied delta hedge level and that actually implies a “long” position in that stock.

Another popular trading strategy is that of “pairs trading” in which one stock is held short against a long position in another stock. Such positions look to exploit perceived imbalances in the valuations of two stocks and imply a “net neutral” market position.

Aside from all the above reasons as to why it would be a potential misconception to draw simply conclusions on short percentages, there are even wider issues to consider. ASIC itself will admit that short position data is not an exact science given the onus on market participants to declare to their broker when positions truly are “short”. Without any suggestion of deceit, there are always participants who are ignorant of the regulations. Discrepancies can also arise when short positions are held by a large investment banking operation offering multiple stock market services as well as proprietary trading activities. Such activity can introduce the possibility of either non-counting or double-counting when custodians are involved and beneficial ownership issues become unclear.

Finally, a simple fact is that the Australian Securities Exchange also keeps its own register of short positions. The figures provided by ASIC and by the ASX at any point do not necessarily correlate.

FNArena has offered this qualified explanation of the vagaries of short stock positions as a warning to subscribers not to jump to any conclusions or to make investment decisions based solely on these unqualified numbers. FNArena strongly suggests investors seek advice from their stock broker or financial adviser before acting upon any of the information provided herein.

Technical limitations

If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

Changes in ratings among the eight brokers in the FNArena database were almost evenly split over the pat week, with 11 recommendation upgrades compared to nine downgrades. One stock, Aristocrat Leisure ((ALL)), was responsible for the difference. Total Buy ratings now stand at 49.76%.

Aristocrat Leisure received three of the upgrades for the week, as Citi, Macquarie and Deutsche Bank have all lifted recommendations on the stock, Macquarie and Deutsche to Neutral from Sell and Citi to Buy from Hold.

The changes come on the back of updated earnings guidance from company management, which has flowed through to changes in earnings forecasts and price targets. Valuation also improved. The Aristocrat share price has fallen 24% since April.

UBS has upgraded Ansell ((ANN)) to Neutral from Sell on valuation grounds given recent share price weakness. At the same time the broker adjusted its model to reflect underlying latex, cotton and chemical prices, which resulted in a slight cut in price target. Macquarie went the other way on Ansell and downgraded to Neutral from Outperform, which is largely a valuation call given current market conditions suggest some medium-term earnings challenges.

A marking-to-market of assumptions for Australian wealth management plays has resulted in Credit Suisse upgrading BT Investment Management ((BTT)) to Buy from Hold. Relative valuation has improved recently in the broker's view, enough to offset a minor cut in price target on the back of changes to earnings estimates.

The changes made to models by Credit Suisse worked against IOOF Holdings ((IFL)), as the broker downgraded its rating to Hold from Buy on relative valuation grounds. Despite minor changes to its model, Credit Suisse left its price target for IOOF unchanged.

Deutsche Bank upgraded David Jones ((DJS)) to Neutral from Sell as the share price reacted to supposed interest from a mystery UK bidder, at the same time lifting its price target. According to general market opinion, the corporate interest highlighted the fact there is some value in David Jones thanks largely to its property holdings.

Valuation was the main driver of JP Morgan's upgrade to an Overweight rating from Neutral previously on Mount Gibson ((MGX)). The change follows the broker's review of the mid-tier Australian iron ore plays under coverage and was accompanied by a downgrade for Gindalbie ((GBG)) to Neutral from Outperform.

While the UK assets of National Australia Bank ((NAB)) have concerned brokers for some time, Macquarie suggests these negatives could turn around in coming months. To reflect this and some re-pricing the broker has adjusted earnings estimates and price target, while moving to a Buy rating from Hold previously.

Lower thermal coal prices and delays to greenfields projects have contributed to cuts to forecasts and price target for New Hope Corporation ((NHC)) by RBS Australia. At the same time, the broker has upgraded to a Buy rating from Hold given its revised forecasts suggest a share price trading at a 40% discount to valuation.

Operational issues have impacted on Newcrest ((NCM)) in recent months but BA Merrill Lynch suggests the market has overreacted as the problems are largely shorter-term in nature. This overreaction implies an improved valuation and sees BA-ML upgrade to Buy from Neutral.

Deutsche Bank has revised commodity price and currency forecasts and the changes have impacted on Sandfire Resources ((SFR)), as the broker has upgraded to a Buy rating from Hold. The increase in rating comes alongside a minor cut in price target.

The changes to Deutsche's forecasts have also impacted on OZ Minerals ((OZL)) and Paladin ((PDN)), as in both cases the broker has downgraded to a Neutral rating. Earnings estimates and price targets have also been adjusted.

Australian Infrastructure Fund ((AIX)) has indicated plans to internalise management and while Macquarie sees this as something of a positive, the investment banker has downgraded to a Neutral rating from Outperform. This is largely a valuation call as the share price is broadly in line with the price target.

The Macquarie Group ((MQG)) share price has been solid of late but this is not the best news for shareholders in the view of JP Morgan as it means the share buyback has been halted. With global market conditions still uncertain there is downside risk in the broker's view, enough for a ratings cut to Sell from Neutral.

Deutsche Bank has downgraded Monadelphous ((MND)) to Hold from Buy as changes to currency forecasts across the engineering and contractors sector has driven changes to earnings estimates and price target. The downgrade in rating also reflects the fact Monadelphous is trading close to Deutsche's revised target.

Tatts Group ((TTS)) has also been downgraded to a Hold from Buy by Deutsche, which is equally a valuation call given recent share price outperformance. Along with the downgrade are minor changes to earnings and price target given recent solid performance from the core operations.

Increases to price targets for the week were modest at best but cuts to targets were more significant for Santos ((STO)) and QRxPharma ((QRX)), the latter reflecting the decision by the US FDA to not approve the MoxDuo-IR compound as expected.

With respect to increases to earnings forecasts, the most significant included Independence Group ((IGO)), Sims Metal ((SGM)), Specialty Fashion ((SFH)) and and Regis Resources ((RRL)), which stem from changes to commodity and forex assumptions across the market.

The largest cuts to earnings forecasts were for Tabcorp ((TAH)), CSG Limited ((CSV)), Whitehaven ((WHC)) and Evolution Mining ((EVN)).

 

Total Recommendations
 Recommendation Changes

 

Broker Recommendation Breakup

 

Broker Rating

Order Company Old Rating New Rating Broker
Upgrade
1 ANSELL LIMITED Sell Neutral UBS
2 ARISTOCRAT LEISURE LIMITED Sell Neutral Macquarie
3 ARISTOCRAT LEISURE LIMITED Buy Buy Citi
4 ARISTOCRAT LEISURE LIMITED Sell Neutral Deutsche Bank
5 BT INVESTMENT MANAGEMENT LIMITED Neutral Buy Credit Suisse
6 DAVID JONES LIMITED Sell Neutral Deutsche Bank
7 Mount Gibson Iron Limited Neutral Buy JP Morgan
8 NATIONAL AUSTRALIA BANK LIMITED Neutral Buy Macquarie
9 NEW HOPE CORPORATION LIMITED Neutral Buy RBS Australia
10 NEWCREST MINING LIMITED Neutral Buy BA-Merrill Lynch
11 SANDFIRE RESOURCES NL Neutral Buy Deutsche Bank
Downgrade
12 ANSELL LIMITED Buy Neutral Macquarie
13 AUSTRALIAN INFRASTRUCTURE FUND Buy Neutral Macquarie
14 GINDALBIE METALS LTD Buy Neutral JP Morgan
15 IOOF HOLDINGS LIMITED Buy Neutral Credit Suisse
16 MACQUARIE GROUP LIMITED Neutral Sell JP Morgan
17 MONADELPHOUS GROUP LIMITED Buy Neutral Deutsche Bank
18 OZ MINERALS LIMITED Buy Neutral Deutsche Bank
19 PALADIN ENERGY LTD Neutral Neutral Deutsche Bank
20 TATTS GROUP LIMITED Buy Neutral Deutsche Bank
 

Recommendation

Positive Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 SFR - 17.0% 17.0% 34.0% 6
2 ALL - 13.0% 13.0% 26.0% 8
3 SPN - 40.0% - 20.0% 20.0% 5
4 ANN 14.0% 29.0% 15.0% 7
5 NCM 63.0% 75.0% 12.0% 8
6 NAB 13.0% 25.0% 12.0% 8
7 DJS - 50.0% - 38.0% 12.0% 8
8 QBE 63.0% 75.0% 12.0% 8
9 MGX 38.0% 50.0% 12.0% 8
10 STO 88.0% 100.0% 12.0% 8

Negative Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 QRX 100.0% 67.0% - 33.0% 3
2 GBG 100.0% 80.0% - 20.0% 5
3 EHL 80.0% 60.0% - 20.0% 5
4 IFL 50.0% 33.0% - 17.0% 6
5 MND 50.0% 33.0% - 17.0% 6
6 AIX 67.0% 50.0% - 17.0% 6
7 MQG 29.0% 14.0% - 15.0% 7
8 OZL 38.0% 25.0% - 13.0% 8
9 CSL 63.0% 50.0% - 13.0% 8
10 SVW 50.0% 40.0% - 10.0% 5
 

Target Price

Positive Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 GBG 0.972 1.006 3.50% 5
2 DJS 2.188 2.263 3.43% 8
3 AIX 2.412 2.482 2.90% 6
4 VBA 0.440 0.447 1.59% 3
5 CSL 39.048 39.419 0.95% 8
6 IFL 6.253 6.303 0.80% 6
7 NAB 25.951 26.101 0.58% 8
8 SPN 1.068 1.070 0.19% 5
9 MND 23.110 23.150 0.17% 6

Negative Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 QRX 1.943 1.210 - 37.73% 3
2 STO 17.253 15.944 - 7.59% 8
3 QAN 1.638 1.529 - 6.65% 7
4 SVW 10.588 10.070 - 4.89% 5
5 ALL 2.964 2.846 - 3.98% 8
6 OZL 10.844 10.481 - 3.35% 8
7 MGX 1.414 1.389 - 1.77% 8
8 ANN 15.236 14.977 - 1.70% 7
9 CQO 3.478 3.420 - 1.67% 3
10 SFR 7.917 7.800 - 1.48% 6
 

Earning Forecast

Positive Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 IGO 2.240 18.720 735.71% 5
2 SGM 12.629 97.414 671.35% 7
3 SFH 1.180 4.980 322.03% 5
4 RRL 15.620 65.820 321.38% 5
5 HZN 0.928 3.168 241.38% 4
6 AIZ 3.059 9.311 204.38% 4
7 QAN 5.485 15.396 180.69% 7
8 AGO 11.800 25.488 116.00% 8
9 PAN 4.325 9.275 114.45% 3
10 PRU 14.486 28.267 95.13% 6

Negative Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 TAH 48.238 22.400 - 53.56% 8
2 CSV 9.950 8.000 - 19.60% 3
3 WHC 10.971 8.986 - 18.09% 7
4 EVN 24.267 21.400 - 11.81% 3
5 SWM 34.213 30.913 - 9.65% 8
6 ALL 17.513 15.988 - 8.71% 8
7 CQO 24.860 23.440 - 5.71% 3
8 AIX 16.533 15.650 - 5.34% 6
9 ILU 193.613 185.363 - 4.26% 8
10 STO 68.288 65.650 - 3.86% 8
 

Technical limitations

If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Weekly Broker Wrap: The Myth Of Oz Housing Undersupply

By Andrew Nelson

Last week saw brokers again discuss the continued better than expected performance of the Australian retail market. Mixed signals from the domestic property market also featured, as did the outlooks for the domestic steel, mining and insurance sectors, along with a quick peek at high end US consumer activity.

Despite the popular belief that Australian retail conditions are continuing to soften, UBS reports that retail sales are continuing to outperform what are admittedly weak forecasts. In May, retail sales were up 5% from the month prior, which served to lift the annual pace to 3.5% growth from 2.4% in April. The rise in May puts the March-May annualized growth rate at 5%-6%, the best 3-month period in the last two years.

And the improvements are not centred on just one or two segments, either. UBS notes the increase was broad-based, with most segments, barring food, enjoying a pickup in May. After falls in April, department stores and household goods were up around 1% from April, eating out was up about half a percentage point, while clothing increased by about 1.5%. Food was down a tad after being up in April.

The broker notes that all sub sectors are now up on a year on year basis. NSW leads the pack, with sales up 0.7% in May making for a 3.6% year on year growth rate, the state’s best performance in over a year. Queensland is also rising solidly, up 0.5% in May and 4.3% on a year on year basis, while Victoria and SA continue to lag the pack. WA remains the strongest, with sales up 1% from April and boasting a 10% growth rate year on year.

This all amounts to pretty good news, in the broker’s view, especially given the more traditional areas of retailing like department stores, clothing and household goods, what have been the weaker sub-sectors, are now showing clear improving trends. Thus, despite the few signs of an improvement in consumer sentiment, retail sales trends are none the less improving, leaving UBS to pencil in a full year retail sales improvement of 4%-5%.

One of the main economic supports Australia has enjoyed over the past few years has been the resilience of domestic housing prices. Where individual American and  European homeowners have seen their single largest investment asset depreciate mercilessly, worsening the effect of the economic downturn exponentially, Australians for the most part have escaped this pain, much to the benefit of national economic reads.

However, the assumed single largest factor supporting Australian housing prices, increasing demand, has been called into question by analysts at Morgan Stanley.

The broker notes that the long held belief that Australia suffers from – or enjoys, depending upon your perspective - a shortage of houses has been the cornerstone of the housing industry’s defence against significantly lower prices. The problem is, Morgan Stanley believes that current estimates of underlying demand are unrealistic and take little account of actual buying behaviour and in no way account for important factors like affordability and the willingness to leverage up.

Citing the 2011 Census data released a few weeks back, the broker notes the 228,000 unit undersupply that is estimated by industry is actually a 341,000 oversupply. The broker cites this as solid evidence of how easily estimates of intending to peg supply and demand can be manipulated and also fall victim to statistical errors.

The broker expects house price growth over the next decade will be meaningfully lower than in the past decade. The silver lining here is that the broker doesn’t expect to some sort of housing crash, but rather flat to negative growth over the medium term as wage growth outpaces price growth.

It is thus no wonder that Morgan Stanley has maintained its cautious outlook for the Australian housing market. It has the sector at Underweight and recommends staying away from names with significant residential exposure, including Stockland ((SGP)), Mirvac ((MGR)) and Australand ((ALZ)). 

Meanwhile, analysts at Credit Suisse took the red pen to their forecasts for the Australian insurance sector given the continued poor performance of investment markets. Insurance Australia Group ((IAG)) took the biggest hit; with FY12 earnings estimates cut by 11% on the back of the company’s significant exposure to equity markets in the short term, with FY13 down on lower bond yield assumptions.

QBE ((QBE)) was cut by lesser amounts, with lower investment market returns also joined by weaker AUD assumptions going forward. Suncorp ((SUN)) forecasts are also lowered on weaker investment returns, although it remains the broker’s top pick in the sector given the group’s ongoing recovery in its general insurance business combined with a strong capital position that should support the prospect of  potential capital management in the near term.

Morgan Stanley also took a look at Australian steel stocks last week, noting the big names in the sector have continued to underperform quite significantly over the past couple of months. There’s no surprise this has taken place at the same time that the last bits of appetite for risk dried up.

While the broker notes the downward moves in the sector have exposed some considerable upside to base case valuations, we all know valuation is little to go on in today’s market. Thus, the broker is still quite reluctant to shift to a more bullish stance on this basis alone, given it expects to see a continuation of the current challenges facing local manufacturing.

Morgan Stanley’s preference in the sector is Arrium ((ARI)), which up until a short time ago was called OneSteel. The broker notes earnings depend more on iron ore exports than steel manufacturing and the broker is fairly positive on the iron ore pricing outlook, believing iron ore pricing can be sustained at or above the marginal cost of Chinese production. 

Analysts at JP Morgan also see some support emerging for the bigger diversified resources plays. However, this support doesn’t come from normal drivers like better prices, lower costs or favourable FX, but rather from the capacity for the deployment of spare cash in the form of capital management initiatives. Such moves would be a sure way to offer shareholders a viable earnings alternative from longer dated production growth.

JPM sees a case for investor returns to hit 10%-12% were BHP Billiton ((BHP)) or Rio Tinto ((RIO)) to undertake share buybacks. Not a bad result when Olympic Dam only offers an 8% return on the broker’s numbers. However, the broker cautions that such relief won’t be forthcoming anytime soon, with neither BHP nor RIO likely to announce buybacks in August along with FY results.

While JPM expects capital management options will be discussed quite regularly in the lead up to and post FY results next month, it sees this as more of a medium term possibility. In the near term, the broker expects both companies will be more concerned about the slowdown in project approvals as growth pipelines are reviewed, with BHP also more likely to look at paying down debt and Rio wanting to keep its powder dry for potential strategic acquisitions.

Lastly, US analysts at Citi continue to hold a dim view of the 2H12 outlook for US consumer spending. The broker expects trends will continue to decline given the continued soft outlook for the global macro environment, ongoing weakness in Europe, declining consumer confidence and uncertainty about the looming presidential election.

Citi notes it first noticed the current slowdown emerging in April, when same-store sales missed forecasts for the first time since December. With trends having remained soft in May and June, the broker believes the slowdown is now being led by high-income consumers, who it points out make up around 50% of spending, own about 90% of US equities and thus take the biggest hits from investment market volatility.

 

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

The Short Report

.ref1 {background-color:#B8E3F8;}

By Chris Shaw

Weekly changes in short positions for the period from June 19 saw increases of more than one percentage point easily outnumber decreases to the tune of seven to two.

The largest increase was in David Jones ((DJS)), where positions rose to 10.38% from 8.36% previously. The increase came prior to the rumoured takeover proposal for the company and followed what had been disappointing 3Q sales for the retailer.

David Jones was not the only retailer for which shorts increased in the week from June 19, as positions in The Reject Shop ((TRS)) also rose to 8.18% from 6.39% previously. The changes don't appear to have been driven by any announcements from the company but reflect changes to in substantial shareholdings during the period.

Myer ((MYR)) was another retailer for which short positions increased during the period, rising to 11.67 from 10.24% the week before. Again there were few announcements from the company other than news of a new store in Darwin, while there were a few announced changes in major shareholdings.

Myer, David Jones and The Reject Shop remain among the top 20 short positions on the Australian market, along with other retailer-based plays including Billabong ((BBG)), Harvey Norman ((HVN)), Flight Centre ((FLT)) and Carsales.com ((CRZ)).

Others in the top 20 largest short positions list include Paladin ((PDN)) and Iluka ((ILU)) among the resource plays, Cochlear ((COH)) and Mesoblast ((MSB)) among healthcare and biotech companies and Echo Entertainment ((EGP)) and Fairfax ((FXJ)) among the industrial plays.

JB Hi-Fi ((JBH)) continues to be the company with the largest short position on the Australian market but as RBS Australia notes, total shorts in the stock have fallen over the past two weeks by 2.6 percentage points to 21.7%.

According to RBS the negative momentum in the TV category has eased somewhat in recent months, which gives increased confidence JB Hi-Fi can meet full year earnings guidance. Given a currently attractive earnings multiple, JB Hi-Fi is RBS's preferred exposure in the discretionary retail sector.

Senex Energy ((SXY)) also saw short positions jump to 2.11% from less than 0.5% previously, this despite the company spudding the Shocking 1 well that subsequently delivered oil shows worth testing further.

Shorts in Murchison Metals ((MMX)) increased to 2.19% from 0.95% for the week, this prior to the company announcing its intention to seek approval for a capital return to shareholders.

An increase in shorts in Cabcharge ((CAB)) to 2.01% from 0.51% previously follows news the Reserve Bank of Australia is assessing surcharge fees applied to credit card transactions. While management has indicated there is unlikely to be a direct impact on Cabcharge it adds to uncertainty in the view of Macquarie.

The largest fall in short positions was in the IShares S&P/ASX High Dividend derivative, where total positions declined to 1.33% from 3.44% in the week from June 19. In terms of specific stocks the largest fall was in Echo Entertainment ((EGP)), where positions moved to 6.09% from 7.49% prior to the group re-negotiating some debt terms but after a capital raising had been factored in by the market.

With respect to monthly changes the major increases have been in Fairfax and The Reject Shop, while Seven West ((SWM)) shorts also rose by more than two percentage points, which came prior to the company reiterating earnings guidance for this year but indicating there remains pressure on FY13 earnings.

SingTel ((SGT)) and Linc Energy ((LNC)) also experienced increases in shorts for the month from May 25, both seeing increases of more than two percentage points despite little in the way of announcements to impact on investor views on the stocks.

Bradken ((BKN)) enjoyed the largest fall in shorts for the month, positions declining to 1.33% from 3.5%, this following a report by Macquarie indicating perceived balance sheet stress for the group was a non-issue given a currently robust sales environment.

Despite a disappointing profit result late last month shorts in Elders ((ELD)) have fallen in the month from May 25 to 3.61% from 5.62%. The result suggested debt remains too high and consensus market forecasts appear too optimistic, but at the same time showed management is making some progress in turning around the business.

 

Top 20 Largest Short Positions

Rank Symbol Short Position Total Product %Short
1 JBH 21457044 98850643 21.71
2 FXJ 343794850 2351955725 14.62
3 FLT 12354227 100039833 12.35
4 CRZ 28615710 233689223 12.25
5 MYR 68102760 583384551 11.67
6 COH 6309219 56929432 11.08
7 LYC 178962250 1714846913 10.44
8 DJS 54856855 528655600 10.38
9 BBG 25419588 257888239 9.86
10 HVN 101809015 1062316784 9.58
11 ILU 39372102 418700517 9.40
12 PDN 78185555 835645290 9.36
13 GNS 75429556 848401559 8.89
14 TRS 2132461 26071170 8.18
15 LNC 38953547 504487631 7.72
16 CSR 38107642 506000315 7.53
17 ISO 419055 5703165 7.35
18 WTF 15206681 211736244 7.18
19 MSB 18189889 284478361 6.39
20 EGP 41894654 688019737 6.09

To see the full Short Report, please go to this link

IMPORTANT INFORMATION ABOUT THIS REPORT

The above information is sourced from daily reports published by the Australian Investment & Securities Commission (ASIC) and is provided by FNArena unqualified as a service to subscribers. FNArena would like to make it very clear that immediate assumptions cannot be drawn from the numbers alone.

It is wrong to assume that short percentages published by ASIC simply imply negative market positions held by fund managers or others looking to profit from a fall in respective share prices. While all or part of certain short percentages may indeed imply such, there are also a myriad of other reasons why a short position might be held which does not render that position “naked” given offsetting positions held elsewhere. Whatever balance of percentages truly is a “short” position would suggest there are negative views on a stock held by some in the market and also would suggest that were the news flow on that stock to turn suddenly positive, “short covering” may spark a short, sharp rally in that share price. However short positions held as an offset against another position may prove merely benign.

Often large short positions can be attributable to a listed hybrid security on the same stock where traders look to “strip out” the option value of the hybrid with offsetting listed option and stock positions. Short positions may form part of a short stock portfolio offsetting a long share price index (SPI) futures portfolio – a popular trade which seeks to exploit windows of opportunity when the SPI price trades at an overextended discount to fair value. Short positions may be held as a hedge by a broking house providing dividend reinvestment plan (DRP) underwriting services or other similar services. Short positions will occasionally need to be adopted by market makers in listed equity exchange traded fund products (EFT). All of the above are just some of the reasons why a short position may be held in a stock but can be considered benign in share price direction terms due to offsets.

Market makers in stock and stock index options will also hedge their portfolios using short positions where necessary. These delta hedges often form the other side of a client's long stock-long put option protection trade, or perhaps long stock-short call option (“buy-write”) position. In a clear example of how published short percentages can be misleading, an options market maker may hold a short position below the implied delta hedge level and that actually implies a “long” position in that stock.

Another popular trading strategy is that of “pairs trading” in which one stock is held short against a long position in another stock. Such positions look to exploit perceived imbalances in the valuations of two stocks and imply a “net neutral” market position.

Aside from all the above reasons as to why it would be a potential misconception to draw simply conclusions on short percentages, there are even wider issues to consider. ASIC itself will admit that short position data is not an exact science given the onus on market participants to declare to their broker when positions truly are “short”. Without any suggestion of deceit, there are always participants who are ignorant of the regulations. Discrepancies can also arise when short positions are held by a large investment banking operation offering multiple stock market services as well as proprietary trading activities. Such activity can introduce the possibility of either non-counting or double-counting when custodians are involved and beneficial ownership issues become unclear.

Finally, a simple fact is that the Australian Securities Exchange also keeps its own register of short positions. The figures provided by ASIC and by the ASX at any point do not necessarily correlate.

FNArena has offered this qualified explanation of the vagaries of short stock positions as a warning to subscribers not to jump to any conclusions or to make investment decisions based solely on these unqualified numbers. FNArena strongly suggests investors seek advice from their stock broker or financial adviser before acting upon any of the information provided herein.

Technical limitations

If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

David Jones Proposal Not Certain

 - David Jones receives unsolicited approach
 - Flagship properties highlight gearing opportunities for an acquirer
 - Structure of approach unclear
 - Brokers remain cautious about value in David Jones at current levels


By Chris Shaw

Last Friday David Jones ((DJS)) announced it had received an unsolicited approach from EB Private Equity of the UK, valuing the department store group at $1,650 million. Details regarding the proposal are limited at present, to the extent Deutsche Bank notes it is unclear whether the value implied by the proposal is enterprise value or equity value.

In the view of Credit Suisse, David Jones offers the usual gearing opportunities to a financial acquirer. This reflects the potential of achieving full value for the group's flagship Sydney and Melbourne properties, which are on the books at David Jones at a combined book value of $460 million. This compares to Macquarie's estimate of market value of around $750 million on a cap rate of 8%, while Citi is more cautious and sees potential for the properties to achieve a price of around $600 million.

Achieving a good price for the properties would be a key to private equity creating value in the view of Credit Suisse, as the broker remains of the view there is downside risk to the sustainability of current department store earnings. 

This reflects the expected negative impact of investing significant amounts in systems and operational changes over the next couple of years. In Credit Suisse's view such investment is needed as David Jones is currently uncompetitive when compared with online specialty peers.

A sale of the credit card business would also deliver some returns to any acquirer, as Citi values the business at around $250 million. One issue may be the joint venture with American Express, which could restrict any deal in Citi's view.

Another issue for Credit Suisse is the structure of the proposal, as it seems to require existing shareholders to maintain an interest in David Jones. The proposal implies existing shareholders will receive $2.27 per share for their existing holdings, while retaining $0.85 per existing share in the equity value of the new entity.

Deutsche estimates the internal rate of return from the proposal would be around 21% over a five-year time frame, which includes the benefits of property sales. This is not large in the broker's view given the structural and cyclical risks associated with Australian retail.

In contrast, Citi's model suggests a bidder could pay $3.00 per share for David Jones and achieve an equity internal rate of return of 25%. This factors in $850 million in asset sales and a recovery in underlying department store margins.

While Citi suggests the approach to David Jones is a signal of value in retail, it is also recognition of the particular attributes David Jones offers via the ownership of its flagship properties. This limits this element of appeal to David Jones and Harvey Norman ((HVN)) in Citi's view as both hold significant property assets.

On news of the approach to David Jones only Deutsche Bank has to date adjusted its rating, upgrading the stock to Hold from Sell. This reflects the fact the risk/reward appears evenly balanced at current levels, allowing for the uncertainty given no concrete offer for the company has yet been received. 

The upgrade by Deutsche means David Jones is now rated as Buy once, Hold three time and Sell four times, with valuation the issue for those brokers retaining more negative views on the stock. The consensus price target according to the FNArena database has increased to $2.26 from $2.19.

Having rallied last Friday on news of the proposal shares in David Jones today are weaker in a stronger overall market and as at 11.15am the stock was down 15c at $2.44. This compares to a range over the past year of $2.10 to $4.14 and implies downside of around 6% relative to the consensus target in the database. 


Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Weekly Broker Wrap: Australian Market Trends

By Andrew Nelson

Putting global issues aside for the most part, we take a look at what local brokers had to say about a number of domestic issues last week. Key topics include Australian household cash flow and the housing market, mining tax impacts, insurers and lower RBA cash rates, the local ad sector and the current state of US consumers.

Starting with a bit of good news on the domestic front, economists from UBS pointed out that Australian household cashflow is actually posting steady gains and will continue to do so as the combination of lower interest rates, carbon tax compensation and  budget cash handouts will continue to be felt.

Unfortunately, that begs the question:  how long and how much of a boost?

Over the coming year, UBS is expecting household free cash flow to double from 4% year on year in 1Q12 to over 8% year on year by 1Q13.  Shorter-term, the increase to household cash flow over 2Q-3Q will amount to about 2% of income and while the broker admits this is not the type of double-digit growth we saw in 2007 or 2009, it is still the strongest growth rate in 3 years.  

However, UBS tempers its good news, noting that while household cash flow may well be increasing, there is no guarantee this will flow through to actual increases in consumer spending and, subsequently, the retail sector.

In fact, the broker has some serious doubts about the near term, noting the current trend is to reduce debt and increase savings given the lack of optimism in overall consumer sentiment.  And with consumption already running at about half of trend, the broker expects a continued mix of negative news from Europe and the US, plus the hostile domestic political environment, will probably continue to limit the pace of spending growth.

There is a light at the end of the tunnel, however, with UBS expecting the improving levels of household cash flow to eventually start providing a bit of help to consumer spending and housing activity over the coming year. However, the broker warns we’ll need to see some signs of stability in Australia’s non-mining economy to avoid higher unemployment and maintain the trend.

Analysts from JP Morgan took a look at housing activity and note finance data so far this calendar year have been disappointingly weak, with total home loans falling 4.3% over the previous quarter. The broker notes the decline walks hand in hand with the downturn in first homebuyers (FHB) activity over the same period.

The broker explains that at least part of this is due to the flurry of buying activity over the latter parts of 2011 as first time buyers rushed to take advantage of the NSW transfer duty exemption, which expired at the end of the year. Given NSW is the nation’s biggest housing market, this has had a significant impact. Other tax and fee reduction schemes in Victoria and Queensland, the nation’s next two largest housing markets, are also starting to expire, which the broker thinks will have a similar effect as that seen in NSW.

The slowing rate of first time homebuyers has done a lot to contribute to the steady decline in house prices over the past year, notes the broker.  The broker points out that the lower income nature of these buyers is one of the main drivers of price fluctuations at the lower end of the market.

In fact, the broker notes that since 2010, prices of the bottom 20% of dwellings have continued to decline as the number of new loans to first time buyers has declined. However, the declines at the bottom end are nowhere near the size of those at the top end, where prices have fallen heavily over the past year as consumers become more debt averse on fears of a serious domestic slowdown on the back of economic troubles offshore.

That said, the broker does see signs of support for housing prices emerging. Firstly, the broker notes cheaper house should go some way to support demand. JP Morgan points out that actually, the average loan size over the past year has fallen at the same rate as house prices, meaning consumers are only borrowing less because houses cost less. The fact consumers are still willing to acquire mortgage debt should well be supportive of the market.

Another supportive factor is that building approvals tend to fall in line with a slower lending rate, meaning supply has fallen with demand. The broker reasons this should also help limit the downside for Australian house prices and continue to offset weak consumer demand.

Another interesting phenomenon taking place in the Australian market is the impact falling cash rates are having on the insurance sector. Analysts from Bank of America-Merrill Lynch point out that the post GFC cuts to the cash rate had some significant consequences for several of insurers the last time around.

The broker notes Insurance Australia Group ((IAG)) had to write down around $50m in its intermediated business 1H09, which was blamed on liability adequacy tests (LAT) post the last big round of interest rate cuts. At the same time, Suncorp (( SUN)) also reported a $33m expense, again blaming an LAT failure due to the large drop in interest rates. BA-ML suspects there is again a risk from the negative impacts on profits from LAT failures.

The broker also notes a sustained period of lower rates will also have longer term implications on the capital positions of insurers as well as on the future pricing of insurance products. Long tailed lines in particular, points out the broker, will have to take into account the additional cost of capital as well as future yields when setting premiums. Right now, premium rates are rising and claims trends appear to be supportive, but the broker points out that this will remain an ongoing concern in the near term for all three major domestic insurers.

UBS also took a look at the two new taxes that will apply to Australian miners as of today, the Minerals Resource Rent Tax (MRRT) and the new carbon tax. The broker notes the former only really applies to the iron ore and coal industries, while the latter will be levied at the entire Australian industry.

Initially, the broker sees the MRRT as being pretty much a tax on iron ore, as coal miners boast lower margins and pay larger royalties than iron ore miners.  However, the broker thinks the coal miners will definitely feel the brunt of the carbon tax, with coal miners expected to see a $1.50-$2.00 per ton increase to costs. Gas miners will also feel the pinch, with costs rising $5-$6 per ton.

All up, the broker notes both taxes will hit BHP Billiton ((BHP)) and Rio Tinto ((RIO)) earnings by around 3%-4% a year and valuations by as much as 3%. Meanwhile, the coal and iron ore industries should also see mostly single-digit impacts to earnings and valuations, on the broker’s numbers.

After a detailed look at the drivers of the Australian ad market, Citi is starting to see an increasingly significant correlation with macroeconomic data, leading the broker to think sentiment has become the key driver of domestic ad growth.

Given the current global macro outlook, the fact that Australian consumer confidence remains rooted in negative territory, the fact the ASX 200 has fallen 8% since from its May-12 peak  and given the Aussie is still so high and is likely to be for a while, Citi  expects ad growth will remain subdued for at least the rest of 2012.

Last on our list of last week’s interesting coverage was analysis from Citi showing real consumer spending in the US has slowed from the good start it got off to in the first quarter of 2012. The broker notes that much of the slowdown is due to a cooling in vehicle sales after hot numbers 4Q 2011 and 1Q 2012 that beat even the most optimistic forecasts.

The broker sees at least one potential bright spot, which is housing related durables. Citi points out that these tend to follow single-family construction and recent signs are suggesting a pickup in this market in the 2H and beyond. In fact, the broker notes that positive signs are also starting to flow though to mortgage approvals now and aren’t just limited to construction data.

Still, Citi thinks US consumer spending outlook will remain fairly subdued over the balance of the year. Even the 2%- 2 .25% growth rate the broker is expecting (well below the 1Q run rate of 2.7%) still dependent upon the US avoiding a large European credit shock, or panic over the US fiscal outlook.

 
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

The number of changes in broker ratings picked up over the past week, with the eight brokers in the FNArena database upgrading 12 recommendations and downgrading seven. This leaves total Buy ratings at 49.85%.

On the upgrade side is Ansell ((ANN)), where Citi has moved to a Buy rating from Neutral given improved value following recent share price weakness. The broker also made modest changes to earnings estimates and price target to reflect updated forex assumptions.

Aurora Oil and Gas ((AUT)) similarly enjoyed an upgrade to a Buy rating from Hold previously, this courtesy of UBS. While an increased stake in the Sugarloaf project is a positive for earnings the production growth profile remains a major attraction for the broker. As with Ansell, Aurora's rating upgrade also reflects improved valuation following recent share price falls.

Better than expected interim earnings guidance from Caltex ((CTX)) helped prompt Credit Suisse to upgrade to a Buy rating on the stock from Neutral previously. A decision to close the refineries operations offers long-term upside in the view of Credit Suisse and supports the upgrade in rating. Across the market brokers revised earnings forecasts and price targets to reflect the new guidance from management.

Credit Suisse went further on Energy Resources of Australia ((ERA)) and upgraded to a Buy rating from Sell previously. The change follows a site visit and some positive signals from traditional landowners, which leaves the broker more positive the company can extract full value from the Ranger 3 Deeps resource.

For Orica ((ORI)), RBS Australia is attracted to the long-term dynamics of the explosives business to upgrade to a Buy rating from Hold. The company is a quality business and in the broker's view now is a good time for longer-term investors to be looking at buying into the stock.

Citi has revised its model for QBE Insurance ((QBE)) to reflect a marking to market of investments and changes to forex assumptions and the end result is an upgrade to a Buy from Neutral previously. The call is largely a valuation one as Citi is now seeing some upside to its price target.

Changed production expectations for Sandfire ((SFR)) have prompted some adjustments to UBS's model, the result being a trimming of price target. At the same time the broker has upgraded to Buy from Neutral on the stock to reflect both recent share price falls and the attraction of high grade copper exposure.

Santos ((STO)) announced some increased capex for its GLNG plant this week but the news has not deterred Credit Suisse, the broker moving to a Buy rating from Hold as the share price fall in reaction to the news was viewed as an overreaction. Credit Suisse and others have adjusted earnings estimates and price targets for Santos to reflect the increase in capex.

Macquarie has moved to an Outperform rating from Neutral on SP Ausnet ((SPN)) as part of a reinstatement of coverage. The attraction is a better yield and asset base than peers and stronger expected investment returns.

Post a tour of Toll's ((TOL)) Asian assets Credit Suisse has upgraded to a Buy rating on the stock from Neutral, reflecting the view the company is well placed for when the cycle eventually turns more favourable. At the same time Credit Suisse trimmed earnings estimates and price target for the stock.

UBS expects operational improvements and cost cutting measures implemented by Transpacific Industries ((TPI)) will start to feed through to earnings, while the sale of some non-core assets is also a positive.

This has TPI well placed for a re-rating once the market better understands the outlook for the company in UBS's view and sees the broker upgrade its rating to Buy from Neutral.

UBS also upgraded Western Areas ((WSA)) to a Buy from Neutral post the company announcing an increase in reserves at the Spotted Quoll project. Adding weight to the upgrade is improved valuation following recent share price weakness.

On the downgrade side of the market the only stock to receive multiple rating changes was Billabong ((BBG)), where both Citi and UBS downgraded ratings. Citi cut its rating to Sell from Hold, while UBS went further and downgraded to a Sell from Buy previously.

Both changes were in response to the equity raising announced by the company as it attempts to address balance sheet issues. In both cases, the brokers question whether there is value at current levels given future strategy has not been fully outlined and earnings issues are yet to be addressed. Others in the market also adjusted targets and earnings estimates to account for the raising and revised earnings guidance from management.

A cut to earnings guidance from management at Boral ((BLD)) was enough for Macquarie to downgrade to a Sell rating from Neutral as earnings estimates were cut to reflect bad weather, weak trading and project delays. Macquarie and others cut price targets for Boral post the update.

Macquarie also downgraded Cochlear ((COH)) to Hold from Buy but for valuation reasons given recent share price strength. Minor changes to its model for the stock saw the broker revised earnings estimates at the same time.

For exactly the same reason of recent share price strength, Citi cut its rating on CSL ((CSL)) to Hold from Buy, while also making minor changes to earnings estimates to account for changes to foreign exchange assumptions.

BA Merrill Lynch downgraded NIB Holdings ((NHF)) post a strategy day as the broker now sees organic growth for the company as becoming tougher to achieve. At the same time a capital management program appears to have largely run its course, which reduces one investment attraction in the broker's view.

RBS has downgraded QRXPharma ((QRX)) on news the US FDA has not granted approval for MoxDuo IR as had been expected. This implies delays and has forced the broker to factor this into its model, which also impacts on earnings estimates and price target.

While not seeing any changes in broker ratings, Consolidated Media ((CMJ)) enjoyed a increase in consensus price target over the week of just over 6%, while outside of QRX Pharma the largest cuts in targets were experienced by Aquarius ((AQP)) and Evolution Mining ((EVN)).

Other reasonable increases to earnings estimates were enjoyed by BC Iron ((BCI)) and Bank of Queensland ((BOQ)), while cuts to forecasts were most significant for Transpacific, Ten Network ((TEN)), Transurban and Horizon Oil ((HZN)).

 

Total Recommendations
 Recommendation Changes

 

Broker Recommendation Breakup
Suisse,Deutsche<*br*>Bank,JP<*br*>Morgan,Macquarie,RBS<*br*>Australia,UBS&b0=115,104,117,101,81,143,150,128&h0=79,104,84,119,94,84,141,109&s0=42,21,26,6,35,35,9,17" style="border-bottom: #000000 1px solid; border-left: #000000 1px solid; border-top: #000000 1px solid; border-right: #000000 1px solid" />

 

Broker Rating

Order Company Old Rating New Rating Broker
Upgrade
1 ANSELL LIMITED Neutral Buy Citi
2 AURORA OIL AND GAS LIMITED Neutral Buy UBS
3 CALTEX AUSTRALIA LIMITED Neutral Buy Credit Suisse
4 ENERGY RESOURCES OF AUSTRALIA Sell Buy Credit Suisse
5 ORICA LIMITED Neutral Buy RBS Australia
6 QBE INSURANCE GROUP LIMITED Neutral Buy Citi
7 SANDFIRE RESOURCES NL Neutral Buy UBS
8 SANTOS LIMITED Neutral Buy Credit Suisse
9 SP AUSNET Neutral Buy Macquarie
10 TOLL HOLDINGS LIMITED Neutral Buy Credit Suisse
11 Transpacific Industries Group Ltd Neutral Buy UBS
12 WESTERN AREAS NL Neutral Buy UBS
Downgrade
13 BILLABONG INTERNATIONAL LIMITED Neutral Sell Citi
14 BILLABONG INTERNATIONAL LIMITED Buy Sell UBS
15 BORAL LIMITED Neutral Sell Macquarie
16 COCHLEAR LIMITED Buy Neutral Macquarie
17 CSL LIMITED Buy Neutral Citi
18 NIB HOLDINGS LIMITED Buy Neutral BA-Merrill Lynch
19 QRXPHARMA LTD Buy Neutral RBS Australia
 

Recommendation

Positive Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 ERA - 13.0% 13.0% 26.0% 8
2 AUT - 40.0% - 20.0% 20.0% 5
3 WSA 50.0% 67.0% 17.0% 6
4 GRR 83.0% 100.0% 17.0% 6
5 TPI 50.0% 67.0% 17.0% 6
6 ANN 14.0% 29.0% 15.0% 7
7 TOL 14.0% 29.0% 15.0% 7
8 MGX 25.0% 38.0% 13.0% 8
9 ILU 50.0% 63.0% 13.0% 8
10 QBE 63.0% 75.0% 12.0% 8

Negative Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 EVN 100.0% 67.0% - 33.0% 3
2 QRX 100.0% 67.0% - 33.0% 3
3 NHF 100.0% 75.0% - 25.0% 4
4 AQP 60.0% 40.0% - 20.0% 5
5 CMJ 29.0% 14.0% - 15.0% 7
6 CSL 63.0% 50.0% - 13.0% 8
7 COH - 38.0% - 50.0% - 12.0% 8
8 OZL 50.0% 38.0% - 12.0% 8
9 PRU 60.0% 50.0% - 10.0% 6
10 VBA 83.0% 75.0% - 8.0% 4
 

Target Price

Positive Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 CMJ 3.154 3.358 6.47% 7
2 ERA 1.643 1.674 1.89% 8
3 GRR 0.838 0.845 0.84% 6
4 NHF 1.695 1.698 0.18% 4
5 WSA 5.908 5.917 0.15% 6
6 GMG 3.001 3.005 0.13% 8

Negative Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 QRX 2.773 1.210 - 56.36% 3
2 AQP 2.800 2.538 - 9.36% 5
3 EVN 2.175 1.983 - 8.83% 3
4 QAN 1.638 1.529 - 6.65% 7
5 OZL 11.540 10.844 - 6.03% 8
6 PRU 3.280 3.158 - 3.72% 6
7 TPI 0.923 0.895 - 3.03% 6
8 MGX 1.429 1.414 - 1.05% 8
9 TOL 5.074 5.031 - 0.85% 7
10 AUT 3.874 3.844 - 0.77% 5
 

Earning Forecast

Positive Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 BCI 41.100 44.033 7.14% 3
2 BOQ 15.600 16.563 6.17% 8
3 SVW 77.680 82.260 5.90% 4
4 AMP 32.100 33.263 3.62% 8
5 NHF 12.950 13.325 2.90% 4
6 EVN 23.650 24.267 2.61% 3
7 CWN 57.675 58.363 1.19% 7
8 QBE 136.112 137.261 0.84% 8
9 AIO 25.413 25.550 0.54% 7
10 IAG 25.538 25.663 0.49% 8

Negative Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 TPI 5.767 4.683 - 18.80% 6
2 TEN 2.328 1.953 - 16.11% 8
3 TCL 13.686 12.271 - 10.34% 7
4 HZN 0.951 0.855 - 10.09% 4
5 SGM 13.729 12.629 - 8.01% 7
6 ROC 4.794 4.525 - 5.61% 5
7 OZL 71.388 68.213 - 4.45% 8
8 AQG 64.336 61.807 - 3.93% 7
9 AUT 28.202 27.159 - 3.70% 5
10 STO 70.075 67.900 - 3.10% 8
 

Technical limitations

If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.