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Weekly Broker Wrap: Global Investor Confidence Rising

By Chris Shaw

A survey of nearly 700 institutional clients by Barclays Capital has shown global investor confidence has risen significantly over the past three months. The lift reflects the expectation prospects for the US economy are likely to continue improving as well as the fact asset valuations are not a major concern at current levels.

While confidence has improved, Barclays notes clients are not overly bullish, which is acknowledgement many risks remain such as the sovereign debt crisis in Europe. The survey showed 38% of respondents expect at least one country will leave the euro zone this year. Barclays views this number, down from 50% in the same survey last year, as still uncomfortably high given the potential significance of such an outcome.

Among its clients, Barclays notes 37% view equities as likely to be the strongest performing asset class, followed by credit at 18%. This compares to December survey results that showed 34% viewed bonds as the likely best performer compared to 19% for equities.

For clients that are equity market investors, the survey showed 71% expect equity prices will increase by 5% or more by the end of this year. This measure is up from 25% last December. Only 10% of such clients expect a fall of at least 5%.

Confidence has also improved in other asset classes, with Barclays noting 39.5% of investors in credit markets expect US high yield securities to be the best performer. Foreign exchange investors see best results coming from G10 currencies, followed by emerging market commodity currencies.

While investors were also fairly confident about the coming year in the first quarter survey last year, Barclays suggests conditions are somewhat different now, as while concerns over the euro zone crisis remain they have diminished somewhat.

A positive is both within and outside the US, monetary policy is expected to remain loose, which should prove to be supportive of economic growth.

BA Merrill Lynch has conducted a similar survey, finding while global equities have risen 28% from their lows of last October, sentiment is far from overly bullish. Cash levels remain high, while March allocations to equities, Europe and Banks rose only modestly from the previous month.

From a macro perspective, BA-ML notes its survey shows investors are now pricing out fresh central bank liquidity measures, as 47% now say there will be no QE3 in the US, which is up from 36% in the previous survey. It is a similar story in Europe as 43% expect no new European Central Bank QE, up from 23% previously.

In terms of asset allocations, BA-ML notes investors remain overweight equities and commodities and are underweight bonds and cash. Among equity markets, emerging market positions remain very overweight, long US equities remains popular and underweight European equities is still the case for most investors. Allocations to Japan rose strongly from the previous month.

In the view of BA-ML, the reluctance of investors to trim emerging market allocations may partly reflect an improving macro outlook, as a net 28% of investors see the global economy strengthening over the next 12 months. This is up from 13% last month.

Among Asia Pacific investors, BA-ML notes while overweight China remains a dominant position allocations fell to a five-month low of plus 26%. Hong Kong is the next most favoured market at plus 18%. Australia remains the least loved market in the region at a minus 13% position.

With respect to the Australian market, Deutsche Bank suggests conditions for a recovery in deposit margins for the major banks are emerging, which could deliver significant upside surprise to profits going forward.

This can be explained by the correlation between falling wholesale funding costs and improving deposit spreads of 0.8x, so the recent 70-80 basis point reduction in wholesale funding costs should see deposit rates reduce, so boosting industry margins.

For every 20-basis point improvement in spreads there is a 5-7 basis point improvement in group margins, which Deutsche suggests would translate to a 3-4% upgrade in earnings per share. The broker suggests ANZ Banking Group ((ANZ)), Commonwealth Bank ((CBA)) and Westpac ((WBC)) should benefit by around the same amount from this theme, while National Australia Bank ((NAB)) would lag given its UK operations.

Among the major banks Deutsche rates ANZ and NAB as Buy, while ascribing Hold ratings to CBA and Westpac.

UBS has looked more closely at the impact of department stores on Australian REITs, especially those involved in leasing retail space. This market is significant given department stores contribute around 5% of total rent, occupy about 20% of gross lettable area and pay rent of around $200-$250 per square metre.

At present, UBS notes the two major department stores in Australia are at opposite ends of the spectrum. Myer ((MYR)) is focused on trying to optimise its store network and returning space to landlords when possible, while David Jones ((DJS)) has a relatively small current footprint but is committed to growing its store network.

By income, UBS estimates CFS Retail Property ((CFX)) has 7.5% exposure to department stores, Westfield Retail ((WRT)) 6.0%, GPT ((GPT)) 4.0% and Centro Retail ((CRF)) 2.1%. The importance of these exposure levels, in the view of UBS, is concerns from retailers on rents are unlikely to go away anytime soon.

This suggests to UBS a cautious stance on those stocks where there is no capital management or capital recycling to prove up net asset value is appropriate. Among the REITs the broker's order of preference remains Westfield Group ((WDC)) and Charter Hall Retail ((CQR)) as the top picks, following by mid-weightings on CFS Retail, GPT, Centro Retail and Westfield Retail. UBS continues to prefer CS Retail to Westfield Retail.

Still in relation to retail in Australia, BA-ML notes earnings growth for food and beverage producers and retailers has been in decline for the past two to three years, this rate of decline picking up sharply over the last six to 12 months.

While the retailers have attributed weaker earnings to cyclical factors such as adverse weather and weak consumer spending, BA-ML sees the issue as more structural. These include over-investment in an already crowded market, a large proportion of investment being on property developments and renovations and the effective entry of a new major competitor given the resurgence in Coles over the past couple of years.

BA-ML argues the consumer sector is currently experiencing margin pressure from price deflation and increasing costs, with these stemming more from over-investment than from cyclical factors. This implies a lengthy period of margin pressure for the Australian food and beverage sector.

On BA-ML's numbers, the three main food retailers in Australia need to lift earnings before interest and tax (EBIT) by around $1.3 billion over the next three years to make an acceptable rate of return. A concern in achieving this is retailers are likely to step up what are already intense efforts to boost earnings via measures such as price cuts, which could cause a worsening outlook for both consumer products and the retailers.

Given price deflation is expected to stay for at least some time, BA-ML suggests Australian consumer companies are likely to realise, at best, low single digit earnings growth over the next two to three years.

For BA-ML a key will be owners and managers adjusting growth expectations to reflect the new market reality. This means not acting in an overly ambitious manner by investing to sustain abnormal growth rates, as such action could generate material dilution to returns on investment.

BA-ML notes the leading consumer stocks in Australia – Woolworths ((WOW)), Wesfarmers ((WES)) and Coca-Cola Amatil ((CCL)) are all trading on earnings multiples of 14-15 times at present, while dividends are better than 4.5%.

A company offering 3% growth with a cost of equity of 10% and a dividend yield of around 5% should have a price to growth multiple of around 1.2 times on BA-ML's numbers. This equates to an earnings multiple of around 10 times, well below current multiples for the sector leaders. This highlights BA-ML's caution in terms of investing in the sector at current levels.

JP Morgan has reviewed its coverage of emerging companies, noting since the start of 2012 the Small Industrials accumulation index has risen 15%. This is outperformance relative to an 8% increase in the Small Resources index and the 4% and 5% gains for S&P/ASX100 Industrials and Resources indices.

In JP Morgan's view the primary reason for the recent outperformance has been earnings multiple expansion, as the Small Industrials are now trading at a premium of around 10% relative to the S&P/ASX100 Industrials on a 12-month forward basis.

Among the emerging cap stocks under coverage, JP Morgan rates Asciano ((AIX)), Aristocrat ((ALL)), Ausdrill ((ASL)), Blackmores ((BKL)), Bradken ((BKN)), Credit Corp ((CCP)), Dulux ((DLX)), Fantastic Holdings ((FAN)), Flight Centre ((FLT)), Henderson Group ((HGG)), iiNet ((IIN)), Jetset Travelworld ((JET)), Miclyn Express ((MIO)), Norfolk ((NFK)), NIB Holdings ((NHF)), Programmed Maintenance ((PRG)), QRxPharma ((QRX)), REA Group ((REA)), SAI Global ((SAI)), Silex Systems ((SLX)), Seven Group ((SVW)), Transfield Services ((TSE)), Thinksmart ((TSM)) and Wotif.com ((WTF)) as Overweight.

Among the REITs, JP Morgan has Overweight ratings on Astro Japan ((AJA)), Carindale Property Trust ((CDP)), Charter Hall Group ((CHC)) and FKP Properties ((FKP)), while for the resource plays Overweight ratings are ascribed to Australian Worldwide ((AWE)), Aston Resources ((AZT)), Grange Resources ((GRR)), Hillgrove Resources ((HGO)), PMI Gold ((PVM)), Roc Oil ((ROC)), Silver Lake ((SLR)), Venture Minerals ((VMS)) and YTC Resources ((YTC)).

Among JP Morgan's Underweight recommendations are REIT plays Bunnings Warehouse Property ((BWP)) and Charter Hall Retail and resource plays Aurora Oil & Gas ((AUT)) and Sandfire Resources ((SFR)).

Among the emerging industrials, JP Morgan is Underweight on Austar ((AUN)), Billabong ((BBG)), Envestra ((ENV)), Gunns ((GNS)), Hastie ((HST)), Matrix Composites ((MCE)), Nufarm ((NUF)) and PaperlinX ((PPX)).

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The Short Report

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By Chris Shaw

While the week from March 6 was relatively quiet in terms of changes in short positions among ASX-listed stocks, some of the changes were of interest given the companies involved.

Among the reductions in short interest of more than 1.0 percentage points were three retail plays – Myer ((MYR)), Billabong ((BBG)) and David Jones ((DJS)). All saw shorts fall to levels now around the 10% mark from more than 11% previously. Despite the falls in shorts for the three companies mentioned, top short positions in the Australian share market continue to be dominated by consumer discretionary plays. JB Hi-Fi ((JBH)), Harvey Norman ((HVN)), Flight Centre ((FLT)) and The Reject Shop ((TRS)) are still among the top-20 shorts in the market.

Among other declines in short positions for the week from March 6 was Beach Energy ((BPT)), where positions fell to 5.29% from 7.21% the week before. This was prior to the company announcing production at a project in Egypt had commenced.

Shorts in Tatts ((TTS)) fell to 1.4% from 2.69% previously, as post a solid interim result Deutsche Bank suggested the second half has started well for the company. Deutsche sees scope for some upside from the recent Tote Tasmania and Lotteries acquisitions.

QBE Insurance ((QBE)) is raising some funds to help with the recent acquisitions of Hang Seng Bank and HSBC Argentina, moves that were generally well received. Shorts have fallen to 3.25% from 4.44% previously as the market adjusts to the transactions and capital raising, though some brokers continue to have some concerns with respect to QBE's capital position. Others, however, are willing to take a more optimistic stance.

On the side of increases in shorts the most significant in the week from March 6 was registered for Singtel ((SGT)), where positions rose to 7.06% from 5.37% previously. The increases follow some broker visits and come post the acquisition of Amobee, a mobile advertising business.

The other largest increase was in Wesfarmers partly protected shares ((WESN)), where shorts rose to 2.61% from 1.56% previously. Shorts in Wesfarmers ordinary shares were largely unchanged.

In terms of monthly changes from February 13 the most significant increases were in Echo Entertainment ((EGP)) and Beach. Echo's shorts increased to more than 7.4% from less than 0.9% previously, as the market continues to question whether Crown ((CWN)) will move on the group from its current stake of around 10%. Beach's shorts have risen over the month to nearly 5.3% from 1.79% previously.

Among stocks where shorts have fallen over the past month were OneSteel ((OST)), where positions have declined to 2.9% from just over 6.0% the month before. Brokers remain positive on the company from a valuation perspective, supported by some increases to forecasts post last month's interim profit result.

Shorts in Seek ((SEK)) fell in the month to just more than 4.1% from just over 6.0% previously, this as brokers have in general lifted forecasts and price targets post the recent interim profit result. Goodman Fielder ((GFF)) also saw short positions for the month fall solidly, total positions now standing at 2.7% from 4.49% previously. The decline is likely related to Singapore agribusiness group Wilmar taking a stake of just over 10% in the company, potentially implying Goodman Fielder is in play.

Elsewhere, an increase in shorts in CSL ((CSL)) of nearly 1.4% in recent weeks to around 1.45% is significant to RBS Australia. The broker is cautious on the stock given moderating sales and growing competition and as CSL appears to be transitioning to a more research-driven organisation. This shift is likely to take time and involve a number of development challenges and regulatory risks.

Top 20 Largest Short Positions

Rank	Symbol	Short Position	Total Product	%Short
1	JBH	20692605	98850643	20.94
2	FXJ	262136108	2351955725	11.15
3	ISO	606809	5703165	10.64
4	BBG	26397994	255102103	10.29
5	DJS	52963906	524940325	10.07
6	MYR	58546325	583384551	10.02
7	FLT	9470628	100017679	9.43
8	COH	5228051	56929432	9.16
9	LYC	151906891	1714396913	8.89
10	EGP	51244627	688019737	7.44
11	GNS	62413343	848401559	7.34
12	SGT	12516986	176974336	7.06
13	WTF	14766631	211736244	6.96
14	HVN	72641318	1062316784	6.84
15	CRZ	14934741	233674223	6.36
16	TEN	63516058	1045236720	6.07
17	TRS	1577120	26071170	6.04
18	PPT	2428858	41980678	5.77
19	ILU	23052563	418700517	5.48
20	BPT	58854487	1113497051	5.29

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

Changes to broker stock ratings have slowed down significantly post the recent interim profit season, the eight brokers in the FNArena database delivering just six downgrades and nine upgrades over the past week. Note that this week marks a reversal in trend as upgrades outnumbered downgrades. Total Buy recommendations now stand at 51.83%.

Among the upgrades airline stocks feature, as Macquarie lifted its ratings on both Air New Zealand ((AIZ)) and Qantas ((QAN) to Buy. The former was an upgrade from Sell and the latter from Neutral, the changes stemming from adjustments to forex assumptions that boosted earnings estimates and price targets.

Building material stocks also featured, with Credit Suisse upgrading both Boral ((BLD)) and James Hardie ((JHX)) to Buy from Neutral recommendations previously. For Boral the broker is attracted to cyclical leverage and has lifted estimates and price target, while for James Hardie the attractions include additional capital management initiatives, strong free cash flow and a net cash position.

Elsewhere, Macquarie has upgraded Dexus ((DXS)) to Buy from Neutral given recent share price weakness, while Citi has lifted its rating on FKP Property ((FKP)) to Neutral from Sell for similar reasons as the stock has lost more than 19% over the past month.

Deutsche Bank sees enough value in Tatts Group ((TTS)) to upgrade its rating to Buy from Neutral. Along with a positive valuation, Deutsche sees potential for some upside from the recent Tote Tasmania and Lottery acquisitions.

For United Group ((UGL)) Credit Suisse has turned more positive following increases to earnings estimates across the Engineering and Construction sector. An improved earnings outlook is enough for the broker to lift United to its top pick in the sector.

Citi has reviewed the supermarket plays and lifted forecasts and price target for Woolworths ((WOW)) as a result. Scale benefits relative to Coles should provide Woolworths with an ongoing advantage in the broker's view, enough for Citi to upgrade to a Buy rating.

Among the downgrades, Macquarie has moved to a Neutral recommendation from Buy on Ampella Mining ((AMX)) citing valuation grounds, this given a cut to forecasts and price target from factoring in revised forex and commodity price assumptions.

Similarly, Macquarie has moved to a Sell rating on St Barbara ((SBM)) from Neutral previously post revisions to its model assumptions. The downgrade has been supported by a cut to the broker's price target.

Beach Energy ((BPT)) has more risks associated with the Nappamerri shale project than the market is pricing in according to BA Merrill Lynch. These risks include costs, competition and technology and see BA-ML's rating downgraded to Sell from Neutral.

BA-ML has also downgraded Carsales.com ((CRZ)) to a Neutral rating from Buy previously, largely due to valuation issues given recent share price strength. As well, the broker has some minor concerns about the recent Torpedo7 investment as it is outside the traditional focus on classifieds businesses.

Relative valuation has prompted JP Morgan to downgrade Centro Retail ((CRF)) to Neutral from Buy, this following 9% outperformance since last December. Value is also the catalyst for Macquarie's downgrade of Qube Logistics ((QUB)) to Sell from Neutral, as on the broker's numbers the stock is trading at twice the earnings multiple of the small cap index at present.

Aside from the cut to St Barbara's price target by Macquarie the major target price change during the week was for Beadell Resources ((BDR)), UBS cutting its target to $1.40 from $1.50 largely to reflect a recent equity raising.

While earnings forecasts for Sandfire Resources ((SFR)) were adjusted significantly post the recent interim result this needs be kept in perspective, JP Morgan pointing out the company remains in the development phase for its key DeGrussa project.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	AIR NEW ZEALAND LIMITED	Sell	Buy	Macquarie
2	BORAL LIMITED	Neutral	Buy	Credit Suisse
3	DEXUS PROPERTY GROUP	Neutral	Buy	Macquarie
4	FKP PROPERTY GROUP	Sell	Neutral	Citi
5	JAMES HARDIE INDUSTRIES N.V.	Neutral	Buy	Credit Suisse
6	QANTAS AIRWAYS LIMITED	Neutral	Buy	Macquarie
7	TATTS GROUP LIMITED	Neutral	Buy	Deutsche Bank
8	UNITED GROUP LIMITED	Neutral	Buy	Credit Suisse
9	WOOLWORTHS LIMITED	Neutral	Buy	Citi
Downgrade
10	AMPELLA MINING LIMITED	Buy	Neutral	Macquarie
11	BEACH PETROLEUM LIMITED	Neutral	Sell	BA-Merrill Lynch
12	CARSALES.COM LIMITED	Buy	Neutral	BA-Merrill Lynch
13	CENTRO RETAIL AUSTRALIA	Buy	Neutral	JP Morgan
14	QUBE LOGISTICS	Neutral	Sell	Macquarie
15	ST BARBARA LIMITED	Neutral	Sell	Macquarie

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	AIZ	50.0%	100.0%	50.0%	4
2	BDR	33.0%	67.0%	34.0%	3
3	FKP	50.0%	67.0%	17.0%	6
4	CDI	50.0%	67.0%	17.0%	3
5	DXS	29.0%	43.0%	14.0%	7
6	UGL	57.0%	71.0%	14.0%	7
7	WOW	25.0%	38.0%	13.0%	8
8	BLD	25.0%	38.0%	13.0%	8
9	QAN	75.0%	88.0%	13.0%	8
10	TTS	- 25.0%	- 13.0%	12.0%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	SBM	- 33.0%	- 67.0%	- 34.0%	3
2	AMX	100.0%	75.0%	- 25.0%	4
3	SFR	40.0%	20.0%	- 20.0%	5
4	ORL	60.0%	40.0%	- 20.0%	5
5	BPT	- 20.0%	- 40.0%	- 20.0%	5
6	CRZ	33.0%	17.0%	- 16.0%	6
7	CRF	33.0%	17.0%	- 16.0%	6
8	PRY	63.0%	50.0%	- 13.0%	8
9	ARP	25.0%	20.0%	- 5.0%	5

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	QAN	2.066	2.158	4.45%	8
2	ARP	8.663	8.818	1.79%	5
3	BPT	1.354	1.378	1.77%	5
4	CDI	0.573	0.583	1.75%	3
5	WOW	26.905	27.143	0.88%	8
6	CRF	1.955	1.958	0.15%	6

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	BDR	1.217	1.117	- 8.22%	3
2	SBM	2.363	2.197	- 7.02%	3
3	AMX	2.083	2.033	- 2.40%	4
4	PRY	3.314	3.289	- 0.75%	8
5	IIN	3.380	3.367	- 0.38%	6
6	TTS	2.515	2.509	- 0.24%	8
7	ORL	8.974	8.954	- 0.22%	5
8	BLD	4.430	4.425	- 0.11%	8

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	BPT	7.360	8.060	9.51%	5
2	CRF	9.600	10.383	8.16%	6
3	QAN	14.225	14.625	2.81%	8
4	TSE	23.829	24.457	2.64%	5
5	IAG	23.450	23.875	1.81%	8
6	FMG	48.439	49.138	1.44%	8
7	AIZ	3.248	3.291	1.32%	4
8	VAH	3.260	3.300	1.23%	5
9	QBE	130.464	131.907	1.11%	8
10	NUF	40.513	40.888	0.93%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	SFR	17.260	- 12.100	- 170.10%	5
2	SBM	40.433	38.300	- 5.28%	3
3	BDR	6.567	6.233	- 5.09%	3
4	IIN	25.750	24.917	- 3.23%	6
5	PBG	7.925	7.688	- 2.99%	7
6	ILU	248.038	242.525	- 2.22%	8
7	WDC	65.350	64.225	- 1.72%	8
8	WHC	17.383	17.217	- 0.95%	6
9	CSR	15.950	15.813	- 0.86%	8
10	BOQ	96.288	95.513	- 0.80%	8

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The Short Report

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By Chris Shaw

The week from February 28 saw a number of significant increases in short positions on the Australian market, while reductions in short positions were far more modest. Increases of more than five percentage points were experienced by three stocks and of more than two percentage points by eight companies, while only three companies saw short positions fall by more than one percentage point.

On the increase in short positions side the largest was in Echo Entertainment ((EGP)), total shorts increasing from a negligible 0.79% to 7.0% during the week. The change came after an interim earnings report that fell short of some expectations and was regarded in some quarters as a low quality result. Corporate activity remains a possibility with Echo but the likes of JP Morgan question whether there are enough synergies for a deal to be completed.

Beach Energy ((BPT)) saw total shorts increase to 7.21% from 1.74% previously, as while the company continues to try and develop its unconventional gas resources some brokers are cautious in terms of whether the resources can be brought to a successful financial conclusion.

Uncertain end markets remain an issue for Gunns ((GNS)) and this is reflected in short positions continuing to rise to 6.98% for the week from February 28 from 5.0% previously. Shorts also rose in QBE Insurance ((QBE)) to 4.44% from just over 3.0% previously, this coming prior to some modestly accretive acquisitions in the Hong Kong and South American markets.

Shorts increased in Mesoblast ((MSB)) post a slightly disappointing interim earnings result to 4.88% from 1.94% previously, while news of a stem cell trial by Baxter also indicates competition in the group's markets is increasing.

Having trended down in recent weeks shorts in Billabong ((BBG)) turned higher for the week from February 28, rising to 11.47% from 8.82% the previous week. This came on the back of news of Billabong management turning away interest from private equity.

Billabong has moved to number three in terms of the market's largest short positions overall, trailing only JB Hi-Fi ((JBH)) and Fairfax ((FXJ)). Consumer discretionary stocks continue to dominate overall short positions as the top 20 include Myer ((MYR)), David Jones ((DJS)), Harvey Norman ((HVN)) and the likes of Wotif.com ((WRF)) and Carsales.com ((CRZ)).

The Reject Shop ((TRS)) is another consumer discretionary stock where short positions rose for the week from February 28, increasing to 6.19% from 3.62%, while shorts in JB Hi-Fi rose for the week to 21.56% from 19.4% previously.

On the other side of the ledger shorts in Seek ((SEK)) fell to 4.51% from 5.69% in the week from February 28, this change coming post an interim profit result that was slightly better than most in the market had expected.

Shorts have also declined in both Treasury Wine Estates ((TWE)) and OneSteel ((OST)) by a little more than one percentage point for the week, to less than 2.4% for the former and to just over 3.2% for the latter.

With respect to monthly increases for the period from February 6, Iluka ((ILU)) was among the more significant as shorts rose from less than 3.6% to more than 6.1%, while shorts in Bradken ((BKN)) also increased to a more significant 3.09% from 1.21% previously.

The former may reflect the risk of weaker zircon prices if the Chinese property market falls, while for the latter the market may still be adjusting to a slightly weaker than expected interim result.

Bank of Queensland ((BOQ)) experienced one of the more significant declines in short positions for the month from February 6, falling to 3.33% from 5.36%, this despite brokers continuing to trim earnings estimates to reflect the expectation of further increases in bad debt charges.

Top 20 Largest Short Positions

Rank	Symbol	Short Position	Total Product	%Short
1	JBH	21293893	98850643	21.56
2	FXJ	276796151	2351955725	11.79
3	BBG	29367544	255102103	11.47
4	MYR	66772210	583384551	11.42
5	DJS	58619085	524940325	11.14
6	ISO	602790	5703165	10.57
7	FLT	9710768	100017679	9.68
8	COH	5364695	56929432	9.41
9	LYC	154027177	1714396913	8.99
10	BPT	80158446	1113497051	7.21
11	EGP	48132371	688019737	7.00
12	GNS	59345650	848401559	6.98
13	HVN	73307885	1062316784	6.88
14	WTF	14261629	211736244	6.73
15	CRZ	14511701	233674223	6.19
16	TRS	1616407	26071170	6.19
17	ILU	25664725	418700517	6.13
18	TEN	61383524	1045236720	5.89
19	WSA	10332252	179735899	5.76
20	PPT	2357879	41980678	5.61

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.

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

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.

Icarus Signal New Entries For Today: Aristocrat

Daily update on share prices and consensus price targets.

By Rudi Filapek-Vandyck

What do you get when you mix a big chunk of short positions with an unexpectedly positive earnings report? A big spike in share price. The current reporting season has witnessed a few... Wotif.com ((WTF)), Seek ((SEK))... and Aristocrat Leisure ((ALL)).

Witness on the price chart below how the share price spiked from below $2.60 to above $2.90, all in a matter of minutes. Problem number one is that is exactly where the average price target has settled post the event. Don't be surprised if the share price finds the easiest way forward is by retreating to lower levels, unless some trading programs out there have by now identified Aristocrat as the momentum play du jour.

It is during times of low trading volumes that these trading programs have an unusually large impact on the share market, in particular for stocks that have fallen off the radar of the wider investment populace. Think OneSteel ((OST)), for example, or Prima Biomed ((PRR)), or Gunns ((GNS)), or Bluescope Steel ((BSL)). There's nothing wrong with small traders trying to make an extra buck by jumping in and out of these stocks, as long as long term investors don't get confused and try to join that same game, with a longer term perspective.

That big jump has catapulted Aristocrat above target, a situation that may well correct itself as early as today (the shares are lower as I write this story). Now that we mention "above target", the other 51 stocks that are in a similar position prove an amalgamation of all kinds of different themes currently impacting on price action in the Australian share market. There's Caltex ((CTX)) whose share price has tried (and tried) to remain at elevated levels ever since company management announced an official review of the refinery assets. This has sparked all kinds of "what if?" upside scenarios.

The problem is, however, that review is going to take months, not days, and in the meantime it's hard to keep up the enthusiasm (while there are other opportunities such as Aristocrat).

As per always, this group of stocks contains quite a few that are affected by corporate action, rumoured or announced. Stocks such as Goodman Fielder ((GFF)), Tassal Group ((TGR)), Pacific Brands ((PBG)), Spotless Group ((SPT)), Austar ((AUN)), Maryborough Sugar ((MSF)), Treasury Wine Estates ((TWE)), Billabong ((BBG)) and Ludowici ((LDW)).

Some of the stocks in this group might as well be regarded as "regulars", such as Metcash ((MTS)), Cochlear ((COH)), Monadelphous ((MND)), SP Ausnet ((SPN)), Domino's Pizza ((DMP)), QR National ((QRN)) and Beach Petroleum ((BPT)).

And then we have a group of abandoned "dogs" whose trading momentum is attracting new interest these days. Irrespective of what ignorant market commentators have to say about these share price movements, it doesn't mean all that much. It certainly doesn't signal these stocks are now great buys for the longer term. Think OM Holdings ((OMH)), Leighton Holdings ((LEI)), Gunns ((GNS)), Murchison Metals ((MMX)).

GR Engineering ((GNG)) featured prominently in this week's Weekly Insights (check your inbox) so watch out with getting too excited about this one.

If we descent one step on Icarus' radar, we see there are as at today (price action until yesterday) 19 stocks trading near their targets, including newcomers Tishman Speyer Office Fund ((TSO)), James Hardie ((JHX)), Sigma Pharmaceuticals ((SIP)), Customers ((CUS)), Spark Infrastructure ((SKI)), Talent2 ((TWO)), APN News & Media ((APN)) and Lindsay Australia ((LAU)). These eight stocks on their own tell us a lot about what is happening in today's share market: part of the market is still chasing yield, others are positioning for corrections in a long term downtrend, while others are buying into turnaround stories.

It is possible that, apart from the continued chase for yield, I am seeking too much behind these share price moves. Maybe "momentum trades" inspired by price charts and technical indicators pretty much covers most of the story?

Investors should consider the information and data are provided for research purposes only.

Stocks <3% Below Consensus

Order	Symbol	Current Price($)	Consensus Target($)	Difference(%)
1	APN	$ 0.89	$ 0.90	1.81%
2	CUS	$ 0.91	$ 0.91	0.55%
3	JHX	$ 7.20	$ 7.22	0.29%
4	LAU	$ 0.20	$ 0.20	2.56%
5	SIP	$ 0.60	$ 0.60	0.50%
6	SKI	$ 1.40	$ 1.41	0.57%
7	TSO	$ 0.91	$ 0.91	0.00%
8	TWO	$ 0.48	$ 0.48	1.05%

Stocks Above Consensus

Order	Symbol	Current Price($)	Consensus Target($)	Difference(%)
1	ALL	$ 2.90	$ 2.66	- 8.41%
2	CTX	$ 13.26	$ 13.16	- 0.74%
3	GFF	$ 0.69	$ 0.58	- 15.18%
4	GWA	$ 2.42	$ 2.41	- 0.29%
5	MTS	$ 4.23	$ 4.20	- 0.71%
6	OMH	$ 0.40	$ 0.36	- 8.86%
7	TGR	$ 1.28	$ 1.27	- 1.02%
8	WTF	$ 4.56	$ 4.52	- 0.79%

Top 50 Stocks Furthest from Consensus

Order	Symbol	Current Price($)	Consensus Target($)	Difference(%)
1	ACL	$ 0.44	$ 0.89	104.60%
2	AJA	$ 2.03	$ 3.82	87.93%
3	ALK	$ 1.25	$ 1.92	53.60%
4	AMX	$ 1.35	$ 2.22	64.67%
5	AOH	$ 0.28	$ 0.65	132.14%
6	AQP	$ 2.02	$ 3.25	60.89%
7	AVG	$ 0.34	$ 0.63	88.06%
8	BDR	$ 0.78	$ 1.22	56.03%
9	BND	$ 0.78	$ 1.30	66.67%
10	BOL	$ 0.27	$ 0.50	88.68%
11	BSL	$ 0.42	$ 0.63	52.04%
12	BTA	$ 0.77	$ 1.79	133.99%
13	CND	$ 0.42	$ 0.74	78.31%
14	COK	$ 0.39	$ 0.68	73.08%
15	CVN	$ 0.15	$ 0.55	266.67%
16	DTE	$ 0.39	$ 1.20	211.69%
17	EVR	$ 2.26	$ 3.50	54.87%
18	FND	$ 0.42	$ 0.67	59.52%
19	GRY	$ 1.21	$ 1.95	60.99%
20	GUF	$ 0.79	$ 1.40	78.34%
21	HGO	$ 0.25	$ 0.41	67.35%
22	HST	$ 0.52	$ 1.17	124.42%
23	HTA	$ 0.05	$ 0.08	73.91%
24	IAU	$ 1.34	$ 2.03	51.72%
25	IFN	$ 0.27	$ 0.60	123.70%
26	IPD	$ 0.48	$ 1.14	137.50%
27	JET	$ 0.65	$ 0.96	48.15%
28	KGD	$ 1.04	$ 2.20	111.54%
29	KZL	$ 0.31	$ 0.46	48.39%
30	LYC	$ 1.23	$ 2.01	64.33%
31	MBN	$ 0.99	$ 1.74	75.35%
32	NCR	$ 0.33	$ 0.65	96.97%
33	NXS	$ 0.20	$ 0.30	53.85%
34	OTH	$ 0.52	$ 1.10	111.54%
35	PAN	$ 1.29	$ 2.14	66.54%
36	PEM	$ 0.44	$ 0.75	72.41%
37	PPC	$ 0.76	$ 1.33	74.74%
38	PPX	$ 0.11	$ 0.34	207.27%
39	PXS	$ 1.04	$ 1.70	63.46%
40	QRX	$ 1.84	$ 2.77	51.12%
41	RES	$ 0.41	$ 0.75	82.93%
42	RFX	$ 0.78	$ 1.62	107.69%
43	SLX	$ 3.22	$ 5.54	72.05%
44	SMR	$ 0.87	$ 1.45	66.67%
45	SYM	$ 0.11	$ 0.24	128.57%
46	TIS	$ 0.36	$ 0.82	130.99%
47	TSM	$ 0.38	$ 0.89	137.33%
48	TXN	$ 0.65	$ 1.28	96.92%
49	VMS	$ 0.33	$ 0.61	87.69%
50	YTC	$ 0.40	$ 0.70	75.00%

To see the full Icarus Signal, please go to this link

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

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

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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Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

Brokers have displayed some caution leading into the profit reporting season this month, the FNArena database showing the eight brokers providing coverage on Australian stocks have upgraded only eight ratings over the past week compared to 13 downgrades. This brings total Buy recommendations to 55.45%.

A solid quarterly update from Aston Resources ((AZT)) was enough for UBS to upgrade to a Buy rating, the broker noting progress at the Maules Creek project continues to be solid. Valuation has also improved in UBS's view given recent share price weakness.

For Automotive Holdings ((AHE) it was an acquisition that expands the group's presence in the Victorian market that was enough to spark an upgrade to a Buy rating from RBS Australia. An attractive valuation adds weight to the broker's rating.

Fletcher Building ((FBU)) was also upgraded to a Buy by RBS, this reflecting the view the outlook for a gradual improvement in conditions in the construction market should favour the value plays into the second half of this year.

Opinions on GWA ((GWA)) remain divided, as while Deutsche Bank suggests the current tough market conditions are priced in and so the stock offers value at current levels sufficient to justify an upgrade to a Buy, Credit Suisse disagrees. The latter has downgraded to Neutral from Outperform, this reflecting the view the current downturn will probably be deeper and last longer than has been expected up until now.

Deutsche also upgraded Mesoblast ((MSB)) to Buy from Hold as the company has received approval to advance to Phase II trials of its diabetes treatment. Further good news is expected in coming weeks from approval for Phase II trials of a congestive heart failure treatment.

Solid mask sales and stronger margins in the second quarter were enough for Deutsche to upgrade ResMed ((RMD)) to Buy from Hold, while both Roc Oil ((ROC)) and Tabcorp ((TAH)) scored upgrades primarily on valuation grounds. The former saw JP Morgan move to Overweight from Underweight, while the latter had Macquarie upgrade to a Neutral recommendation.

Among the downgrades the most common was Energy Resources of Australia ((ERA)), which is fast becoming an exploration company with potential projects threatened by bad weather. Concern over the future at Ranger Deeps and the lack of any potential catalysts for outperformance were behind downgrades to Sell ratings by both UBS and Credit Suisse.

A weak quarterly production report from Aquarius ((AQP)) and the expectation of at least one more quarter of the same level was enough for Citi to downgrade to a Neutral rating. The change reflects the lack of potential share price upside medium-term and valuation issues at current levels.

The lack of shorter-term catalysts were also enough for BA-Merrill Lynch to downgrade Asciano ((AIO)) to Neutral from Buy, especially given rival QR National ((QRN)) appears to have more shorter-term growth options.

Earnings headwinds across the IT sector have seen RBS cut its earnings estimates for ASG Group ((ASZ)), the prevailing headwinds enough to see the broker move to a Hold rating. It is a similar story over at Bank of Queensland ((BOQ)), where Deutsche has downgraded to a Hold rating to reflect the current lack of asset growth being achieved.

Reduced expectations for the Melbourne and Sydney office markets are behind Macquarie downgrading to an Underperform rating on Commonwealth Property Office ((CPA)), the broker also downgrading to a Neutral rating on Dexus for similar reasons.

A weak result and a resultant lowering in forecasts and confidence in coming years is enough for RBS to downgrade to sell from Buy on CSG ((CSV)). Upcoming commissioning risks at the Boseto project are enough for Deutsche to move to a Neutral rating on Discovery Metals ((DML)), while valuation issues and tough market conditions have prompted downgrades for James Hardie ((JHX)) and Regis Resources ((RRL)).

Outside of ERA the most significant change in price targets was in Alesco ((ALS)), as tough market conditions continue to outweigh any operational improvements the group is achieving. Mirabela ((MBN)) saw both its target and earnings estimates reduced after a disappointing quarterly report, while post somewhat disappointing quarterly reports from Gloucester Coal ((GCL)), Alacer Gold ((AQG)), Panoramic Resources ((PAN)) and Atlas Iron ((AGO)) brokers responded by lowering earnings estimates.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup Suisse,Deutsche<br>Bank,JP<br>Morgan,Macquarie,RBS<br>Australia,UBS&b0=119,110,123,108,92,150,187,158&h0=79,104,84,116,87,90,113,86&s0=41,18,18,8,30,23,9,16" 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	ASTON RESOURCES LIMITED	Neutral	Buy	UBS
2	AUTOMOTIVE HOLDINGS GROUP LIMITED	Neutral	Buy	RBS Australia
3	FLETCHER BUILDING LIMITED	Neutral	Buy	RBS Australia
4	GWA GROUP LIMITED	Neutral	Buy	Deutsche Bank
5	MESOBLAST LIMITED	Neutral	Buy	Deutsche Bank
6	RESMED INC	Neutral	Buy	Deutsche Bank
7	ROC OIL COMPANY LIMITED	Sell	Buy	JP Morgan
8	TABCORP HOLDINGS LIMITED	Neutral	Neutral	Macquarie
Downgrade
9	AQUARIUS PLATINUM LIMITED	Neutral	Neutral	Citi
10	ASCIANO GROUP	Buy	Neutral	BA-Merrill Lynch
11	ASG GROUP LIMITED	Buy	Neutral	RBS Australia
12	BANK OF QUEENSLAND LIMITED	Buy	Neutral	Deutsche Bank
13	COMMONWEALTH PROPERTY OFFICE FUND	Neutral	Sell	Macquarie
14	CSG LIMITED	Buy	Sell	RBS Australia
15	DEXUS PROPERTY GROUP	Buy	Neutral	Macquarie
16	DISCOVERY METALS LIMITED	Neutral	Neutral	Deutsche Bank
17	ENERGY RESOURCES OF AUSTRALIA	Buy	Sell	UBS
18	ENERGY RESOURCES OF AUSTRALIA	Sell	Sell	Credit Suisse
19	GWA GROUP LIMITED	Buy	Neutral	Credit Suisse
20	JAMES HARDIE INDUSTRIES N.V.	Buy	Neutral	RBS Australia
21	REGIS RESOURCES LIMITED	Buy	Neutral	Deutsche Bank

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	ROC	25.0%	75.0%	50.0%	4
2	AHE	50.0%	75.0%	25.0%	4
3	KCN	40.0%	60.0%	20.0%	5
4	AZT	60.0%	80.0%	20.0%	5
5	GNC	33.0%	50.0%	17.0%	6
6	MRM	67.0%	83.0%	16.0%	6
7	ORG	75.0%	88.0%	13.0%	8
8	FBU	63.0%	75.0%	12.0%	8
9	RMD	38.0%	50.0%	12.0%	8
10	CPB	14.0%	17.0%	3.0%	6

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	ERA	- 38.0%	- 63.0%	- 25.0%	8
2	RRL	75.0%	50.0%	- 25.0%	4
3	ALS	60.0%	40.0%	- 20.0%	5
4	CRZ	83.0%	67.0%	- 16.0%	6
5	WHC	83.0%	67.0%	- 16.0%	6
6	DXS	29.0%	14.0%	- 15.0%	7
7	CPA	- 29.0%	- 43.0%	- 14.0%	7
8	REA	71.0%	57.0%	- 14.0%	7
9	QAN	88.0%	75.0%	- 13.0%	8
10	MGX	25.0%	13.0%	- 12.0%	8

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	AIO	3.371	3.790	12.43%	8
2	RRL	3.618	3.975	9.87%	4
3	ROC	0.498	0.538	8.03%	4
4	KCN	8.664	8.966	3.49%	5
5	MGX	1.609	1.623	0.87%	8
6	CPA	1.007	1.013	0.60%	7
7	RMD	3.163	3.180	0.54%	8
8	AHE	2.408	2.415	0.29%	4
9	MRM	3.493	3.502	0.26%	6

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	ERA	2.403	1.444	- 39.91%	8
2	ALS	2.366	1.560	- 34.07%	5
3	FBU	7.350	6.350	- 13.61%	8
4	QAN	2.088	2.030	- 2.78%	8
5	BOQ	9.576	9.345	- 2.41%	8
6	WHC	6.980	6.840	- 2.01%	6
7	ORG	17.574	17.380	- 1.10%	8
8	AZT	11.888	11.763	- 1.05%	5
9	WBC	23.026	22.965	- 0.26%	8

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	ROC	3.109	6.011	93.34%	4
2	TAP	1.625	2.125	30.77%	4
3	BPT	4.820	5.560	15.35%	5
4	SXL	14.263	16.188	13.50%	8
5	AIO	16.438	18.625	13.30%	8
6	AWE	7.286	8.200	12.54%	7
7	BRG	29.333	32.000	9.09%	3
8	IGO	5.720	6.020	5.24%	5
9	RMD	15.139	15.740	3.97%	8
10	PPT	133.257	135.443	1.64%	7

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	MBN	0.477	- 0.199	- 141.72%	5
2	GCL	21.240	5.480	- 74.20%	5
3	AQP	16.709	7.135	- 57.30%	5
4	AQG	113.627	73.746	- 35.10%	6
5	PAN	9.925	6.800	- 31.49%	4
6	AGO	28.475	20.726	- 27.21%	8
7	MML	64.677	48.496	- 25.02%	3
8	CHC	23.467	17.800	- 24.15%	6
9	MGX	37.413	28.425	- 24.02%	8
10	ALS	22.435	17.833	- 20.51%	5

Technical limitations

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Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

Christmas is edging ever so closer but the share market is not displaying its usual tendencies to put a positive twist onto the calendar year's finish, but that doesn't stop the major stockbrokerages in Australia to continue to downgrade more stocks than to issue upgrades. The week past saw the eight brokers in the FNArena database downgrading recommendations on 16 stocks while lifting only four. Total Buy ratings now stand at 56.6%, down from 57.1% last week.

Among the upgrades was ANZ Banking Group ((ANZ)), BA Merrill Lynch upgrading to a Buy rating from Neutral on both valuation grounds and expectations Asia will provide solid growth opportunities for the bank going forward. ANZ is now the broker's top pick in the sector.

A full review of Cochlear's ((COH)) prospects sees Macquarie upgrade to an Outperform rating from Neutral, this despite cuts to earnings estimates and price target to reflect manufacturing issues, supply constraints and product recalls. The upgrade is a valuation call, Macquarie seeing the stock as attractive at current levels given recent share price weakness.

Investa Office ((IOF)) was the only play to receive two upgrades, both JP Morgan and Deutsche Bank lifting ratings to Buy from Hold previously. For JP Morgan the call is valuation inspired after recent relative underperformance, while Deutsche sees reduced execution risk and some growth prospects following offshore asset sales and a share buyback.

Deutsche has also adjusted its target for Investa slightly higher. The upgrades follow a similar move the previous week by UBS, who also identified improved value in the stock on the back of overseas asset sales.

On the downgrade side, Amcor ((AMC)) saw a cut to a Neutral rating by Citi given the current share price represents a premium on the broker's numbers. Earnings estimates were also adjusted slightly to reflect changes to forex assumptions.

Citi made a similar change with respect to Ansell ((ANN)), again on the basis the current share price is a stretch relative to valuation even allowing for the possibility current earnings guidance might turn out to be conservative. Target has been trimmed slightly.

APA ((APA)) has made an offer for Hastings Diversified ((HDF)) and this has prompted both Citi and BA-ML to downgrade ratings, the former to Neutral and the latter to Underperform. While the associated sale of AllGas is viewed positively, the possibility a higher offer may be needed and some valuation concerns post recent share price gains is enough to see both brokers adopt more conservative views. Citi has also trimmed its price target.

Commonwealth Property Office ((CPA)) has enjoyed some gains of late and this has created some valuation issues for both Credit Suisse and JP Morgan. The former has moved to an Underperform rating and the latter to a Neutral recommendation as both now see better value elsewhere in the sector.

A review by Deutsche Bank left the broker with the view competition is increasing in some of CSL's ((CSL)) markets, a concern that was enough for the broker to downgrade to a Hold rating. The downgrade also reflects recent share price outperformance, while the review generated an increase in price target.

JB Hi-Fi ((JBH)) surprised the market on Thursday by cutting earnings guidance for 1H12, citing ongoing price deflation and tough competition. Brokers have responded by cutting earnings estimates and price targets, with Citi, JP Morgan and UBS all downgrading ratings as well. JP Morgan moves to Underweight, the other two brokers to Neutral recommendations.

Valuation has been the driver of Credit Suisse's downgrade on Mirvac ((MGR)) to a Neutral rating, the broker similarly cutting its rating on Stockland ((SGP)) to Underperform following recent share price movements.

As brokers continue to adjust numbers for Telecom New Zealand ((TEL)) to account for the recent de-merger, RBS has gone a step further and downgraded to a Sell rating, this reflecting recent relative outperformance post the de-merger. The broker's target comes down to account for the split in the business.

An asset tour saw UBS adjust numbers for Wesfarmers ((WES)), the trimming of forecasts enough for a minor cut in target. Such a reaction was also seen elsewhere in the market, though UBS was the only broker to also downgrade its rating, moving to Neutral on valuation grounds.

A similar review of prospects for Ten network ((TEN)) saw Deutsche downgrade to a Sell rating, the broker now factoring in increased overall risk and volatility for earnings in the shorter-term.

Elsewhere, BA-ML has reviewed prospects for the IT sector and the result is changes to earnings estimates and price target for Oakton ((OKN)), the move following similar cuts to expectations for SMS Management and Technology ((SMX)) made by Macquarie last week.

Changes to sales assumptions for Whitehaven ((WHC)) have seen RBS Australia lower expectations and price target for the coal play, while a capital raising by Qube Logistics ((QUB)) sees brokers adjust earnings per share expectations.

Changes to expectations for Echo Entertainment ((EGP)) resulted in BA-ML lifting earnings estimates and price target for the group, while Citi has lifted earnings forecasts for Australian Worldwide Exploration ((AWE)) post a review of the Sugarloaf project.

A change in analyst at JP Morgan has resulted in some changes to price target and earnings forecasts for Charter Hall ((CHC)), while AMP's ((AMP)) strategic distribution agreement with Mitsubishi UFJ in Japan has caused some estimate and target changes across the market. Citi has further lowered earnings estimates and its price target for Ridley ((RIC)) to reflect poor weather conditions and associated operating delays.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	AUSTRALIA & NEW ZEALAND BANKING GROUP	Neutral	Buy	BA-Merrill Lynch
2	COCHLEAR LIMITED	Neutral	Buy	Macquarie
3	INVESTA OFFICE FUND	Neutral	Buy	JP Morgan
4	INVESTA OFFICE FUND	Neutral	Buy	Deutsche Bank
Downgrade
5	AMCOR LIMITED	Buy	Neutral	Citi
6	ANSELL LIMITED	Buy	Neutral	Citi
7	AUSTRALIAN PIPELINE TRUST	Buy	Neutral	RBS Australia
8	AUSTRALIAN PIPELINE TRUST	Buy	Neutral	Citi
9	AUSTRALIAN PIPELINE TRUST	Neutral	Sell	BA-Merrill Lynch
10	COMMONWEALTH PROPERTY OFFICE FUND	Buy	Neutral	JP Morgan
11	COMMONWEALTH PROPERTY OFFICE FUND	Neutral	Sell	Credit Suisse
12	CSL LIMITED	Buy	Neutral	Deutsche Bank
13	JB HI-FI LIMITED	Buy	Neutral	Citi
14	JB HI-FI LIMITED	Neutral	Sell	JP Morgan
15	JB HI-FI LIMITED	Buy	Neutral	UBS
16	MIRVAC GROUP	Buy	Neutral	Credit Suisse
17	STOCKLAND	Neutral	Sell	Credit Suisse
18	TELECOM CORPORATION OF NEW ZEALAND LIMITED	Neutral	Sell	RBS Australia
19	TEN NETWORK HOLDINGS LIMITED	Neutral	Sell	Deutsche Bank
20	WESFARMERS LIMITED	Buy	Neutral	UBS

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	IOF	50.0%	67.0%	17.0%	6
2	COH	- 38.0%	- 25.0%	13.0%	8
3	ILU	75.0%	88.0%	13.0%	8
4	EGP	63.0%	75.0%	12.0%	8
5	ANZ	38.0%	50.0%	12.0%	8
6	SGT	57.0%	67.0%	10.0%	6

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	JBH	75.0%	38.0%	- 37.0%	8
2	OKN	60.0%	40.0%	- 20.0%	5
3	MAH	67.0%	50.0%	- 17.0%	4
4	WHC	100.0%	83.0%	- 17.0%	6
5	SGP	71.0%	57.0%	- 14.0%	7
6	MGR	71.0%	57.0%	- 14.0%	7
7	TCL	100.0%	86.0%	- 14.0%	7
8	CFX	71.0%	57.0%	- 14.0%	7
9	ANN	43.0%	29.0%	- 14.0%	7
10	CSL	63.0%	50.0%	- 13.0%	8

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	ILU	20.219	20.786	2.80%	8
2	CSL	33.600	33.891	0.87%	8
3	IOF	0.678	0.683	0.74%	6
4	EGP	4.440	4.468	0.63%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	OKN	1.970	1.770	- 10.15%	5
2	JBH	17.996	16.925	- 5.95%	8
3	MAH	0.713	0.685	- 3.93%	4
4	WHC	7.090	6.980	- 1.55%	6
5	COH	54.840	54.084	- 1.38%	8
6	QUB	1.593	1.580	- 0.82%	4
7	ANZ	22.869	22.688	- 0.79%	8
8	WES	32.941	32.716	- 0.68%	8
9	TEN	1.036	1.029	- 0.68%	8
10	ANN	14.391	14.357	- 0.24%	7

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	HST	3.237	20.300	527.12%	5
2	QUB	7.800	14.075	80.45%	4
3	BPT	4.140	4.920	18.84%	5
4	AWE	6.871	7.300	6.24%	7
5	QAN	12.988	13.688	5.39%	8
6	CHC	22.800	23.467	2.93%	6
7	AMP	32.103	32.678	1.79%	8
8	HGG	15.964	16.172	1.30%	6
9	STO	59.000	59.538	0.91%	8
10	OSH	14.833	14.959	0.85%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	AZT	17.980	- 3.600	- 120.02%	5
2	WHC	37.600	31.650	- 15.82%	6
3	TEL	14.691	12.553	- 14.55%	8
4	PAN	11.475	9.925	- 13.51%	4
5	RIC	10.033	9.333	- 6.98%	3
6	TAH	47.375	44.438	- 6.20%	8
7	JBH	138.325	130.500	- 5.66%	8
8	OKN	18.620	17.640	- 5.26%	5
9	COH	220.275	210.400	- 4.48%	8
10	SMX	48.420	46.460	- 4.05%	5

Technical limitations

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