Tag Archives: Consumer Discretionary

The Short Report

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By Chris Shaw

For the week from February 21 the most significant changes in short positions were reductions in total shorts, with five companies seeing reductions of more than 2.0 percentage points from the previous week.

The largest reduction in total shorts was in Gunns ((GNS)), where positions fell to 1.98% from 6.25% the week prior. The change in positions was prior to an interim profit result impacted by asset impairments and revaluations and followed a proposed capital raising that would strengthen the group's balance sheet. The share price rallied.

Shorts in retailer The Reject Shop ((TRS)) fell to 3.62% from 6.55%, the change again coming after interim earnings for the company that brokers viewed as solid and suggestive of reduced financial risks surrounding the company. Shares in The Reject Shop have since rallied strongly too.

Wesfarmers ((WES)) again saw a decline in shorts in its new securities ((WESN)) to a total position of just 0.11%, down from 2.44% the week before. This followed a solid interim, though Macquarie suggested some disappointment in that the company appears to have a focus on value creation while the market is looking for growth. Shorts in the regular Wesfarmers shares also declined during the week, to 2.53% from 3.39% previously. Shares in Wesfarmers have failed to rally, instead they discovered that trending south is the path of least resistance.

While still the number one stock for short positions on the market, total shorts in JB Hi-Fi ((JBH)) fell during the week from February 21 to 19.4% from 21.7%. While the company met guidance with its interim result, brokers remain cautious given a still tough consumer discretionary market. Shares in JB Hi-Fi have also failed to rally. Just like Wesfarmers, they have weakened instead.

Stocks exposed to the consumer discretionary sector continue to dominate the top short positions, as along with JB Hi-Fi the top 20 includes Myer ((MYR)), David Jones ((DJS)), Billabong ((BBG)), Harvey Norman ((HVN)) and Flight Centre ((FLT)).

Of these, Billabong also enjoyed a solid fall in total shorts for the week from February 21, positions declining to around 8.8% from nearly 11% the previous week as the company continues to look at restructuring options and remains of interest to private equity.

There were no increases in short positions of 1.0% or more in the week from February 21 but closest was Ten Network ((TEN)), where total shorts increased to 6.2% from 5.3% previously. Ten's latest guidance update was disappointing and left brokers with the expectation further cuts to consensus earnings numbers were likely. A similar increase in shorts was seen in Western Areas ((WSA)), which came after an interim report that fell a little short of expectations due to the timing of some ore shipments.

Among the monthly changes, Rialto Energy ((RIA)) saw shorts increase from 0.2% to around 5.0% and SingTel ((SGT)) to 5.4% from 3.1%, while shorts in Gunns, JB Hi-Fi and The Reject Shop all declined by 2.6% to 3.0%.

While Flight Centre remains among the top 20 short positions, BA Merrill Lynch is not sure the market's concerns over the outlook for consumer discretionary stocks is appropriate in this case. This is because Flight Centre has a more flexible business structure and a dominant market share and faces less short-term structural threats than others in the sector.

Tabcorp ((TAH)) remains well down the list in terms of total short positions, standing at just 1.31% for the week from February 21. But as RBS Australia notes, this has increased by almost double over the past few weeks, something RBS sees as a reflection of ongoing challenges including weak organic revenue growth and an expense base that is difficult to control. In RBS's view Tabcorp is a stock that will struggle to outperform the broader market given this issues.

Previous research conducted by RBS suggests increasing numbers in short positions are usually closely linked to share price underperformance in the following weeks, if not months.

Top 20 Largest Short Positions

Rank	Symbol	Short Position	Total Product	%Short
1	JBH	19175716	98840643	19.40
2	FXJ	269023275	2351955725	11.45
3	ISO	586412	5403165	10.85
4	MYR	61159541	583384551	10.46
5	DJS	52413224	524940325	9.96
6	FLT	9627616	100009946	9.59
7	BBG	22544808	255102103	8.82
8	COH	4990491	56922933	8.75
9	LYC	146148090	1714396913	8.53
10	WTF	14582724	211736244	6.87
11	HVN	70934517	1062316784	6.67
12	TEN	64765918	1045236720	6.19
13	SEK	19199119	337101307	5.69
14	PPT	2339462	41980678	5.57
15	CRZ	13024435	233264223	5.56
16	SGT	9943853	183608625	5.41
17	ILU	21922037	418700517	5.23
18	WSA	9352753	179735899	5.20
19	RIA	21505734	431256264	4.99
20	RIO	20840257	435758720	4.77

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.

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Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

The final week of reporting season for Australian equities has again seen downgrades from brokers in the FNArena database outweigh upgrades, this time by a score of 35 to 17. The ratings changes have brought total Buy ratings to 51.45%, down from 52.15% last week.

Among the companies to receive more than one upgrade were James Hardie ((JHX)) and QBE Insurance ((QBE)). Upgrades for the former came from UBS and Credit Suisse, both moving to Neutral recommendations from Sell previously.

The changes followed a 3Q result that gave some cause for optimism the worst may be behind the company, particularly with the prospect of additional capital management initiatives going forward. At the same time Macquarie downgraded to a Neutral recommendation from Outperform on valuation grounds.

More positive were the upgrades for QBE as Citi, BA-Merrill Lynch, JP Morgan and UBS all moved to Buy ratings from Neutral previously. The changes reflect a combination of factors, including value in the stock at current levels, better understanding of the company's margin outlook post its recent result and a more positive stance on general insurance stocks in general.

Among the other upgrades where brokers moved to Buy views were Aston Resources ((AZT)), Macquarie seeing some upside from the proposal for 10% of the group's stake in the Maules Creek project to be sold.

Deutsche Bank upgraded CSL ((CSL)) to a Buy from Neutral given its view the company should continue to enjoy margin expansion in coming years, while Citi has turned more positive on Insurance Australia Group ((IAG)) also in part due to an improved margin outlook.

Jetset Travelworld ((JET)) offers potential for a re-rating over the next 12 months according to Deutsche and this was enough to prompt an upgrade to Buy, while RBS Australia made the same change with Prime Television ((PRT)) given a somewhat more positive outlook and the potential for some corporate activity involving the company.

For Deutsche the potential for grade and production expansion is enough to justify upgrading to a Buy on Regis Resources ((RRL)), though at the same time UBS has downgraded to a Neutral rating on the stock on valuation grounds.

ResMed ((RMD)) offers scope for an increased buyback boosting earnings per share, which sees Credit Suisse lift its valuation and move to a Buy rating. It was a similar story for Seven Group ((SVW)), as BA-ML no longer sees working capital as an issue and expects valuation support from the group's media assets.

Warrnambool Cheese and Butter ((WCB)) was upgraded to a Buy by RBS following a stronger than expected profit result that implies good value at current levels, while JP Morgan upgraded Westpac ((WBC)) on relative valuation grounds following what appears to be excessive underperformance relative to ANZ Bank ((ANZ)). The broker downgraded ANZ to a Sell at the same time.

On the downgrades side, those receiving multiple cuts to ratings were Aristocrat Leisure ((ALL)), Australian Worldwide Exploration ((AWE)), Harvey Norman ((HVN)) and Newcrest Mining ((NCM)).

For Aristocrat, the downgrades were a factor of valuation after recent share price gains, as full year earnings were generally better than expected and prompted increases to earnings estimates and price targets.

UBS and Deutsche both moved to Neutral ratings on AWE from previous Buy ratings, again valuation calls following recent share price gains. Harvey Norman continues to deal with poor retail conditions and brokers now see additional pressure on franchise margins, which was enough for Macquarie and BA-ML to downgrade to Sell ratings from Hold previously.

Newcrest also has some issues as Lihir is again proving a problematic asset, enough that full year production expectations have been revised lower. The changes saw JP Morgan and UBS downgrade to Neutral views as shorter-term outperformance now appears less likely.

The other most significant downgrade this week came courtesy of Macquarie, the broker moving to a Sell on Air New Zealand ((AIZ)) from a Buy previously. The change in view reflects still tough operating conditions given a combination of weaker long haul demand and increases to operating costs.

In terms of changes to price targets, the largest increases were in Seven Group, Aristocrat and Ausdrill ((ASL)), the latter on the back of a better than expected interim result. Price target cuts were most significant for Jetset, as brokers adjusted for lower than expected interim earnings.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	ABACUS PROPERTY GROUP	Sell	Neutral	JP Morgan
2	ASTON RESOURCES LIMITED	Neutral	Buy	Macquarie
3	CSL LIMITED	Neutral	Buy	Deutsche Bank
4	INSURANCE AUSTRALIA GROUP LIMITED	Neutral	Buy	Citi
5	JAMES HARDIE INDUSTRIES N.V.	Sell	Neutral	UBS
6	JAMES HARDIE INDUSTRIES N.V.	Sell	Neutral	Credit Suisse
7	JETSET TRAVELWORLD LIMITED	Neutral	Buy	Deutsche Bank
8	PRIME TELEVISION LIMITED	Neutral	Buy	RBS Australia
9	QBE INSURANCE GROUP LIMITED	Neutral	Buy	Citi
10	QBE INSURANCE GROUP LIMITED	Neutral	Buy	BA-Merrill Lynch
11	QBE INSURANCE GROUP LIMITED	Neutral	Buy	JP Morgan
12	QBE INSURANCE GROUP LIMITED	Neutral	Buy	UBS
13	REGIS RESOURCES LIMITED	Neutral	Buy	Deutsche Bank
14	RESMED INC	Neutral	Buy	Credit Suisse
15	SEVEN GROUP HOLDINGS LIMITED	Neutral	Buy	BA-Merrill Lynch
16	WARRNAMBOOL CHEESE AND BUTTER FACTORY COMPANY HOLDING LTD	Neutral	Buy	RBS Australia
17	WESTPAC BANKING CORPORATION	Neutral	Buy	JP Morgan
Downgrade
18	AIR NEW ZEALAND LIMITED	Buy	Sell	Macquarie
19	ARISTOCRAT LEISURE LIMITED	Neutral	Sell	Macquarie
20	ARISTOCRAT LEISURE LIMITED	Buy	Buy	Citi
21	ARISTOCRAT LEISURE LIMITED	Neutral	Sell	Deutsche Bank
22	ASG GROUP LIMITED	Buy	Neutral	UBS
23	AUSDRILL LIMITED	Buy	Neutral	BA-Merrill Lynch
24	AUSTAL LIMITED	Buy	Neutral	Macquarie
25	AUSTRALIA & NEW ZEALAND BANKING GROUP	Neutral	Sell	JP Morgan
26	AUSTRALIAN WORLDWIDE EXPLORATION LIMITED	Buy	Neutral	UBS
27	AUSTRALIAN WORLDWIDE EXPLORATION LIMITED	Buy	Neutral	Deutsche Bank
28	BEACH PETROLEUM LIMITED	Buy	Neutral	Macquarie
29	BRAVURA SOLUTIONS LIMITED	Buy	Neutral	JP Morgan
30	CLARIUS GROUP LIMITED	Buy	Neutral	JP Morgan
31	CROWN LIMITED	Buy	Neutral	RBS Australia
32	ECHO ENTERTAINMENT GROUP LIMITED	Buy	Neutral	Citi
33	GLOUCESTER COAL LTD	Buy	Neutral	RBS Australia
34	GRANGE RESOURCES LIMITED	Buy	Neutral	RBS Australia
35	HARVEY NORMAN HOLDINGS LIMITED	Neutral	Sell	Macquarie
36	HARVEY NORMAN HOLDINGS LIMITED	Neutral	Sell	BA-Merrill Lynch
37	HENDERSON GROUP PLC.	Buy	Neutral	Citi
38	HUTCHISON TELECOMMUNICATIONS (AUST) LIMITED	Buy	Neutral	RBS Australia
39	JAMES HARDIE INDUSTRIES N.V.	Buy	Neutral	Macquarie
40	LINDSAY AUSTRALIA LIMITED	Buy	Neutral	RBS Australia
41	MACQUARIE ATLAS ROADS GROUP	Buy	Neutral	Macquarie
42	NATIONAL AUSTRALIA BANK LIMITED	Buy	Neutral	UBS
43	NEW HOPE CORPORATION LIMITED	Buy	Neutral	RBS Australia
44	NEWCREST MINING LIMITED	Buy	Neutral	JP Morgan
45	NEWCREST MINING LIMITED	Buy	Neutral	UBS
46	PREMIER INVESTMENTS LIMITED	Neutral	Sell	Credit Suisse
47	REGIONAL EXPRESS HOLDINGS LIMITED	Buy	Neutral	RBS Australia
48	REGIS RESOURCES LIMITED	Buy	Neutral	UBS
49	RETAIL FOOD GROUP LIMITED	Buy	Neutral	JP Morgan
50	TAP OIL LIMITED	Buy	Neutral	Credit Suisse
51	TELECOM CORPORATION OF NEW ZEALAND LIMITED	Buy	Neutral	Deutsche Bank
52	THORN GROUP LIMITED	Buy	Buy	RBS Australia

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	QBE	13.0%	63.0%	50.0%	8
2	SYD	- 25.0%	17.0%	42.0%	6
3	SVW	50.0%	75.0%	25.0%	4
4	JET	50.0%	75.0%	25.0%	4
5	AZT	80.0%	100.0%	20.0%	5
6	PRT	33.0%	50.0%	17.0%	6
7	SUL	57.0%	71.0%	14.0%	7
8	RMD	50.0%	63.0%	13.0%	8
9	WBC	38.0%	50.0%	12.0%	8
10	CSL	63.0%	75.0%	12.0%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	AIZ	100.0%	50.0%	- 50.0%	4
2	RHC	25.0%	- 13.0%	- 38.0%	8
3	TTS	13.0%	- 25.0%	- 38.0%	8
4	NHC	67.0%	33.0%	- 34.0%	3
5	ENV	17.0%	- 17.0%	- 34.0%	6
6	RFG	67.0%	33.0%	- 34.0%	3
7	AWE	71.0%	43.0%	- 28.0%	7
8	TAP	75.0%	50.0%	- 25.0%	4
9	ALL	38.0%	13.0%	- 25.0%	8
10	NCM	100.0%	75.0%	- 25.0%	8

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	SVW	9.423	10.925	15.94%	4
2	ALL	2.656	2.989	12.54%	8
3	ASL	4.018	4.456	10.90%	5
4	TOL	5.436	5.783	6.38%	8
5	PRT	0.760	0.807	6.18%	6
6	TPI	0.878	0.923	5.13%	6
7	RSG	1.750	1.833	4.74%	3
8	AWE	1.961	2.050	4.54%	7
9	IAG	3.368	3.499	3.89%	8
10	ENV	0.763	0.792	3.80%	6

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	JET	0.988	0.890	- 9.92%	4
2	FKP	0.798	0.760	- 4.76%	6
3	GCL	9.618	9.225	- 4.09%	5
4	RFG	3.017	2.917	- 3.31%	3
5	ILU	21.074	20.569	- 2.40%	8
6	NCM	42.969	41.965	- 2.34%	8
7	CWN	10.150	9.944	- 2.03%	8
8	DJS	2.656	2.605	- 1.92%	8
9	NHC	6.073	6.017	- 0.92%	3
10	TAP	1.085	1.075	- 0.92%	4

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	CHC	17.800	22.417	25.94%	6
2	NWH	30.300	33.600	10.89%	4
3	SKI	12.600	13.938	10.62%	8
4	ASL	33.440	36.880	10.29%	5
5	PAN	4.700	5.050	7.45%	4
6	TAP	3.075	3.300	7.32%	4
7	ENV	4.083	4.367	6.96%	6
8	SVW	82.180	87.780	6.81%	4
9	IAG	22.013	23.450	6.53%	8
10	VBA	2.914	3.086	5.90%	7

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	GCL	5.480	- 22.520	- 510.95%	5
2	AGO	20.726	7.300	- 64.78%	8
3	AIZ	6.579	3.245	- 50.68%	4
4	QUB	14.075	7.600	- 46.00%	4
5	IGO	6.020	4.080	- 32.23%	5
6	ROC	6.532	4.716	- 27.80%	5
7	FKP	10.450	8.483	- 18.82%	6
8	HZN	1.365	1.148	- 15.90%	4
9	ILU	290.388	248.038	- 14.58%	8
10	FXJ	10.600	9.163	- 13.56%	8

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The Short Report

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By Chris Shaw

The week from February 14 was relatively quiet in terms of significant changes in short positions, only 10 stocks experiencing changes in total short positions of more than one percentage point.

Among the increases the largest was in Wesfarmers ((WESN)), where total positions increased from 0.04% to 2.44%. At the same time shorts in the ordinary shares of Wesfarmers also rose to 3.39% from 2.86% previously, this following an interim earnings result that missed on a few key metrics (margins for Coles included).

Shorts continued to rise in Cochlear, hitting 9.59% for the week from February 14 compared to 8.4% the week before, again post what was a solid interim for some in the market but a less positive result in the view of others including UBS given a decline in unit sales.

Little covered Alliance Aviation ((AQZ)) and Tangiers Petroleum ((TPT)) both saw shorts jump from a negligible levels of less than 0.25% the previous week to more than 1.0% respectively, while Paladin ((PDN)) and Iluka ((ILU)) also saw modest increases in total short positions.

In terms of declining short positions, Linc Energy ((LNC)) saw shorts fall from a somewhat significant 5.75% the week before to 2.94% for the week from February 14, while Shorts in Southern Cross Media ((SXL)) declined from 2.3% to 0.44% after the company announced a share buyback with its interim result.

Shorts in Hastings Diversified ((HDF)) fell to 0.41% from 1.88% the previous week as the market adjusts to a proposed acquisition of the company by APA Group ((APA)). The next largest decline in shorts was in Energy World Corporation ((EWC)), where positions in the junior fell to 1.33% from 2.68% the week before.

With respect to monthly changes, the major increases were experienced by Rialto Energy ((RIA)) and Singapore Telecom ((SGT)), increases of more than 5.0 and 3.0 percentage points in each case pushing total shorts to 5.23% and 4.88% respectively.

The major decline over the month from January 20 has been in the iShares Small Ords derivative ((ISO)), where total shorts have fallen to 10.58% from 17.24% previously. From a stock perspective, the major decline was in Bank of Queensland ((BOQ)), shorts falling to 3.28% from just over 5.0% previously.

The changes in positions have not impacted significantly on the top 20 short positions, which continue to be dominated by consumer discretionary stocks. Among the top 20 continue to be JB Hi-Fi ((JBH)), Myer ((MYR)), David Jones ((DJS)), Billabong ((BBG)), Flight Centre ((FLT)), Harvey Norman ((HVN)), The Reject Shop ((TRS)) and Wotif.com ((WTF)).

Among these companies the pick of the interim results appeared to come from Wotif.com, where headline results were a little better than had been expected. While this was due in part to one-off cost cutting, the result was enough to prompt a solid rally in the share price that may have reflected some covering of short positions.

Top 20 Largest Short Positions

Rank	Symbol	Short Position	Total Product	%Short
1	JBH	21449536	98840643	21.70
2	MYR	70933745	583384551	12.12
3	FXJ	282570650	2351955725	12.04
4	DJS	58355903	524940325	11.09
5	BBG	28028623	255102103	10.96
6	ISO	571468	5403165	10.58
7	COH	5450536	56902933	9.59
8	FLT	9517934	100009946	9.49
9	LYC	156953209	1714396913	9.15
10	HVN	74774546	1062316784	7.05
11	SEK	23486633	337101307	6.94
12	WTF	14407551	211736244	6.82
13	TRS	1714382	26071170	6.55
14	GNS	53124711	848401559	6.25
15	VLC	10000	160001	6.25
16	OST	80037613	1342393583	5.96
17	CRZ	13890041	233264223	5.94
18	PPT	2284897	41980678	5.43
19	TEN	55392137	1045236720	5.31
20	RIA	22560161	431256264	5.23

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

IMPORTANT INFORMATION ABOUT THIS REPORT

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.

75% Of Oz Online Sales Spent Locally

- NAB launches online retail sales index
- Index shows domestic retailers account for bulk of online sales
- Growth in online retail remains well above bricks and mortar
- Strongest growth coming from under 30s demographic

By Chris Shaw

With online shopping a booming market, National Australia Bank has joined forces with Quantium, a data analytics firm, to launch the NAB Online Retail Sales Index. The Index offers an analysis of trends in online spending in Australia.

For 2011 the Index recorded 29% growth in online spending, achieved on total online sales in Australia of $10.5 billion. Of this, almost 75% of online sales were made with domestic based retailers, the balance with overseas-based online retailers.

Of the two the growth rate for international sales is higher, growing at 40% per year compared to 25% sales growth for domestic online sales. Despite the growth, NAB head of consumer sectors, David Thorn, notes online sales still only account for about 4.9% of retail spending.

The pace of growth in online retailing slowed across the second half of 2011, Thorn noting by the end of last year growth in year-on-year terms had pulled back to around 20%. This is still well above the growth rate for traditional retail sales of around 2.5%. Online sales also showed less seasonality than traditional retail sales, though the lead up to Christmas remains the peak period for both online and traditional retail sales.

As Thorn notes, changing consumer preferences and spending habits are contributing to some structural changes in the retail sector. But with 95% of sales still coming through bricks and mortar stores, the key for retailers remains the type of goods sold, who the buyers are where the retailer is located.

This means a decision as to whether online should be introduced as a compliment for an existing business model or whether the focus should be further attempts to reinvigorate an existing physical store presence.

NAB's Index divides online retail goods into four categories, the largest being Auctions, Department Stores, Fashion, Cosmetics and Variety stores, which accounted for around 50% of all online retail goods bought in 2011.

In contrast, Thorn points out while food is traditionally the major category in physical retailing, the Groceries, Liquor and Specialised goods category is the smallest of the four in NAB's Index at just 13%.

The other two categories are Home, Furniture, Appliances and Electronics and Recreation, Toys, Games and Hobbies, Music, Movies and Books, both of which account for around 20% respectively of all online retail sales.

In demographic terms, the Index showed online spending is concentrated among people aged in the 40s, 30s and under 30 age group, each accounting for around 23% of total online sales. While those in their 30s and 40s make the most purchases, the strongest growth in online sales is coming from the under 30s age group.

From a geographical perspective NAB's Index showed New South Wales accounts for 35% of online retail spending, following by Queensland and Victoria. The strongest growth in online spending over the past two years has come from Western Australia.

The NAB Online Retail Sales Index will be produced monthly.

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.

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

With earnings season almost complete it has been a busy week for changes to broker ratings, the FNArena database showing a total of 19 upgrades and 51 downgrades to recommendations by the eight brokers covered. Total Buy ratings now stand at 52.15%, well down from 53.86% last week.

Among the upgrades were four companies where ratings were lifted by more than one broker – these were Bendigo and Adelaide Bank ((BEN)), CSL ((CSL)), David Jones ((DJS)) and Toll Holdings ((TOL)).

For Bendigo Bank, both RBS Australia and BA Merrill Lynch upgraded to Hold recommendations from Sell previously, the former as the recent profit result showed some signs of stabilisation and the latter on valuation grounds post recent share price weakness. Across the market price targets and earnings estimates for the bank were adjusted.

In contrast to a less bad result from Bendigo Bank, CSL delivered strong earnings thanks to albumin and specialty products performing well. Brokers lifted earnings estimates and price targets on the back of the result and both Macquarie and BA-ML now see enough value to upgrade to Buy ratings from Neutral previously.

For David Jones ((DLS)) it was the turn of both UBS and RBS Australia to upgrade to Neutral ratings from Sell previously, this to reflect both better value on the back of recent share price weakness and the company having better positioned itself for stronger FY13 results by clearing excess inventory.

Toll Holdings ((TOL)) has also improved its position and with potential for new contracts and some scope for positive earnings surprise relative to low expectations, both Macquarie and Deutsche Bank have upgrade to Buy ratings. This was partially offset by Credit Suisse downgrading to Neutral from Outperform on valuation grounds.

Among the other upgrades, a strong result from Ausenco ((AAX)) prompted UBS to reverse a recent downgrade and move to Buy from Sell, almost doubling its price target for the stock in the process. A similarly solid Coca-Cola Amatil ((CCL)) result, particularly given tough markets and a dispute with a key customer (Woolworths), was enough for Credit Suisse to upgrade to a Neutral view.

Emerging value following recent underperformance was enough for Citi to upgrade Oil Search ((OSH)) to Buy from Neutral, while around the market earnings estimates and price targets for the stock were largely increased following a better than expected profit result.

Super Retail Group ((SUL)) delivered one of the standout results in the consumer discretionary sector and this was enough for BA-ML to upgrade to a Buy rating, while again estimates and price targets across the market were lifted post the result.

On the downgrade side those companies copping a cut in rating from more than one broker were Charter Hall Office ((CQO)), Envestra ((ENV)), Fleetwood ((FWD)), iiNet ((IIN)), Industrea ((IDL)), Kingsgate Consolidated ((KCN)), Ramsay Health ((RHC)), Tatts Group ((TTS)), Woodside ((WPL)) and Wotif.com ((WTF)).

Valuation was behind the downgrades to both Charter Hall Office and Envestra, with both Credit Suisse and Citi seeing limited share price upside from current levels for the former even allowing for current corporate interest and RBS and Macquarie taking similar views with respect to the latter.

While Fleetwood's result was broadly as expected, the solid earnings outlook is now priced in according to RBS, a view shared by both UBS and Credit Suisse. For iiNet increasing competitive pressures means the result was a little on the disappointing side for both RBS and Credit Suisse, while both also see less relative value in the stock at current levels than was the case a few months ago.

A poor profit result from Industrea meant earnings estimate across the market have been cut significantly, which leaves the outlook for little earnings growth this unattractive when compared to peers. The earnings miss has also raised the question of management credibility in the view of BA-ML.

Kingsgate Consolidated's earnings were broadly in line with expectations but the company surprised by announcing a capital raising that prompted cuts to estimates and targets. As well, Kingsgate faces a challenging year from an operational perspective in the view of both Citi and BA-ML.

Uncertainty with respect to the outcome of proposed changes to private health insurance pose enough risks for Ramsay Health that both Macquarie and Deutsche Bank downgraded to a Neutral rating, this despite a result broadly in line with expectations. Valuation was behind the downgrade of Credit Suisse.

Limited upside potential, especially given some recent share price strength, saw both Macquarie and Citi downgrade to Sell ratings on Tatts, while less value following recent gains was enough for Citi and Credit Suisse to downgrade Woodside to Neutral from Outperform in both cases. A similar story is behind downgrades by Macquarie and BA-ML on Wotif.com, as tough market conditions suggest limited upside from current share p[rice levels.

In terms of changes to price targets, the largest increase was seen in Ausenco, as along with the near doubling in target from UBS, the likes of RBS, Macquarie and Deutsche also lifted their targets significantly.

Aside from the capital raising induced changes to targets for Kingsgate, the most significant cut in target was experienced by Alumina Ltd ((AWC)), both RBS Australia and JP Morgan cutting their targets on revisions to earnings and related commodity price estimates.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	AUSENCO LTD	Sell	Buy	UBS
2	BENDIGO AND ADELAIDE BANK LIMITED	Sell	Neutral	RBS Australia
3	BENDIGO AND ADELAIDE BANK LIMITED	Neutral	Neutral	BA-Merrill Lynch
4	BILLABONG INTERNATIONAL LIMITED	Sell	Neutral	Deutsche Bank
5	CFS RETAIL PROPERTY TRUST	Neutral	Buy	UBS
6	COCA-COLA AMATIL LIMITED	Sell	Neutral	Credit Suisse
7	COMMONWEALTH PROPERTY OFFICE FUND	Sell	Neutral	Credit Suisse
8	CSL LIMITED	Neutral	Buy	Macquarie
9	CSL LIMITED	Neutral	Buy	BA-Merrill Lynch
10	DAVID JONES LIMITED	Neutral	Neutral	RBS Australia
11	DAVID JONES LIMITED	Sell	Neutral	UBS
12	MACQUARIE ATLAS ROADS GROUP	Neutral	Buy	Deutsche Bank
13	MIRVAC GROUP	Neutral	Buy	Credit Suisse
14	OIL SEARCH LIMITED	Neutral	Buy	Citi
15	PERPETUAL LIMITED	Sell	Neutral	UBS
16	SONIC HEALTHCARE LIMITED	Neutral	Buy	Credit Suisse
17	SUPER RETAIL GROUP LIMITED	Neutral	Buy	BA-Merrill Lynch
18	TOLL HOLDINGS LIMITED	Neutral	Buy	Macquarie
19	TOLL HOLDINGS LIMITED	Neutral	Buy	Deutsche Bank
Downgrade
20	AMCOR LIMITED	Buy	Neutral	BA-Merrill Lynch
21	AMP LIMITED	Buy	Neutral	Citi
22	BILLABONG INTERNATIONAL LIMITED	Buy	Sell	Credit Suisse
23	CHALLENGER FINANCIAL SERVICES GROUP	Buy	Neutral	Citi
24	CHARTER HALL OFFICE REIT	Neutral	Sell	Credit Suisse
25	CHARTER HALL RETAIL REIT	Neutral	Neutral	UBS
26	COMMONWEALTH PROPERTY OFFICE FUND	Buy	Neutral	UBS
27	DISCOVERY METALS LIMITED	Neutral	Neutral	Citi
28	DIVERSIFIED UTILITY AND ENERGY TRUSTS	Buy	Neutral	UBS
29	DOWNER EDI LIMITED	Neutral	Sell	Credit Suisse
30	ENVESTRA LIMITED	Buy	Neutral	RBS Australia
31	ENVESTRA LIMITED	Buy	Neutral	Macquarie
32	FKP PROPERTY GROUP	Neutral	Sell	Citi
33	FLEETWOOD CORPORATION LIMITED	Buy	Neutral	RBS Australia
34	FLEETWOOD CORPORATION LIMITED	Buy	Neutral	UBS
35	FLEETWOOD CORPORATION LIMITED	Neutral	Sell	Credit Suisse
36	FLETCHER BUILDING LIMITED	Buy	Neutral	JP Morgan
37	FLIGHT CENTRE LIMITED	Buy	Neutral	UBS
38	GR ENGINEERING SERVICES LIMITED	Buy	Neutral	Macquarie
39	IINET LIMITED	Buy	Neutral	RBS Australia
40	IINET LIMITED	Neutral	Sell	Credit Suisse
41	ILUKA RESOURCES LIMITED	Buy	Neutral	UBS
42	INDUSTREA LIMITED	Buy	Sell	BA-Merrill Lynch
43	INDUSTREA LIMITED	Buy	Neutral	UBS
44	KINGSGATE CONSOLIDATED LIMITED	Buy	Neutral	RBS Australia
45	KINGSGATE CONSOLIDATED LIMITED	Neutral	Sell	Citi
46	KINGSGATE CONSOLIDATED LIMITED	Neutral	Sell	BA-Merrill Lynch
47	MACQUARIE ATLAS ROADS GROUP	Buy	Neutral	JP Morgan
48	MORTGAGE CHOICE LIMITED	Sell	Sell	UBS
49	PERSEUS MINING LIMITED	Buy	Neutral	Credit Suisse
50	RAMSAY HEALTH CARE LIMITED	Buy	Neutral	Macquarie
51	RAMSAY HEALTH CARE LIMITED	Buy	Neutral	Credit Suisse
52	RAMSAY HEALTH CARE LIMITED	Buy	Neutral	Deutsche Bank
53	REA GROUP LIMITED	Buy	Neutral	Deutsche Bank
54	SEEK LIMITED	Buy	Neutral	Macquarie
55	ST BARBARA LIMITED	Neutral	Sell	Citi
56	TATTS GROUP LIMITED	Neutral	Sell	Macquarie
57	TATTS GROUP LIMITED	Neutral	Sell	Citi
58	TATTS GROUP LIMITED	Buy	Neutral	UBS
59	TATTS GROUP LIMITED	Neutral	Sell	Credit Suisse
60	TEN NETWORK HOLDINGS LIMITED	Buy	Neutral	JP Morgan
61	TOLL HOLDINGS LIMITED	Buy	Neutral	Credit Suisse
62	TOX FREE SOLUTIONS LIMITED	Buy	Neutral	RBS Australia
63	Transpacific Industries Group Ltd	Buy	Neutral	RBS Australia
64	TREASURY WINE ESTATES LIMITED	Neutral	Sell	Macquarie
65	UNITED GROUP LIMITED	Buy	Neutral	Macquarie
66	WOODSIDE PETROLEUM LIMITED	Buy	Neutral	Citi
67	WOODSIDE PETROLEUM LIMITED	Buy	Neutral	Credit Suisse
68	WOOLWORTHS LIMITED	Neutral	Sell	Credit Suisse
69	WOTIF.COM HOLDINGS LIMITED	Buy	Neutral	Macquarie
70	WOTIF.COM HOLDINGS LIMITED	Neutral	Sell	BA-Merrill Lynch

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	AAX	25.0%	100.0%	75.0%	4
2	SYD	- 25.0%	17.0%	42.0%	6
3	MGR	43.0%	71.0%	28.0%	7
4	CSL	38.0%	63.0%	25.0%	8
5	GNC	50.0%	67.0%	17.0%	6
6	OST	57.0%	71.0%	14.0%	7
7	CFX	57.0%	71.0%	14.0%	7
8	SHL	75.0%	88.0%	13.0%	8
9	OSH	75.0%	88.0%	13.0%	8
10	GMG	63.0%	75.0%	12.0%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	KCN	60.0%	- 20.0%	- 80.0%	5
2	TTS	38.0%	- 13.0%	- 51.0%	8
3	IIN	80.0%	40.0%	- 40.0%	5
4	ENV	17.0%	- 17.0%	- 34.0%	6
5	TOX	67.0%	33.0%	- 34.0%	3
6	AMP	88.0%	63.0%	- 25.0%	8
7	WES	38.0%	13.0%	- 25.0%	8
8	WPL	38.0%	13.0%	- 25.0%	8
9	AMC	75.0%	50.0%	- 25.0%	8
10	ILU	88.0%	63.0%	- 25.0%	8

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	AAX	3.110	4.485	44.21%	4
2	REA	13.243	13.963	5.44%	7
3	EHL	1.218	1.283	5.34%	6
4	DOW	4.146	4.367	5.33%	7
5	FLT	23.448	24.660	5.17%	8
6	IIN	3.232	3.380	4.58%	5
7	TPI	0.877	0.915	4.33%	6
8	OST	1.203	1.253	4.16%	7
9	TOX	2.583	2.683	3.87%	3
10	CSL	34.293	35.516	3.57%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	KCN	8.966	7.435	- 17.08%	5
2	AWC	1.784	1.589	- 10.93%	8
3	PBG	0.737	0.672	- 8.82%	7
4	CGF	5.474	5.039	- 7.95%	7
5	BEN	8.986	8.513	- 5.26%	8
6	WES	31.961	30.335	- 5.09%	8
7	AMP	5.054	4.834	- 4.35%	8
8	SFR	8.800	8.440	- 4.09%	5
9	GFF	0.593	0.569	- 4.05%	8
10	PRU	3.853	3.712	- 3.66%	6

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	GBG	0.057	1.343	2256.14%	6
2	AIO	18.625	26.325	41.34%	8
3	AAX	27.380	33.960	24.03%	4
4	SKE	18.767	21.233	13.14%	3
5	BLY	42.214	47.184	11.77%	8
6	CTX	119.600	132.867	11.09%	6
7	MAH	7.200	7.825	8.68%	4
8	GNC	85.683	92.200	7.61%	6
9	SDM	18.500	19.867	7.39%	3
10	ASL	33.440	35.840	7.18%	5

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	AWC	1.416	0.144	- 89.83%	8
2	SFR	27.450	17.260	- 37.12%	5
3	WHC	27.717	17.550	- 36.68%	6
4	MQA	28.300	22.183	- 21.61%	6
5	GFF	6.363	5.300	- 16.71%	8
6	AIX	21.650

The Short Report

.ref1 {background-color:#B8E3F8;}

By Chris Shaw

Changes in short positions on the Australian market for the week from February 7 showed some interesting movements, as positions for some companies rose from negligible levels to more significant positions and for others they declined in a similar matter.

In terms of increases the most substantial was in Linc Energy ((LNC)), where total shorts rose to 5.75% from 3.82% previously, this despite little news from the company over the past few weeks (but a lot of share price movements, predominantly to the down side). The observed spike continues a trend that has seen shorts in Linc rise to current levels from around 1.8% the month before. Shorts also jumped in Southern Cross Media ((SXL)) to 2.3% from just more than 0.8% the week before, this increase coming prior to the group's interim result later this month.

Energy World Corporation ((EWC)) rose to near the top of the board in terms of short position increases for the week from February 7, total shorts essentially doubling to 2.68% from 1.32% the week prior.

Heading into its result this month shorts have increased for PaperlinX ((PPX)) to more than 1.8% from less than 0.7% previously, while Hastings Diversified ((HDF)) saw a similar increase to 1.88% from 0.77% previously.

Among a largely unchanged top 20, Billabong ((BBG)) saw shorts rise to 11.84% from 10.88% previously. Note this was before the company outlined plans to ease its constrained financial position and before private equity expressed interest in the retailer.

Top 20 short positions for the week ending February 7 continue to be dominated by the consumer discretionary sector given JB Hi-Fi ((JBH)), Billabong, Myer ((MYR)), David Jones ((DJS)), Flight Centre ((FLT)) Harvey Norman ((HVN)) and The Reject Shop ((TRS)) are all on the list.

Bank of Queensland ((BOQ)) scored the largest decline in shorts for the week from February 7, positions declining to 3.35% from 5.19% previously. While some asset quality and funding issues remain there continue to be brokers that see value in BOQ at current levels. More importantly, maybe, is that bank results have not been as bad as feared by sector bears. MEO Australia ((MEO)) saw the other major fall in shorts, total positions for the week declining to 0.33% from 1.84%. This week MEO announced it had acquired some 3D seismic surveys that will help define drilling locations in coming months.

In terms of monthly changes from January 13 the significant short positions in both JB Hi-Fi and Myer both declined modestly, while shorts in Rio Tinto ((RIO)) and Bathurst Resources ((BTU)) also came down by around 1.4 percentage points. Despite the decline, Rio Tinto remains in the top 20 of largest short positions.

Increases in shorts were more significant over the month, with Rialto Energy ((RIA)) seeing short positions jump from virtually none to just over 5.0%, while Linc, Lynas Corporation ((LYC)) and OneSteel ((OST)) all saw increases of more than 2.0 percentage points.

Top 20 Largest Short Positions

Rank	Symbol	Short Position	Total Product	%Short
1	JBH	21075487	98833643	21.33
2	FXJ	284038351	2351955725	12.10
3	BBG	30292609	255102103	11.84
4	MYR	69188671	583384551	11.81
5	DJS	58427589	524940325	11.11
6	ISO	579126	5403165	10.72
7	FLT	9439617	100009946	9.44
8	LYC	158092111	1714296913	9.26
9	COH	4801120	56902433	8.40
10	TRS	1804664	26071170	6.91
11	HVN	73147455	1062316784	6.89
12	WTF	14495787	211736244	6.84
13	SEK	22477184	337101307	6.65
14	OST	82098529	1342393583	6.09
15	GNS	51353845	848401559	6.02
16	CRZ	13856706	233264223	5.94
17	PPT	2428312	41980678	5.80
18	LNC	29108913	504487631	5.75
19	CSR	26201717	506000315	5.17
20	RIO	22476202	435758720	5.15

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

IMPORTANT INFORMATION ABOUT THIS REPORT

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.

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

In what may be either a barometer on reporting season to date or an indication recent market gains are making value harder to find, the FNArena database has seen 28 ratings downgrades over the past week. This compares to just eight upgrades and means total Buy recommendations now stand at 53.86%.

Among the upgrades was Commonwealth Bank ((CBA)), where Citi lifted its rating to Neutral from Sell to reflect a few factors becoming less negative than had been the case. Changes to earnings estimates meant a lift in price target and this also supported the rating upgrade.

Also scoring an upgrade by Citi was Graincorp ((GNC)), the broker moving to Buy from Neutral as the company's guidance for full year earnings came in above expectations. The guidance remains conservative in Citi's view and with valuation attractive at current levels a more positive rating is now justified. Price target was also increased.

There is also longer-term value on offer in JB Hi-Fi ((JBH)) in the view of Macquarie, who expects an eventual recovery in consumer spending and so an eventual recovery in the JB Hi-Fi share price. Others struggle to see such value, as Credit Suisse downgraded to Underperform from Neutral on the stock given an uncertain medium-term outlook and few shorter-term catalysts.

While Primary Health Care's ((PRY)) interim result missed expectations full year earnings guidance has been maintained, which was enough for both RBS Australia and Credit Suisse to adopt more positive views. Both brokers upgraded to Buy ratings from Neutral previously, with valuation the catalyst for the change following recent share price underperformance.

Interim earnings from Transfield ((TSE)) and updated full year guidance didn't prompt a lot of changes to broker models, but JP Morgan saw enough to upgrade to Overweight from Neutral. More disciplined capital use and improved efficiencies are positives, while the broker sees an expected share buyback as share price supportive as well.

AGL Energy ((AGK)) was among those stocks suffering a downgrade in rating, RBS moving to a Neutral recommendation from Buy previously. This is because while a move to acquire more of the Loy Yang A asset is likely, so too is a capital raising to pay for any such acquisition.

Alumina Ltd ((AWC)) has also been downgraded by both RBS and Credit Suisse to Neutral ratings from Buy, the former as while earnings were as expected the decision to pay a dividend rather than pay down debt was disappointing. For Credit Suisse the problem is the market and while prices mean some capacity will be removed, it will take some time for higher pricing to flow through to improved earnings for Alumina.

Credit Suisse has also downgraded both AMP ((AMP)) and ARB Corporation ((ARP)) to Neutral from Outperform recommendations, the former as the latest result showed a deterioration in balance sheet quality and the latter on valuation grounds given an elevated current earnings multiple.

For Beach Petroleum ((BPT)), Citi's downgrade to a Sell from Neutral comes despite guidance coming in well above the broker's estimate. The big concern for Citi remains the cost and viability of the Cooper Shale Gas operations, which leaves the broker preferring the likes of Santos ((STO)) in the sector.

Citi also downgraded Bunnings Warehouse Property ((BWP)) to Neutral from Buy, as while a solid profit result was posted a lack of valuation upside is likely to make any share price outperformance difficult from here.

Macquarie downgraded Carsales.com ((CRZ)) to Underperform from Outperform as post the interim result there appears to be more downside than upside risk. This largely reflects Macquarie's expectation of a market share war with rising competitor Carsguide.

David Jones ((DJS)) also offers some downside earnings risk in the view of Credit Suisse, enough for the broker to downgrade to an Underperform rating. The broker also has some shorter-term concerns given the loss of Stephen Goddard as CFO.

Still tough market conditions have seen Macquarie lower earnings estimates and price target for GWA ((GWA)). The broker has downgraded to a Neutral rating from Outperform. Valuation is the issue for James Hardie ((JHX)) according to UBS and sees a downgrade to Sell from Neutral, while RBS has downgraded Mermaid Marine ((MRM)) to Hold from Buy on the same basis.

A more cautious approach to the group's Middle East operations has been enough for Deutsche Bank to downgrade Leighton Holdings ((LEI)) to a Neutral rating from Buy previously, while tepid earnings guidance from Oakton ((OKN)) given still tough IT markets has prompted both UBS and Credit Suisse to downgrade to Neutral ratings from Buy previously.

Increased costs for non-core ventures prompted a profit warning from Mortgage Choice ((MOC)) and this was enough for UBS to downgrade to a Sell rating from Neutral. Earnings estimates were also adjusted lower, meaning a cut in price target.

Among resource plays both Oz Minerals ((OZL)) and Paladin ((PDN)) suffered two downgrades during the week, the former on valuation grounds and the latter given some concerns in the market with respect to cash generation ability leading into some debt maturities.

In the view of RBS, the slight miss with respect to earnings at Coles could put some pressure on the Wesfarmers ((WES)) share price, while Macquarie's downgrade on Westfield Group ((WDC)) reflects better value elsewhere in the sector.

Lower margins and higher costs at Royal Wolf Holdings ((RWH)) saw Macquarie downgrade forecasts and its recommendation to Neutral from Outperform, while the broker similarly downgraded its rating on Slater and Gordon ((SGH)) post what was perceived as a disappointing interim. Finally, recent share price outperformance from Tatts ((TTS)) has been enough for Deutsche Bank to downgrade to a Hold rating.

Most significant in terms of changes to price targets were increases for Domino's Pizza ((DMP)) as brokers lifted estimates on the back of a strong interim result, while targets for Alumina Ltd and Paladin both fell as lower earnings forecasts were incorporated into models.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	COMMONWEALTH BANK OF AUSTRALIA	Sell	Neutral	Citi
2	GRAINCORP LIMITED	Neutral	Buy	Citi
3	JB HI-FI LIMITED	Neutral	Buy	Macquarie
4	PRIMARY HEALTH CARE LIMITED	Neutral	Buy	RBS Australia
5	PRIMARY HEALTH CARE LIMITED	Neutral	Buy	Credit Suisse
6	TRANSFIELD SERVICES LIMITED	Neutral	Buy	JP Morgan
Downgrade
7	AGL ENERGY LTD	Buy	Neutral	RBS Australia
8	ALUMINA LIMITED	Buy	Neutral	RBS Australia
9	ALUMINA LIMITED	Buy	Neutral	Credit Suisse
10	AMP LIMITED	Buy	Neutral	Credit Suisse
11	ARB CORPORATION LIMITED	Buy	Neutral	Credit Suisse
12	BEACH PETROLEUM LIMITED	Neutral	Sell	Citi
13	BUNNINGS WAREHOUSE PROPERTY TRUST	Buy	Neutral	Citi
14	CARSALES.COM LIMITED	Buy	Sell	Macquarie
15	DAVID JONES LIMITED	Neutral	Sell	Credit Suisse
16	GWA GROUP LIMITED	Buy	Neutral	Macquarie
17	JAMES HARDIE INDUSTRIES N.V.	Neutral	Sell	UBS
18	JB HI-FI LIMITED	Neutral	Sell	Credit Suisse
19	LEIGHTON HOLDINGS LIMITED	Buy	Neutral	Deutsche Bank
20	MERMAID MARINE AUSTRALIA LIMITED	Buy	Neutral	RBS Australia
21	MORTGAGE CHOICE LIMITED	Neutral	Sell	UBS
22	OAKTON LIMITED	Buy	Neutral	UBS
23	OAKTON LIMITED	Buy	Neutral	Credit Suisse
24	OZ MINERALS LIMITED	Neutral	Sell	UBS
25	OZ MINERALS LIMITED	Buy	Neutral	Deutsche Bank
26	PALADIN ENERGY LTD	Neutral	Sell	Macquarie
27	PALADIN ENERGY LTD	Buy	Neutral	UBS
28	PRIMARY HEALTH CARE LIMITED	Neutral	Sell	Macquarie
29	PRIMARY HEALTH CARE LIMITED	Neutral	Neutral	Macquarie
30	ROYAL WOLF HOLDINGS LIMITED	Buy	Neutral	Macquarie
31	SLATER & GORDON LIMITED	Buy	Neutral	Macquarie
32	TATTS GROUP LIMITED	Buy	Neutral	Deutsche Bank
33	WESFARMERS LIMITED	Neutral	Sell	RBS Australia
34	WESTFIELD GROUP	Buy	Neutral	Macquarie

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	PRY	38.0%	63.0%	25.0%	8
2	TSE	40.0%	60.0%	20.0%	5
3	GNC	50.0%	67.0%	17.0%	6
4	CPU	57.0%	71.0%	14.0%	7
5	COH	- 38.0%	- 25.0%	13.0%	8
6	GMG	63.0%	75.0%	12.0%	8
7	AQG	50.0%	57.0%	7.0%	7
8	ROC	75.0%	80.0%	5.0%	5

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	BWP	50.0%	- 25.0%	- 75.0%	4
2	TRS	67.0%	33.0%	- 34.0%	3
3	CRZ	67.0%	33.0%	- 34.0%	6
4	PDN	71.0%	43.0%	- 28.0%	7
5	ARP	50.0%	25.0%	- 25.0%	4
6	OZL	50.0%	25.0%	- 25.0%	8
7	AWC	50.0%	25.0%	- 25.0%	8
8	GWA	50.0%	33.0%	- 17.0%	6
9	DMP	67.0%	50.0%	- 17.0%	6
10	MRM	83.0%	67.0%	- 16.0%	6

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	DMP	7.105	8.098	13.98%	6
2	COH	58.681	59.806	1.92%	8
3	MRM	3.502	3.567	1.86%	6
4	GNC	8.517	8.658	1.66%	6
5	TRS	11.617	11.767	1.29%	3
6	CBA	50.431	51.038	1.20%	8
7	LEI	23.434	23.626	0.82%	8
8	CPU	9.174	9.246	0.78%	7
9	CRZ	5.452	5.492	0.73%	6
10	TLS	3.373	3.391	0.53%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	AWC	1.784	1.589	- 10.93%	8
2	PDN	2.454	2.191	- 10.72%	7
3	TSE	2.770	2.580	- 6.86%	5
4	WES	31.961	30.549	- 4.42%	8
5	PRY	3.459	3.314	- 4.19%	8
6	AMP	5.149	4.986	- 3.17%	8
7	PBG	0.760	0.737	- 3.03%	7
8	DJS	2.713	2.656	- 2.10%	8
9	GWA	2.462	2.413	- 1.99%	6
10	AGK	16.489	16.295	- 1.18%	8

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	GBG	0.086	1.343	1461.63%	6
2	TAP	2.125	3.075	44.71%	4
3	ROC	6.009	6.536	8.77%	5
4	TAH	44.513	48.163	8.20%	8
5	GNC	85.683	92.200	7.61%	6
6	CTX	119.583	126.817	6.05%	6
7	AQG	73.818	77.711	5.27%	7
8	NCM	173.363	181.000	4.41%	8
9	PPT	134.986	140.157	3.83%	7
10	DMP	36.317	37.500	3.26%	6

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	SGM	111.971	- 10.914	- 109.75%	7
2	AQP	7.129	- 0.273	- 103.83%	5
3	AWC	1.417	0.181	- 87.23%	8
4	HZN	2.066	1.366	- 33.88%	4
5	WHC	27.717	20.317	- 26.70%	6
6	WSA	40.150	31.750	- 20.92%	6
7	GFF	6.363	5.450	- 14.35%	8
8	SAI	29.725	26.925	- 9.42%	8
9	OZL	88.271	80.663	- 8.62%	8
10	FMG	53.066	48.584	- 8.45%	8

Technical limitations

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Tough Retail Market Poses Challenges For JB Hi-Fi

- JB Hi-Fi meets revised earnings guidance
- Tough retail environment posing challenges
- Broker opinion on stock remains divided

By Chris Shaw

In a trading update in December JB Hi-Fi ((JBH)) guided to interim earnings before interest and tax of around $120 million and yesterday the company delivered a result right in line with this guidance. Interim profit came in at $120.7 million, the result reflecting a fall in like-for-like sales for the period of 3.1%.

The result was worse for mature stores, where like-for-like sales fell by 6.5%. As Credit Suisse notes, this was due to ongoing margin pressure, slow underlying top line growth and cost growth of 3-4% per year.

Costs are of increasing importance to JB Hi-Fi in the view of RBS Australia, as the broker suggests there is now little opportunity for any further lowering of the cost of doing business going forward. Given the fixed nature of major expenses, further weakening in turnover is likely to generate additional contraction in operating margins according to RBS.

This is because sales and marketing expenses appear to be at a base level of around 9% of sales, while occupancy costs are unlikely to come down further as landlords more than likely avoid offering any rent relief.

With consumers appearing to be suffering from some promotional fatigue post the Christmas period, JB Hi-Fi has revised FY12 sales guidance to a gain of 5.0%. This is slightly disappointing, as for example JP Morgan had been forecasting growth of 6.3% and median forecasts were around the 6.5% mark.

In JP Morgan's view JB Hi-Fi now faces a number of external challenges, as not only is the sales outlook in discretionary retail weak but there are the industry specific issues for consumer electronics retailers of price deflation and exposure to underperforming categories such as gaming, music and DVDs.

This won't help group margins, while JP Morgan is also cautious on the margin outlook for JB Hi-Fi given the company is maintaining its low price position despite ongoing discounting through the industry.

In such an environment JP Morgan takes the view earnings for JB Hi-Fi will remain under pressure, even allowing for positive company specific initiatives. To account for this the broker has trimmed earnings estimates by 1-6% through FY14 and in earnings per share (EPS) terms now expects outcomes of 118.2c in FY12 and 121.6c in FY13..

Others in the market have reacted similarly, RBS Australia trimming its EPS estimates by 2-6% for the same period and Macquarie by 4-7%. Consensus EPS estimates according to the FNArena database now stand at 120.8c and 126.9c for FY12 and FY13 respectively.

Post JB Hi-FI's interim result there have been some changes to broker ratings, with Credit Suisse downgrading to an Underperform recommendation from Neutral previously and Macquarie lifting its rating to Outperform from Neutral.

For Macquarie the upgrade is a valuation call, as relative to a price target of $15.96 JB Hi-Fi offers a total 12-month shareholder return of nearly 40%. This includes a dividend yield of better than 6%, fully franked.

RBS Australia agrees JB Hi-Fi remains a Buy, as the stock is the best of the discretionary retail plays in the Australian market in the broker's view. This is due to both quality of operations and management and the potential for the company to benefit from any further consolidation in the market.

But JP Morgan and now Credit Suisse disagree, both rating the stock as the equivalent of a Sell. For the former the recommendation is a reflection of the view the share price is simply unlikely to outperform while the operating environment for JB Hi-Fi remains such a challenge.

Credit Suisse offers similar reasoning, arguing the current environment is unlikely to deliver a consistent uplift in discretionary spending generally, while there are also medium-term risks to store profitability from margin pressures. For Credit Suisse this suggests market earnings estimates for JB Hi-Fi through FY15 have further to fall.

Overall the FNArena database shows JB Hi-Fi is rated as Buy twice, Sell twice and Hold four times. The consensus price target is $13.01, down from $15.53 prior to the result. Targets cover a wide range, from Macquarie at $15.96 to Credit Suisse at $10.85.

Shares in JB Hi-Fi today are slightly weaker and as at 1.45pm the stock was 4c lower at $11.99. Over the past year the stock has traded in a range of $11.10 to $20.50. The current share price implies upside of around 8.5% relative to the consensus price target in the FNArena database.

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The Short Report

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By Chris Shaw

For some time the majority of the major short positions on the Australian market have been retail stocks or those companies exposed to discretionary spending, a positioning that has been proven to be justified with the likes of JB Hi-Fi ((JBH)) reporting interim results indicating trading conditions remain very difficult.

The market has not adjusted its positioning significantly over the past week, as among the top short positions are JB Hi-Fi, Myer ((MYR)), David Jones ((DJS)), Billabong ((BBG)) and Harvey Norman ((HVN)), as well as discretionary spending plays such as Flight Centre ((FLT)) and Wotif.com Holdings ((WTF)).

Outside of retail exposed stocks, interest is in the more significant changes in short positions in recent sessions. Among the largest increases in shorts for the week from January 31 was in Linc Energy ((LNC)), where positions increased by 1.66 percentage points to 3.82%. This follows the release of the group's quarterly production report at the end of last month.

Lynas Corporation ((LYC)) also saw shorts jump by a little more than 1.6ppts to 8.79%, an increase that has continued even after the company was granted a temporary operating licence for its LAMP facility in Malaysia.

Australian Infrastructure ((AIX)) shorts increased from less than 0.4% to nearly 2.0% for the week from January 31, which may be a reflection of some concerns stemming from pressure on the group's airport assets given Hochtief is having trouble selling its stake in the Budapest and Athens airports.

Shorts also rose significantly in Kingsgate Consolidated ((KCN)), total positions jumping to 2.75% from less than 1.2% previously. This came despite a quarterly report that surprised to the upside in production terms.

The largest weekly increase in shorts came from Billabong ((BBG)), with a jump of 1.8ppts to 10.88% enough to reverse what had been a similar sized decline in short positions in the stock the previous week.

Declines in company short positions were less pronounced for the week from January 31, Fortescue leading the way with a fall of 1.96ppts to total shorts of just 1.68%. This followed a solid quarterly production report but one that showed some sign of margin slippage.

Other significant declines in short positions for the week were in Asciano ((AIO)), where shorts now stand at less than 0.9%, and in Rialto Energy ((RIA)), where shorts have again dropped below 5.4% from 6.7% previously. On a monthly basis Rialto has still seen shorts rise from almost zero to more than 5.0%, while the decline in shorts for Asciano follows a period of relative underperformance by the stock against peers.

The largest fall in weekly shorts was in ISO, a Small Ordinaries ETF derivative. Total shorts here fell by more than 5.5ppts to 11.42%.

Elsewhere among the monthly changes, OneSteel ((OST)) has seen shorts rise by 2.5ppts to 5.7% and Linc by 2.4ppts to 3.8%. The changes for OneSteel come as the company continues to deal with still difficult steel and iron ore market conditions.

The major monthly declines in shorts have been seen in Gloucester Coal ((GCL)) and QR National ((QRN)), which has been the peer performing the best relative to Asciano in recent weeks. Despite months of poor performance in share price terms, shorts in QBE Insurance ((QBE)) declined in the month from January 6 to 1.39% from 2.16% previously.

Top 20 Largest Short Positions

Rank	Symbol	Short Position	Total Product	%Short
1	JBH	21818917	98833643	22.06
2	MYR	72408624	583384551	12.37
3	FXJ	269346195	2351955725	11.49
4	ISO	617102	5403165	11.42
5	DJS	58318435	524940325	11.09
6	BBG	27818742	255102103	10.88
7	FLT	9344731	100009946	9.33
8	LYC	150716728	1713846913	8.79
9	COH	4573208	56902433	8.01
10	WTF	14197112	211736244	6.70
11	HVN	68900358	1062316784	6.48
12	TRS	1652056	26071170	6.34
13	CRZ	13981140	233264223	5.99
14	PPT	2475051	41980678	5.89
15	SEK	19892549	337101307	5.89
16	OST	76775962	1342393583	5.72
17	GNS	46938546	848401559	5.52
18	RIA	23038796	431256264	5.35
19	RIO	22749882	435758720	5.20
20	BOQ	11947637	229598329	5.19

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

IMPORTANT INFORMATION ABOUT THIS REPORT

Technical limitations

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The Short Report

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By Chris Shaw

Short positions on the Australian market recorded some significant moves in the week from January 24, the most significant being in Rialto Energy ((RIA)). Shorts in Rialto jumped from less than 0.2% to 6.7% for the week, the increase likely reflecting an equity raising announced by the company for working capital and development expenses.

Another sizable jump was seen in Paladin Energy ((PDN)), where shorts rose by 1.24% to 3.39% following a quarterly production report that was largely in line with market expectations. Asciano ((AIO)) also saw shorts rise for the week by more than 1.0% to a more significant 1.73%. this came as BA Merrill Lynch in particular saw few short-term catalysts for the stock given fewer potential coal contracts in the pipeline and a likely longer time-frame for cost outs to have some impact.

While still among the retail dominated top 10 short positions on the Australian market, Billabong ((BBG)) actually enjoyed a solid decline in shorts for the week from January 24. Total shorts in the stock declined 1.77% and now stand at just more than 9.0%.

Shorts also declined significantly for Australian Infrastructure ((AIX)), total positions down from nearly 2.0% previously to just 0.36% now despite little company specific news to explain such a change. Shorts in Kingsgate ((KCN)) fell 1.43% to 1.19% in total, a move seemingly justified by evidence from the company's quarterly report both the Chatree and Challenger projects have turned the corner in terms of performance.

While quarterly production from Whitehaven ((WHC)) disappointed somewhat, there has been a 1.36% decline in shorts to 1.61%, while Macquarie Atlas Roads ((MQA)) saw a similar fall to a total short position of 1.37%. Brokers remain of the view the outlook for MQA is closely tied to the upcoming Eiffarie refinancing.

The recent quarterly production report of Independence Group ((IGO)) contained no major surprises but short positions in the stock essentially halved to 1.24% in the week from January 24, while shorts in Charter Hall Office ((CQO)) have fallen to almost zero from 1.24% previously.

In terms of monthly changes in shorts, aside from Rialto the biggest increases were in Cochlear ((COH)), Fortescue ((FMG)) and OneSteel ((OST)). The latter two companies are both exposed to the iron ore market, where the shorter-term outlook appears more uncertain given ongoing concerns with respect to the Chinese and global economies.

There were few significant decreases in short positions over the month from December 22, while the top-20 short positions continue to be dominated by companies directly exposed to the retail sector such as JB Hi-FI ((JBH)), Myer ((MYR)) and David Jones ((DJS)) and those linked to discretionary spending in general such as Flight Centre ((FLT)), Carsales.com ((CRZ)) and Wotif.com Holdings ((WTF)).

Top 20 Largest Short Positions

Rank	Symbol	Short Position	Total Product	%Short
1	JBH	22234609	98833643	22.51
2	ISO	914555	5403165	16.93
3	MYR	72246792	583384551	12.34
4	FXJ	272400260	2351955725	11.60
5	DJS	55131985	524940325	10.50
6	FLT	9426155	100005264	9.41
7	BBG	23147131	255102103	9.07
8	COH	4666140	56902433	8.14
9	LYC	122827184	1713846913	7.15
10	RIA	25130875	375006264	6.70
11	WTF	14105918	211736244	6.66
12	RIO	26013257	435758720	5.97
13	CRZ	13878975	233264223	5.96
14	PPT	2491736	41980678	5.94
15	HVN	59978683	1062316784	5.63
16	TRS	1390659	26071170	5.33
17	GNS	45116730	848401559	5.30
18	BOQ	11727918	229598329	5.08
19	OST	64823991	1342393583	4.82
20	WSA	8165912	179735899	4.54

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

IMPORTANT INFORMATION ABOUT THIS REPORT

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.