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The Short Report

By Chris Shaw

The past week has seen a number of relatively significant changes in short positions on the Australian Stock Exchange, with 10 companies seeing a change of more than 1% in their total short positions relative to the previous week.

Among those where shorts came down were Beach Energy ((BPT)), shorts here falling by 3.39% over the week to 0.60%. The change follows news the Tantanna to Gidgealpa pipeline is back online, something UBS noted would boost oil volumes for Beach.

Paladin ((PDN)), BlueScope Steel ((BSL)) and James Hardie ((JHX)) also experienced falls in short positions of more than 2% over the past week. For Paladin the change may reflect the Federal Government's proposal to end the ban on uranium sales to India, BA Merrill Lynch seeing this as increasing the pressure on those opposed to uranium mining.

BlueScope has announced a capital raising and the market has likely adjusted its views on the stock given the move will strengthen the balance sheet, while the second quarter report from James Hardie last month came in above most market expectations.

David Jones ((DJS)) has also seen shorts come down, the fall of 1.58% bringing total shorts down to 8.42%. The expected Reserve Bank of Australia rate cut announced yesterday is regarded as a potential positive for the retail sector.

Shorts in Aston Resources ((AZT)) also fell by 0.65% to 0.50% in the week from November 23, which may reflect preliminary merger discussions between Aston and Whitehaven Coal ((WHC)). UBS suggests such a merger would deliver some shared synergies.

In terms of increased short positions, the largest gain over the week from November 23 was in Campbell Brothers ((CPB)), this despite a strong interim profit result. Valuation seems a concern for Campbell Brothers, JP Morgan noting the stock is priced for a continuation of buoyant conditions in its core markets.

Shorts in White Energy ((WEC)) also rose by nearly 2% for the week to just over 3.0% in total, the market still adjusting to the announcement earlier in November of an apparent fall-out with joint venture partner and coal supplier PT Bayan.

Western Areas ((WSA) saw a jump in shorts of 1.26% to 6.7% despite the company announcing the start of underground mining at Spotted Quoll. The start of new operations is when mining companies tend to experience the most teething difficulties, so investors may be adopting a cautious approach while expecting operational hiccups.

Unlike the fall in shorts for David Jones, fellow retailer Myer ((MYR)) has seen shorts rise by 1.25% to more than 11.3% in the past week. This continues a trend of increased short positions in the stock over the past month. RBS Australia estimates Myer is currently trading at a discount to David Jones. This might explain the diverging trend between the two.

RBS also notes an increase in shorts in OM Holdings ((OMH)) over the past week, which may indicate traders continuing to position themselves ahead of an expected equity raising to help fund the Sarawak smelting project.

From a longer-term perspective of a few weeks, RBS Australia notes short positions in ASX ((ASX)) have been creeping up over the past month and now stand at around 1.36%. This is up from around 0.8% a month ago, the change possibly explained by the market accounting for softening volumes in both equities trading and new listings, as well as increasing competitive threats that are emerging.

Another major increase over the past month has been in Bank of Queensland ((BOQ)), shorts here rising from 2.88% late in October to more than 4.5% in late November. Poor credit quality in the core Queensland market has been a major market concern, though some stockbrokers feel this threat has been overplayed and so the stock is seen offering value.

Shorts in Flight Centre ((FLT)) have also risen over the past month, increasing by more than 2.0% to a total short interest of nearly 9.0%. This comes despite the most recent update from the company in early November indicating a strong outbound leisure travel market. This is causing earnings to track well above year ago levels.

Another significant increase over the past month has been to short positions in Wotif.com ((WTF)), which have risen by just over 2.5% to more than 6.2%. Over the last few weeks broker commentary on Wotif.com has reflected increasing concern over the group's growth profile as competition continues to increase.

Falls in short positions of 1-2% over the past month have been experienced by Carsales.com ((CRZ)) and Goodman Fielder ((GFF)), the latter coming at the same time as management indicated a strategic review was still being undertaken to find the best way forward for the company.

Top Ten Largest Short Positions

Rank	Symbol	Short Position	Total Product	%Short
1	FIX	209662	407763	51.42
2	BBG	28297259	255102103	11.11
3	BOQ	11865233	225369547	5.26
4	ALL	25035750	543181024	4.62
5	APN	25522616	630211415	4.03
6	ARU	10658766	367980342	2.87
7	AUT	11710494	411655343	2.82
8	ALS	2494569	94193403	2.64
9	ALK	6992475	269028158	2.60
10	ANN	2792718	131197201	2.12

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

In another week where downgrades have dominated, brokers in the FNArena database have lowered ratings on 12 stocks while upgrading just four. This brings total Buy ratings to just a touch under last week's 57.7%.

Among the upgrades was BlueScope Steel ((BSL)), Macquarie moving to an Outperform rating from Neutral on expectations the “new” BlueScope will be a closer play on the domestic economic cycle. This reflects a reduction in some loss making export operations as part of an operational restructuring.

Macquarie expects the market's confidence in BlueScope will lift as the proposed cost out story and earnings improve, which should be enough to drive a re-rating of the stock in time. Earnings and price target have been adjusted not only by Macquarie but also by the likes of JP Morgan.

A strategic review by Goodman Fielder ((GFF)) has also prompted an upgrade by Macquarie to Neutral from Underperform, the broker taking a slightly more optimistic approach to new management's proposed cost out story. Improved valuation also supports the upgrade in rating, as do increases to earnings estimates. At the same time Macquarie has trimmed its price target for the stock.

JP Morgan meanwhile has upgraded to Overweight from Neutral on Lend Lease ((LLC)), driven by what it sees as a solid medium-term earnings growth outlook and an attractive valuation at current levels. The broker has also identified some positive near-term catalysts such as new work for Valemus and good mixed-use and residential development pipelines. Forecasts and price target have also been adjusted.

Sonic Healthcare ((SHL)) enjoyed an upgrade to Neutral from Sell by UBS, the broker now adopting a more positive stance on opportunities in the UK pathology sector as outsourcing momentum increases. Factoring in the potential also saw UBS adjust its price target higher for the stock.

On the downgrade side, Aston Resources ((AZT)) has been downgraded to Neutral from Outperform by Macquarie to reflect uncertainty from board changes arising from a difference of opinion in relation to corporate strategy.

While the Maules Creek project continues to offer promise, the board issues have seen Macquarie remove a previous takeover premium, which also means a cut in price target. A similar boardroom issue at Mount Gibson ((MGX)) has also seen Macquarie downgrade to an Underperform rating from Neutral previously.

Both UBS and BA Merrill Lynch downgraded Campbell Brothers ((CPB)) during the week, both on valuation grounds to reflect recent share price gains. In both cases the brokers moved to Neutral ratings from Buy recommendations previously, though BA-ML did lift its price target slightly.

Recent outperformance was also enough for JP Morgan to downgrade Coca-Cola Amatil ((CCL)) to Neutral from Overweight, while earnings estimates have been trimmed in anticipation of another wet summer impacting on demand.

Citi's downgrade on Commonwealth Bank ((CBA)) to Sell from Neutral is based on the view a new CEO will be looking for growth avenues, so potentially putting some downward pressure on the share price. As well, Citi's view is the recent trading update by the bank implies a slow start to the new fiscal year.

A strategy day was enough to prompt RBS Australia into making minor changes to its model for Iluka ((ILU)), with earnings and price target both adjusted. While the stock now offers an attractive yield there is potentially less growth on offer, which supports the broker's move to a Hold rating. Other brokers have also adjusted earnings forecasts and targets for the stock post the update.

While Incitec Pivot's ((IPL)) full year earnings broadly met expectations Credit Suisse downgraded to a Neutral rating from Outperform, this reflecting a tempering of expectations in coming years. Price target was unchanged, so the downgrade was a valuation call by the broker. Others in the market have made modest changes to earnings forecasts and price targets.

Valuation also explains Citi's downgrade of James Hardie ((JHX)), as the company delivered a solid 2Q update with some signs of volume and margin improvement. Price targets and earnings estimates have been adjusted modestly across the market on the back of the quarterly result.

For MAp Group ((MAP)) valuation is also an issue in the view of JP Morgan, who has downgraded to Underweight from Neutral given the share price is now in line with its estimate of value. Also supportive of the downgrade is the stock is trading at a premium to the market, this despite the possibility of softer passenger numbers in coming months.

Peet ((PPC)) delivered a weak update and a lowering of earnings guidance for the full year caused brokers to quickly adjust forecasts and price targets. Both UBS and Macquarie downgraded to Neutral ratings from Outperform previously, as weak operating conditions and capital levels suggest outperformance is unlikely in the shorter-term.

In terms of other changes to broker models, earnings expectations for Lynas Corporation ((LYC)) have seen minor changes following a site visit to the LAMP facility in Malaysia, while a solid quarterly for associate companies has prompted some minor increases to earnings estimates and price target for Cabcharge ((CAB)).

A revaluation of projects has seen BA-ML make a minor increase to its price target for Santos ((STO)), while earnings forecasts for Crown ((CWN)) have also seen minor changes following a solid quarterly result from the MPEL venture in Macau.

Changes in depreciation and amortisation charges have caused Credit Suisse to lower earnings forecasts for Alacer Gold ((AQG)), while Sims Group ((SGM)) selling Australian Refined Alloys has prompted some minor model changes on the part of brokers covering the stock.

While Elders ((ELD)) delivered an improvement in full year earnings, the result still falls short of acceptable according to RBS Australia, with both RBS and Citi adjusting forecasts and price targets as a result.

A disappointing AGM update has seen Macquarie lower earnings forecasts and price target for Salmat ((SLM)), with JP Morgan and Credit Suisse also reducing their estimates. For BHP Billiton ((BHP)) a fall in price target reflects changes to commodity price assumptions from Macquarie, while Credit Suisse has also tweaked its model.

ARB Corporation ((ARP)) is expected to experience some difficulty in sourcing parts given flooding in Thailand, where most of its products are sourced. Both Macquarie and Credit Suisse have adjusted estimates, with the former also trimming its price target for the stock.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup Suisse,Deutsche<br>Bank,JP<br>Morgan,Macquarie,RBS<br>Australia,UBS&b0=124,121,128,106,90,147,195,158&h0=74,92,80,118,87,94,106,80&s0=39,16,14,6,27,21,7,12" 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	BLUESCOPE STEEL LIMITED	Neutral	Buy	Macquarie
2	GOODMAN FIELDER LIMITED	Sell	Neutral	Macquarie
3	LEND LEASE CORPORATION LIMITED	Neutral	Buy	JP Morgan
4	SONIC HEALTHCARE LIMITED	Sell	Neutral	UBS
Downgrade
5	ASTON RESOURCES LIMITED	Buy	Neutral	Macquarie
6	Campbell Brothers Limited	Buy	Neutral	BA-Merrill Lynch
7	Campbell Brothers Limited	Buy	Neutral	UBS
8	COCA-COLA AMATIL LIMITED	Buy	Neutral	JP Morgan
9	COMMONWEALTH BANK OF AUSTRALIA	Neutral	Sell	Citi
10	ILUKA RESOURCES LIMITED	Buy	Neutral	RBS Australia
11	INCITEC PIVOT LIMITED	Buy	Neutral	Credit Suisse
12	JAMES HARDIE INDUSTRIES N.V.	Buy	Neutral	Citi
13	MACQUARIE AIRPORTS	Neutral	Sell	JP Morgan
14	Mount Gibson Iron Limited	Neutral	Sell	Macquarie
15	PEET & COMPANY LIMITED	Buy	Neutral	Macquarie
16	PEET & COMPANY LIMITED	Buy	Neutral	UBS

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	ALZ	50.0%	67.0%	17.0%	6
2	LLC	71.0%	86.0%	15.0%	7
3	BSL	43.0%	57.0%	14.0%	7
4	IFL	57.0%	71.0%	14.0%	7
5	QAN	75.0%	88.0%	13.0%	8
6	BXB	63.0%	75.0%	12.0%	8
7	SHL	63.0%	75.0%	12.0%	8
8	SGT	50.0%	57.0%	7.0%	7
9	AZT	75.0%	80.0%	5.0%	5

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	PPC	100.0%	67.0%	- 33.0%	6
2	CPB	57.0%	29.0%	- 28.0%	7
3	MAP	50.0%	33.0%	- 17.0%	6
4	ILU	88.0%	75.0%	- 13.0%	8
5	IPL	63.0%	50.0%	- 13.0%	8
6	JHX	25.0%	13.0%	- 12.0%	8
7	CCL	75.0%	63.0%	- 12.0%	8
8	BLY	88.0%	86.0%	- 2.0%	7

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	AZT	12.088	12.870	6.47%	5
2	JHX	6.391	6.609	3.41%	8
3	ILU	19.938	20.456	2.60%	8
4	QAN	2.125	2.166	1.93%	8
5	LLC	9.729	9.836	1.10%	7
6	SHL	12.804	12.908	0.81%	8
7	CPB	49.024	49.327	0.62%	7
8	ALZ	2.985	2.990	0.17%	6
9	CCL	12.459	12.478	0.15%	8
10	BXB	7.601	7.608	0.09%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	PPC	1.817	1.445	- 20.47%	6
2	IPL	4.150	3.931	- 5.28%	8
3	SGT	2.820	2.700	- 4.26%	7
4	BSL	1.363	1.356	- 0.51%	7

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	AZT	25.275	39.460	56.12%	5
2	LYC	0.540	0.580	7.41%	4
3	CAB	53.333	54.450	2.09%	5
4	JHX	29.712	30.223	1.72%	8
5	CHC	22.467	22.800	1.48%	6
6	IPL	32.054	32.413	1.12%	8
7	CPB	283.886	286.857	1.05%	7
8	STO	61.163	61.775	1.00%	8
9	CWN	54.025	54.525	0.93%	8
10	MAP	7.259	7.287	0.39%	6

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	PPC	12.833	7.108	- 44.61%	6
2	GBG	1.157	0.771	- 33.36%	6
3	AQG	67.394	59.400	- 11.86%	5
4	SGM	128.943	115.414	- 10.49%	7
5	ELD	5.525	5.000	- 9.50%	3
6	SLM	35.350	32.017	- 9.43%	6
7	SFH	8.520	8.120	- 4.69%	5
8	AIO	10.025	9.650	- 3.74%	8
9	BHP	418.629	403.328	- 3.66%	8
10	ARP	57.225	55.625	- 2.80%	4

Technical limitations

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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

The past week has proven to be a more balanced one for broker rating changes, the eight brokers in the FNArena database upgrading five ratings while downgrading seven stocks. Total Buy ratings now stand at 57.7%.

Among the upgrades was RBS Australia lifting its rating on Collection House ((CLH)) to Buy from Hold post a trading update that showed ongoing earnings momentum. While an equity raising is expected the size should be modest and given the move will reduce balance sheet leverage RBS sees the decision as a positive.

Also upgraded during the week was Computershare ((CPU)) after the company announced it had received approval for the acquisition of BNY Mellon Shareowner Services. Macquarie saw the announcement as enough of a positive to move to an Outperform rating from Underperform previously, given the long-term growth the deal should deliver.

Brokers across the market have adjusted earnings estimates and price targets for Computershare, not only to reflect the acquisition and two other small bolt-on deals, but to also include AGM earnings guidance that implied still weak operating conditions.

UBS upgraded Myer ((MYR)) post a quarterly sales result that met expectations, which for the broker implies evidence of some form of positive momentum building into the Christmas sales period. While no other ratings were adjusted brokers in general lifted earnings estimates and price targets for Myer on the back of the sales result.

An upgrade to Outperform from Neutral for Qantas ((QAN)) by Macquarie is a reflection of a de-risking of the earnings profile, this following some industrial resolutions. Macquarie has also lifted its price target but lowered earnings for FY12 to account for the airline paying compensation to passengers impacted by the recent grounding.

On the downgrade side of the ledger, Australian Pipeline Trust ((APA)) saw two downgrades during the week, Macquarie and Credit Suisse moving to Neutral ratings from Outperform previously to account for a less attractive valuation following recent gains for the former and a sector review by the latter.

Credit Suisse similarly downgraded Diversified Utility and Energy Trusts ((DUE)) to Neutral from Outperform as part of its sector review, while Macquarie has downgraded SP Ausnet ((SPN)) to Neutral from Outperform on the back of a fall in price target. The change reflects cuts to earnings forecasts to account for higher interest costs and a delay to some earnings.

Citi downgraded CSR ((CSR)) to Neutral from Buy post the interim earnings result, this as management downgraded the outlook for coming periods at the time of the result. Cuts to earnings estimates and price targets reflect ongoing headwinds, a theme identified also by others in the market.

Expectations of further falls in employment advertisement volumes have seen BA Merrill Lynch downgrade Seek ((SEK)) to Neutral from Buy, the move accompanied by cuts to earnings estimates and price target. As BA-ML points out, the current share price implies an unemployment rate of 6.0% for Australia, meaning there is downside risk if conditions in the labour market worsen beyond this level.

Citi has moved to Neutral from Buy on White Energy ((WEC)) to reflect uncertainty from news JV partner and coal supplier PT Bayan plans to increase the cost of feedstock coal. The move means increased risk to production expectations at the Tabang plant and so creates enough uncertainty for Citi to take a more cautious stance. The share price tanked following the news.

Ongoing uncertainty as to the full extent of recall issues for Cochlear ((COH)) has prompted Credit Suisse to downgrade to an Underperform rating from Neutral previously. The removal of a previous multiple premium sees the broker lower its price target for the stock as well.

With Citi initiating coverage on Miclyn Offshore ((MIO)) with a Buy rating and $2.15 price target overall ratings and the consensus target for the company have improved, while targets for Brambles have been adjusted slightly post a solid quarterly trading update.

One consequence of the industrial issues at Qantas is an increase to earnings estimates for Virgin Blue ((VBA)) as both BA-ML and JP Morgan expect earnings to receive a boost from the company having picked up additional traffic in recent months.

Better than expected interim guidance from Seven Group ((SVW)) has seen earnings forecasts lifted across the market, while signs of a recovery for Macmahon ((MAH)) have prompted Macquarie to lift its full year numbers.

JP Morgan now sees a better US market outlook for Aristocrat ((ALL)) and has adjusted its numbers accordingly, while Telecom New Zealand ((TEL)) has seen some minor changes to valuation models leading into structural separation.

The announcement of $50 million in losses related to the flooding in Thailand has led to brokers lowering earnings estimates for Insurance Australia ((IAG)), while commissioning delays have caused Deutsche Bank to lower forecasts for Lynas Corporation ((LYC)). A similar delay to first shipments from Karara have prompted cuts to earnings estimates and price targets for Gindalbie ((GBG)).

Weak interim guidance was enough for brokers to lower forecasts for Perpetual ((PPT)), while difficult trading conditions have seen Credit Suisse trim forecasts for Boral ((BLD)). Orica ((ORI)) has also seen earnings estimates lowered to reflect additional costs stemming from the forced shutdown of the Kooragang ammonia storage facility.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	COLLECTION HOUSE LIMITED	Neutral	Buy	RBS Australia
2	COMPUTERSHARE LIMITED	Sell	Buy	Macquarie
3	MYER HOLDINGS LIMITED	Neutral	Buy	UBS
4	QANTAS AIRWAYS LIMITED	Neutral	Buy	Macquarie
Downgrade
5	AUSTRALIAN PIPELINE TRUST	Buy	Neutral	Credit Suisse
6	CSR LIMITED	Neutral	Neutral	Citi
7	DIVERSIFIED UTILITY AND ENERGY TRUSTS	Buy	Neutral	Credit Suisse
8	SEEK LIMITED	Buy	Neutral	BA-Merrill Lynch
9	SP AUSNET	Buy	Neutral	Macquarie
10	SP AUSNET	Buy	Neutral	UBS
11	WHITE ENERGY COMPANY LIMITED	Buy	Neutral	Citi

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	CPU	14.0%	57.0%	43.0%	7
2	BXB	63.0%	75.0%	12.0%	8
3	MYR	13.0%	25.0%	12.0%	8
4	MIO	67.0%	75.0%	8.0%	4

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	APA	63.0%	38.0%	- 25.0%	8
2	SEK	88.0%	75.0%	- 13.0%	8
3	COH	- 25.0%	- 38.0%	- 13.0%	8
4	MRM	80.0%	67.0%	- 13.0%	6
5	DUE	50.0%	38.0%	- 12.0%	8
6	TSE	50.0%	40.0%	- 10.0%	5
7	SGT	50.0%	43.0%	- 7.0%	7

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	CPU	8.526	9.277	8.81%	7
2	MIO	1.970	2.015	2.28%	4
3	MYR	2.509	2.563	2.15%	8
4	BXB	7.581	7.626	0.59%	8
5	APA	4.430	4.443	0.29%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	TSE	2.922	2.788	- 4.59%	5
2	MRM	3.500	3.433	- 1.91%	6
3	COH	55.315	54.840	- 0.86%	8
4	DUE	1.796	1.785	- 0.61%	8
5	SEK	7.309	7.265	- 0.60%	8

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	VBA	2.614	2.871	9.83%	7
2	SVW	78.100	81.900	4.87%	4
3	MAH	5.800	5.933	2.29%	3
4	ORI	195.563	199.613	2.07%	8
5	ALL	10.688	10.863	1.64%	8
6	MIO	21.072	21.377	1.45%	4
7	TEL	18.347	18.532	1.01%	8
8	EGP	20.538	20.725	0.91%	8
9	APA	19.163	19.288	0.65%	8
10	IAG	26.725	26.875	0.56%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	LYC	0.850	0.540	- 36.47%	4
2	GBG	1.157	0.771	- 33.36%	6
3	IGO	15.760	12.820	- 18.65%	5
4	DUE	11.169	9.569	- 14.33%	8
5	PPT	154.100	135.400	- 12.13%	7
6	OST	17.043	15.114	- 11.32%	7
7	CSR	17.525	16.225	- 7.42%	8
8	CPU	54.560	51.497	- 5.61%	7
9	PRU	23.600	22.517	- 4.59%	6
10	BLD	26.550	25.425	- 4.24%	8

Technical limitations

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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

The tide appears to have well and truly turned in favour of ratings downgrades on the Australian market, as over the past week brokers in the FNArena database have pushed through 18 cuts in ratings compared to just four upgrades. This brings total Buy ratings to 57.6%, down from 58.2% previously.

A resilient interim earnings result from Macquarie Bank ((MQG)) was enough for BA Merrill Lynch to upgrade to a Buy rating, the change also a reflection of what the broker sees as strong valuation support at current levels.

As BA-ML points out, if current funding sources prove sustainable the value available from annuity-style income alone is enough to justify most of the current market value of the bank. This implies upside when an improvement in market conditions boosts earnings in other divisions. Others in the market have adjusted forecasts and price target for Macquarie post its profit result.

QR National ((QRN)) was also upgraded, Deutsche Bank moving to a Buy rating from the potential for upside to volumes, which should translate into increased earnings. Further justifying the upgrade in rating was Deutsche's new numbers translate to an increase in price target.

BA-ML also upgraded Santos (STO)) to Buy during the week, this following a review of its model resulting in a revaluation of the group's assets. While the value of the GLNG assets were reduced, this has been offset by increases to the value of the Cooper gas assets.

Expected price tension in gas markets in the coming year should be a further positive and support BA-ML's upgrade. Price target has also been increased modestly. Credit Suisse went the other way, downgrading Santos to Neutral on the back of recent share price outperformance.

A restructuring of debt and a capital raising by Transpacific Industries ((TPI)) has seen both RBS Australia and Credit Suisse upgrade to Buy ratings from Hold previously. The improved balance sheet removes some headwinds in the view of RBS, while management will be able to focus on operational rather than financial issues and this should boost the company's financial performance according to Credit Suisse.

On the downgrades side, OneSteel's ((OST)) revision to earnings guidance on the back of lower iron ore prices saw brokers cut earnings forecasts and price targets significantly. Both Deutsche Bank and RBS Australia downgraded ratings to Sell and Hold respectively, reflecting concerns over debt covenants and ongoing tough market conditions.

While quarterly production for Aquila Resources ((AQA)) was solid, RBS Australia has still downgraded to a Sell rating, this reflecting the broker's concern over the company's ability to raise sufficient cash to meet its development ambitions. This implies a capital raising is a possibility in coming months.

A similarly disappointing production report from Kingsgate ((KCN)) saw both Deutsche and Citi downgrade the stock to Hold from Buy previously, with targets and earnings estimates cut accordingly. A disappointing quarterly from Paladin ((PDN)) was also enough for RBS to downgrade to Hold from Buy, with earnings and price target also reduced.

Australian Pipeline Trust ((APA)) has been downgraded on valuation grounds by Macquarie following recent share price gains, while valuation has seen Credit Suisse make the same shift to Hold from Buy on Australian Worldwide Exploration ((AWE)) while RBS Australia issued a similar downgrade for Consolidated Media ((CMJ)).

UBS also downgraded Mirvac ((MGR)) to a Hold following a review of sector valuations, while Citi resumed coverage on Spotless ((SPT)) with a downgrade to a Neutral rating as tough market conditions have caused the broker to lower earnings expectations. Price target was also reduced.

Ongoing increases to the N5 implant failure rate have Credit Suisse concerned enough about Cochlear ((COH)) to downgrade to an Underperform rating on the stock, with the broker also cutting its price target.

Ongoing tough market conditions are behind Deutsche Bank downgrading to Hold from Buy on CSR ((CSR)), the broker also lowering earnings estimates and price target leading into the company's interim profit result. James Hardie ((JHX)) was downgraded by both Credit Suisse and JP Morgan, in both cases the rating moving to Underperform from Neutral.

Harvey Norman ((HVN)) copped two ratings downgrades to Neutral from Outperform post a 1Q sales result that showed the company has had to sacrifice margins to defend market share. Brokers across the market also lowered earnings estimates and price targets for the stock on the back of the report.

For Iron Road ((IRD)) it was a review of magnetite projects and changes to foreign exchange assumptions that saw RBS Australia downgrade to a Hold rating from Buy, the broker's price target also being reduced.

Tatts ((TTS)), GPT ((GPT)) and Blackmores ((BKL)) were also downgraded during the week, with valuation the key factor in the decisions of brokers to lower ratings for the three stocks, while tough ad market conditions saw forecasts, price target and rating for Ten Network ((TEN)) lowered by RBS.

Earnings and price targets for AMP ((AMP)) were trimmed to reflect weak fund flows in the September quarter, while construction delays have pushed out earnings expectations for Lynas ((LYC)) and this has resulted in Deutsche Bank also trimming its price target for the stock.

A mixed quarterly result has seen earnings estimates and price targets revised for Independence Group ((IGO)), while earnings expectations for Qantas ((QAN)) have come down to account for the impact of the grounding of the group's fleet and the industrial action of recent weeks.

Slightly lower than expected production for OceanaGold ((OGC)) has seen a trimming of earnings estimates and price targets, while it has been a similar story for earnings expectations for Horizon Oil ((HZN)) post its quarterly.

On a more positive note, earnings expectations for Campbell Brothers ((CPB)) have been lifted slightly following two bolt-on acquisitions by the company, while National Australia Bank's ((NAB)) result was enough to see minor increases to earnings estimates. Forecasts for Miclyn Offshore ((MIO)) have also moved higher as the company is to acquire the balance of Samson Marine it doesn't already own.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup Suisse,Deutsche<br>Bank,JP<br>Morgan,Macquarie,RBS<br>Australia,UBS&b0=125,119,129,104,88,144,193,159&h0=73,92,77,118,88,94,106,77&s0=39,15,14,6,26,22,7,13" 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	MACQUARIE GROUP LIMITED	Neutral	Buy	BA-Merrill Lynch
2	QR NATIONAL	Neutral	Buy	Deutsche Bank
3	SANTOS LIMITED	Neutral	Buy	BA-Merrill Lynch
4	Transpacific Industries Group Ltd	Neutral	Buy	RBS Australia
Downgrade
5	AQUILA RESOURCES LIMITED	Neutral	Sell	RBS Australia
6	AUSTRALIAN PIPELINE TRUST	Buy	Neutral	Macquarie
7	AUSTRALIAN WORLDWIDE EXPLORATION LIMITED	Buy	Neutral	Credit Suisse
8	COCHLEAR LIMITED	Neutral	Sell	Credit Suisse
9	CONSOLIDATED MEDIA HOLDINGS LIMITED	Buy	Neutral	RBS Australia
10	CSR LIMITED	Buy	Neutral	Deutsche Bank
11	HARVEY NORMAN HOLDINGS LIMITED	Buy	Neutral	Citi
12	HARVEY NORMAN HOLDINGS LIMITED	Buy	Neutral	Credit Suisse
13	IRON ROAD LIMITED	Buy	Neutral	RBS Australia
14	JAMES HARDIE INDUSTRIES N.V.	Neutral	Sell	Credit Suisse
15	KINGSGATE CONSOLIDATED LIMITED	Buy	Neutral	Citi
16	KINGSGATE CONSOLIDATED LIMITED	Buy	Neutral	Deutsche Bank
17	MIRVAC GROUP	Buy	Neutral	UBS
18	ONESTEEL LIMITED	Buy	Neutral	RBS Australia
19	ONESTEEL LIMITED	Neutral	Sell	Deutsche Bank
20	PALADIN ENERGY LTD	Buy	Neutral	RBS Australia
21	SANTOS LIMITED	Buy	Neutral	Credit Suisse
22	SPOTLESS GROUP LIMITED	Buy	Neutral	Citi

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	TPI	17.0%	50.0%	33.0%	6
2	MQG	43.0%	57.0%	14.0%	7
3	AMP	75.0%	88.0%	13.0%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	KCN	60.0%	20.0%	- 40.0%	5
2	BKL	67.0%	33.0%	- 34.0%	3
3	OST	86.0%	57.0%	- 29.0%	7
4	HVN	50.0%	25.0%	- 25.0%	8
5	TTS	57.0%	38.0%	- 19.0%	8
6	GPT	50.0%	33.0%	- 17.0%	6
7	AWE	86.0%	71.0%	- 15.0%	7
8	MGR	86.0%	71.0%	- 15.0%	7
9	SIP	- 14.0%	- 29.0%	- 15.0%	7
10	CMJ	57.0%	43.0%	- 14.0%	7

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	TPI	0.842	0.872	3.56%	6
2	MQG	30.611	30.999	1.27%	7
3	CWN	10.263	10.350	0.85%	8
4	SIP	0.583	0.587	0.69%	7
5	MGR	1.369	1.371	0.15%	7

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	OST	2.104	1.619	- 23.05%	7
2	HVN	2.558	2.321	- 9.27%	8
3	KCN	9.444	8.804	- 6.78%	5
4	PDN	2.456	2.333	- 5.01%	7
5	TEN	1.090	1.036	- 4.95%	8
6	AMP	5.244	5.141	- 1.96%	8
7	TTS	2.410	2.363	- 1.95%	8
8	NWS	18.720	18.483	- 1.27%	7
9	COH	55.315	54.840	- 0.86%	8
10	CSR	2.805	2.798	- 0.25%	8

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	IMD	20.467	22.040	7.69%	3
2	AIX	22.300	23.033	3.29%	6
3	DMP	35.250	36.317	3.03%	6
4	FLT	185.338	188.838	1.89%	8
5	NAB	265.138	267.775	0.99%	8
6	MIO	20.904	21.070	0.79%	3
7	NWS	130.886	131.913	0.78%	7
8	CPB	282.029	283.886	0.66%	7
9	CTX	115.817	116.483	0.58%	6
10	BPT	4.040	4.060	0.50%	5

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	PDN	2.074	- 1.623	- 178.25%	7
2	LYC	4.475	0.850	- 81.01%	3
3	IGO	24.334	12.820	- 47.32%	5
4	AQP	31.065	16.798	- 45.93%	5
5	OST	24.343	15.114	- 37.91%	7
6	QAN	20.513	15.075	- 26.51%	8
7	AWE	8.857	6.871	- 22.42%	7
8	OGC	18.673	15.449	- 17.27%	3
9	HZN	2.720	2.425	- 10.85%	4
10	TEN	7.963	7.204	- 9.53%	8

Technical limitations

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Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

For the second week in a row downgrades from the eight brokers in the FNArena database have outnumbered upgrades, this week by a score of 12 to three. This brings total Buy recommendations to 58.7%, down from last week's 59.3%.

Among the few receiving an upgrade this week were Cardno ((CDD)), Macquarie lifting its rating to Outperform from Neutral on the back of the company announcing the acquisition of TEC in the US. The new assets are seen as a good fit with existing operations and should boost earnings.

Macquarie also upgraded fund manager Henderson Group ((HGG)) to Neutral from Underperform on valuation grounds. Looking through short-term market headwinds suggest the stock is attractive even post some cuts to earnings estimates, while a 6% dividend yield is also viewed positively by the broker.

Toll Holdings ((TOL)) was also upgraded by Macquarie to Neutral from Underperform, this change also reflecting an improved valuation for the stock at current levels. A review of its model saw Macquarie make minor changes to earnings forecasts and price target.

On the resources side, an initiation of coverage by UBS with a Buy rating on Atlas Iron ((AGO)) has lifted overall ratings for the stock, while bringing about a minor reduction in consensus price target given UBS set a lower target than others in the FNArena database.

Among the companies where ratings were downgraded was Super Retail Group ((SUL)), Citi, BA Merrill Lynch and Credit Suisse all downgrading to Neutral ratings from Buy previously on the back of the purchase of the Rebel Sport assets.

The general view is that the assets being acquired are not top quality and a full price is being paid, while the magnitude of the deal also changes Super Retail's risk profile going forward. Price targets have thus been reduced on the back of the acquisition, while earnings estimates have been adjusted lower to reflect earnings dilution from a share issue to pay for part of the purchase.

While a soft retail environment won't help Super Cheap succeed with the Rebel Sport purchase, it has also seen Deutsche Bank downgrade to a Hold rating on Carsales.com ((CRZ)), the broker also lowering earnings estimates as well as its price target.

It is a similar story for the likes of Computershare ((CPU)) with RBS downgrading to a Hold rating on valuation grounds given tough operating conditions, Credit Suisse downgrading on Aristocrat Leisure ((ALL)) to an Underperform rating and Macquarie downgrading to a Neutral rating on Ten Network ((TEN)) - all on the same basis.

Tough conditions saw Fletcher Building ((FBU)) lower earnings guidance and brokers responded by cutting forecasts and price targets accordingly. Only Macquarie saw fit to downgrade to a Neutral rating from Outperform, the broker arguing the tough environment makes outperformance for the shares unlikely in the shorter-term.

Oz Minerals ((OZL)) also copped a downgrade to a Neutral rating from Credit Suisse post a quarterly production report that disappointed on the gold side, while Deutsche Bank downgraded Energy Resources of Australia (ERA) to Hold on the back of an unexpected rights issue. Rio Tinto ((RIO)) is underwriting the capital raising and is likely to boost its equity ownership past 80% as a result.

Changes in price targets were largely tied to changes in earnings estimates for the industrial plays such as Cardno and Toll Holdings, while for resources stocks such as ERA, Oz Minerals and PanAust ((PNA)) the changes tended to reflect either production reports falling short of expectations or adjustments to commodity price assumptions by brokers.

The consensus target for Jetset Travelworld ((JET)) has fallen as UBS's initiation added a lower target than those already in the market.

Changes to earnings forecasts for Macquarie Airports ((MAP)) were modest following September traffic data, while a better performance on costs contributed to increases to earnings forecasts for Fortescue Metals ((FMG)).

Estimates for Caltex ((CTX)) moved slightly higher as broker models were updated for the latest refiner margins, while better volumes and cost performance saw estimates lifted for mineral sands play Iluka ((ILU)).

Cochlear (COH)) continues to struggle from an earnings perspective given uncertainty with respect to total costs relating to its hearing implant recall, while a slower than expected ramp-up of some operations has led to Macquarie trimming estimates for Beach Energy ((BPT)).

For Bank of Queensland ((BOQ)) full year earnings were a little lower than expected and so estimates have been trimmed, the changes also impacting on price targets for brokers in the database. BHP Billiton ((BHP)) and Customers ((CUS)) also experienced minor changes to earnings estimates over the week.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	CARDNO LIMITED	Neutral	Buy	Macquarie
2	MINCOR RESOURCES NL	Sell	Neutral	UBS
3	SINGAPORE TELECOMMUNICATIONS LIMITED	Neutral	Buy	JP Morgan
4	TOLL HOLDINGS LIMITED	Sell	Neutral	Macquarie
Downgrade
5	CARSALES.COM LIMITED	Buy	Neutral	Deutsche Bank
6	COMPUTERSHARE LIMITED	Buy	Neutral	RBS Australia
7	CSG LIMITED	Buy	Neutral	RBS Australia
8	IRESS MARKET TECHNOLOGY LIMITED	Buy	Neutral	Credit Suisse
9	OZ MINERALS LIMITED	Buy	Neutral	UBS
10	OZ MINERALS LIMITED	Buy	Neutral	Credit Suisse
11	PRIMARY HEALTH CARE LIMITED	Buy	Neutral	Credit Suisse
12	SUPER RETAIL GROUP LIMITED	Buy	Neutral	Citi
13	SUPER RETAIL GROUP LIMITED	Buy	Neutral	BA-Merrill Lynch
14	SUPER RETAIL GROUP LIMITED	Buy	Neutral	Credit Suisse
15	TEN NETWORK HOLDINGS LIMITED	Buy	Neutral	Macquarie
16	TREASURY WINE ESTATES LIMITED	Buy	Neutral	Deutsche Bank
17	WESFARMERS LIMITED	Buy	Neutral	Credit Suisse
18	WESTERN AREAS NL	Buy	Neutral	UBS

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	CDD	33.0%	67.0%	34.0%	3
2	TOL	25.0%	38.0%	13.0%	8
3	SGT	40.0%	50.0%	10.0%	6
4	TTS	50.0%	57.0%	7.0%	7
5	AGO	71.0%	75.0%	4.0%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	SUL	100.0%	33.0%	- 67.0%	6
2	OZL	88.0%	63.0%	- 25.0%	8
3	CRZ	100.0%	83.0%	- 17.0%	6
4	JET	67.0%	50.0%	- 17.0%	4
5	CPU	29.0%	14.0%	- 15.0%	7
6	TWE	- 14.0%	- 29.0%	- 15.0%	7
7	WES	63.0%	50.0%	- 13.0%	8
8	TEN	50.0%	38.0%	- 12.0%	8
9	SVW	60.0%	50.0%	- 10.0%	4
10	FGL	- 13.0%	- 14.0%	- 1.0%	7

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	TWE	3.376	3.390	0.41%	7
2	TOL	5.254	5.275	0.40%	8
3	CDD	6.190	6.203	0.21%	3
4	SVW	9.314	9.318	0.04%	4
5	TTS	2.409	2.410	0.04%	7

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	JET	1.050	0.988	- 5.90%	4
2	SUL	7.297	6.996	- 4.12%	6
3	OZL	13.641	13.169	- 3.46%	8
4	TEN	1.105	1.090	- 1.36%	8
5	WES	33.108	32.941	- 0.50%	8
6	CRZ	5.477	5.452	- 0.46%	6
7	CPU	8.550	8.526	- 0.28%	7

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	PDN	1.753	2.075	18.37%	7
2	MAP	6.187	7.259	17.33%	6
3	GBG	1.014	1.157	14.10%	6
4	STO	56.425	61.125	8.33%	8
5	WPL	204.950	216.917	5.84%	8
6	FMG	66.736	70.301	5.34%	8
7	GNM	6.600	6.933	5.05%	3
8	GCL	47.800	50.200	5.02%	5
9	NCM	217.229	222.250	2.31%	8
10	AWC	5.777	5.897	2.08%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	PAN	16.450	11.475	- 30.24%	4
2	OZL	113.513	95.200	- 16.13%	8
3	COH	255.638	220.275	- 13.83%	8
4	MQA	9.683	8.433	- 12.91%	6
5	WSA	53.667	48.700	- 9.26%	6
6	PRU	25.433	23.600	- 7.21%	6
7	GWA	19.583	18.250	- 6.81%	6
8	BHP	446.994	426.732	- 4.53%	8
9	CUS	12.740	12.200	- 4.24%	5
10	GUD	78.100	74.983	- 3.99%	6

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

Ratings downgrades outnumbered upgrades over the past week by 15 to 11, bringing the total proportion of Buy ratings by the eight brokers in the FNArena database to 53.2%. This is down from 53.7% last week. Given the share market sold off quite heavily during the week, this is quite a remarkable observation. Obviously, expectations are being re-adjusted and more optimism is now disappearing from expert models.

Among those enjoying upgrades over the week was Echo Entertainment Group ((EGP)), where ratings were lifted on both valuation and strong near-term operating momentum grounds. Valuation was also the argument behind upgrades for Wesfarmers ((WES)) and Australand ((ALZ)), while upgrades continued for Premier Investments ((PMV)) following a recent strategic review.

On the downgrades side recent share price strength saw ratings cut for Aston Resources ((AZT)), while valuation was also the driving force behind downgrades for both OceanaGold ((OGC)) and Panoramic Resources ((PAN)). Mount Gibson ((MGX)) also saw two downgrades, both coming on the back of a poor June quarter production report and some emerging mine life and strategy issues.

While Aston experienced downgrades to ratings there were also modest increases to price targets, these reflecting potential upside if the company was to become a target given ongoing consolidation in the Australian coal sector.

Gindalbie ((GBG)) also enjoyed an increase in price target, along with a rating upgrade, on the back of changes to iron ore price forecasts, but target changes over the week were far more pronounced on the downside.

These included Panoramic and OceanaGold as higher cash costs were built into broker models, as well as GUD Holdings ((GUD)) as brokers digested a slightly weaker than expected full year earnings result. Price targets for Navitas ((NVT)) were also lowered as a tougher outlook was factored into expectations.

Gindalbie's increase in price target was supported by increases to earnings estimates, while earnings forecasts were also lifted for Kathmandu after management delivered better than expected earnings guidance for FY11.

An initiation of coverage for Sandfire ((SFR)) saw a fall in consensus earnings estimates, while also bringing to the market an Underweight rating to offset the two existing Buy ratings in the FNArena database.

The downgrades for OceanaGold also extended to cuts in earnings estimates, while to reflect lower coal sales in the June quarter there were reductions to forecasts for Aquila ((AQA)). As well, following a generally weaker than expected quarterly result from Macquarie Bank ((MQG)) both earnings forecasts and price targets were reduced across the market.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	EGP	14.0%	43.0%	29.0%	7
2	WES	38.0%	63.0%	25.0%	8
3	CNA	60.0%	80.0%	20.0%	5
4	PMV	33.0%	50.0%	17.0%	6
5	GBG	83.0%	100.0%	17.0%	6
6	ALZ	33.0%	50.0%	17.0%	6
7	CHC	67.0%	83.0%	16.0%	6
8	GUD	67.0%	83.0%	16.0%	6
9	CPA	- 29.0%	- 14.0%	15.0%	7
10	ORG	75.0%	88.0%	13.0%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	SFR	100.0%	33.0%	- 67.0%	3
2	AZT	100.0%	50.0%	- 50.0%	4
3	PAN	100.0%	67.0%	- 33.0%	3
4	OGC	100.0%	67.0%	- 33.0%	3
5	MGX	63.0%	38.0%	- 25.0%	8
6	AIZ	100.0%	75.0%	- 25.0%	4
7	WEB	50.0%	25.0%	- 25.0%	4
8	KMD	100.0%	80.0%	- 20.0%	5
9	NVT	29.0%	14.0%	- 15.0%	7
10	BHP	75.0%	63.0%	- 12.0%	8

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	AZT	11.530	12.053	4.54%	4
2	GBG	1.098	1.133	3.19%	6
3	CPA	0.964	0.991	2.80%	7
4	PNA	4.527	4.587	1.33%	7
5	OZL	15.161	15.299	0.91%	8
6	KMD	2.153	2.170	0.79%	5
7	ORG	18.506	18.580	0.40%	8
8	CNA	120.800	121.200	0.33%	5

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	PAN	2.707	2.383	- 11.97%	3
2	GUD	10.637	9.748	- 8.36%	6
3	OGC	4.133	3.800	- 8.06%	3
4	NVT	4.709	4.350	- 7.62%	7
5	JBH	21.036	19.709	- 6.31%	8
6	ALZ	3.090	2.985	- 3.40%	6
7	SFR	8.565	8.293	- 3.18%	3
8	WES	34.171	33.128	- 3.05%	8
9	WEB	2.305	2.255	- 2.17%	4
10	BHP	54.244	53.069	- 2.17%	8

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	GBG	0.343	0.786	129.15%	6
2	NHC	17.713	28.568	61.28%	3
3	TPM	10.225	14.375	40.59%	4
4	PMV	33.598	40.810	21.47%	6
5	KMD	14.725	17.487	18.76%	5
6	SIP	2.886	3.029	4.95%	7
7	AGO	40.243	41.671	3.55%	7
8	CPA	7.029	7.186	2.23%	7
9	CDI	4.900	5.000	2.04%	4
10	CWN	52.575	53.363	1.50%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	SFR	12.500	- 3.233	- 125.86%	3
2	OGC	21.917	16.332	- 25.48%	3
3	PAN	28.350	21.575	- 23.90%	3
4	AQA	7.825	6.000	- 23.32%	4
5	MQG	325.557	282.629	- 13.19%	7
6	MGX	48.574	42.600	- 12.30%	8
7	DJS	32.650	28.925	- 11.41%	8
8	HZN	2.843	2.585	- 9.07%	4
9	GUD	85.717	79.000	- 7.84%	6
10	CNA	741.000	683.200	- 7.80%	5

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.

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Where’s The Value Post Tabcorp De-Merger?

- Tabcorp completes de-merger of Echo Entertainment
- Brokers question value in both entities
- Assuming no M&A activity both stocks appear fully priced

By Chris Shaw

Tabcorp ((TAH)) has completed its de-merger, with the gaming and casino assets commencing trading as separate entities yesterday, as Tabcorp and Echo Entertainment Group ((EGP)) respectively. Following the de-merger a number of brokers have been quick to update their models and views.

For Tabcorp, there has been one associated downgrade in rating, RBS Australia cutting its recommendation to Hold from Buy. RBS now sees Tabcorp as a play on the outcome of the Victorian wagering and betting licence awarding process, as well as the longer-term outlook for wagering in general.

The Victorian wagering licence is expected to be awarded soon and Tabcorp is a strong favourite, but as RBS points out, the general wagering outlook is somewhat problematic given strong competitive pressures.

Macquarie agrees, expecting wagering will continue to face challenges from the growth in online-led corporate bookmakers. As wagering represents two-thirds of the new Tabcorp, such issues are likely to play on share price performance in Macquarie's view.

As well, Macquarie notes a number of Tabcorp's licences are short-dated in nature, which introduces some valuation concerns. This is particularly the case given the Tabcorp share price is well above Macquarie's $2.80 per share valuation.

On the positive side RBS suggests the current environment could drive consolidation in the sector, with one possibility in the broker's view being a joining of the operations of Tabcorp and Tattersalls ((TTS)).

But Deutsche Bank is less positive on the potential for such corporate activity involving Tabcorp, largely due to valuation issues. On Deutsche's numbers, the de-merger has left Tabcorp a smaller, more highly geared entity, meaning at current levels the stock is trading at an 18% premium to the broker's valuation of $2.85. This suggests Tabcorp is not a highly attractive shorter-term target.

For both Deutsche Bank and Macquarie the valuation issue means Tabcorp is rated as a Sell, which compares to Hold ratings for RBS, JP Morgan and Goldman Sachs. The latter sees some value starting to emerge at current share price levels, but would prefer to wait for the Victorian Wagering Licence decision before making any adjustment in rating given the importance of the decision to Tabcorp's earnings.

JP Morgan adds the cost of the licence assuming Tabcorp wins will have a major impact on valuation for the company. On a de-merged basis, share price targets for Tabcorp range from $2.80 to $3.50, which suggests the stock is fully priced at current levels. Tabcorp today is trading down 19c at $3.16 as at 11.30am.

Turning to Echo Entertainment, Goldman Sachs suggests the key issue shorter-term will be driving earnings growth from the current $1.6 billion casino capex program. While management has made good progress to date and significant earnings growth is expected at Star City through FY13, Echo still looks expensive at current levels.

In the view of Goldman Sachs, the share price is factoring in not only successful execution of capex spending but a reasonable chance of Echo being involved in some merger and acquisition activity in the sector.

Echo is not a likely shorter-term target in Goldman Sachs's view as Star City will soon be ex-capex, so limiting any turnaround potential. As well, Echo will have some gearing and any potential buyer would need be prepared for what would be a large transaction. This limits the number of potential buyers.

Macquarie agrees, arguing its valuation for Echo Entertainment factors in good execution of the current capex program by management. This implies less potential for M&A upside. The other issue for Macquarie is there is better value elsewhere in the sector, as Crown ((CWN)) is trading at a more attractive medium-term earnings multiple at current levels.

The argument from Deutsche Bank is similar, with Crown being the preferred exposure given a more attractive valuation and little likelihood of corporate activity to boost the Echo Entertainment share price shorter-term.

Deutsche goes a step further than Macquarie and rates Echo as a Sell compared to Macquarie's Hold, while Goldman Sachs has also initiated coverage with a Sell rating. Goldman Sachs has a price target of $4.30, which compares to Macquarie at $4.70 and Deutsche Bank at $3.80.

Shares in Echo Entertainment today are slightly higher and as at 11.30am the stock was up 1.5c at $4.375.

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Tabcorp Proving A Good Bet

- Tabcorp delivers strong March quarter revenue result
- Star City a good performer
- Brokers broadly see value leading into de-merger

By Chris Shaw

Tabcorp ((TAH)) delivered revenue for the third quarter of $1,061 million, the result a 5.4% improvement on the previous corresponding period. Best performer was Star City, which recorded revenue growth of 11.3% for the period.

The importance of the strong result at Star City was it came despite disruptions from refurbishments at the venue. JP Morgan expects the result will give the market greater confidence Tabcorp can execute a successful turnaround at the casino.

Goldman Sachs is a little more cautious, noting visitation at Star City needs to increase by around 30% and revenue per visitor by 20% if the casino is to achieve the broker's forecast of $360 in EBITDA (earnings before interest, tax, depreciation and amortisation) by 2015.

As BA Merrill Lynch notes, the overall result for the period was better than the market had been forecasting. This is despite some impact from the floods in Queensland during the period. With a weakening of these headwinds expected in the fourth quarter, BA-ML expects growth should accelerate in coming months.

Macquarie agrees, while pointing out there will be a partial offset to improved conditions from wagering cycling a tough comparable period given World Cup betting revenue in the June quarter of last year.

Elsewhere, a recovery in gaming accelerated in the March quarter notes Goldman Sachs, helped in part by the introduction of a lower max bet. A strong recovery in the Victorian gaming market should also deliver benefits going forward.

One benefit of the strong operational performance in the March quarter according to Macquarie is an improved balance sheet, as debt has been reduced. This suggests reduced risk of a future capital raising within the Casino business post the upcoming de-merger.

The other benefit stemming from the operational performance in the March quarter is increases to market earnings estimates. Macquarie has been among the more aggressive in lifting earnings per share (EPS) forecasts in FY11 by 5.6% and in FY12 by 5.8%. Macquarie's EPS estimates now stand at 75.2c this year and 71.8c in FY12.

Other changes to earnings estimates have been more modest, BA-ML lifting its profit forecasts by 1-2% through FY12 and JP Morgan making adjustments of a similar magnitude. Consensus EPS estimates according to the FNArena database now stand at 71.4c in FY11 and 74.1c in FY12.

Along with changes to earnings estimates have come some changes in price targets for Tabcorp. The database now shows a consensus target of $7.91, up from $7.77 prior to the trading update.

There remains some important newsflow for Tabcorp in coming months, one being the announcement of the winner of the Victorian Wagering licence due in May. The other is the de-merger, and shareholders are expected to vote on the proposal in June.

JP Morgan expects as the de-merger comes closer the market will continue to consider the potential for corporate activity in the stock . Given this potential JP Morgan expects Tabcorp will trade at expensive levels relative to a sum-of-the-parts valuation.

Post the trading update only Macquarie has changed its recommendation, upgrading Tabcorp to Neutral from Underperform. Overall the FNArena database shows Tabcorp is rated as Buy and Hold four times each. RBS Australia is one to rate Tabcorp a Buy, seeing value given potential for M&A activity and an undemanding trading multiple at current levels.

Citi agrees, pointing out Tabcorp trades at a valuation discount to both Crown ((CWN)) and Tatts ((TTS)) despite the near-term catalyst of the de-merger. Goldman Sachs is not in the FNArena database but rates Tabcorp as a Hold at present.

Shares in Tabcorp today are slightly higher and as at 11.10am the stock was up 8c at $7.49. Over the past year Tabcorp has traded in a range of $6.18 to $7.70, the current share rice implying upside of around 6% relative to the consensus price target in the FNArena database.

Cricket Australia To Launch IPO

- Cricket Australia is proposing to list on the stock exchange
- Analysts see the potential to invest at the bottom of the cycle
- T20 and betting revenues could provide significant cashflow

By Greg Peel

Since Australia last won the Ashes in 2007 and lost several key players to retirement, our cricket fortunes in all forms of the game have been on a downward slide. Even before the announced resignation this week of captain Ricky Ponting and the quarter final exit in the ODI World Cup, Cricket Australia has been struggling with its finances.

The two decade dominance of Australia in international cricket, including consecutive Ashes wins from 1989-2003 and a superior test match win/loss record, along with three consecutive World Cup victories, had pushed Australian player salaries to the highest in the world. Winning assured solid gate takings and sponsorships to offset the cost of salaries and of the Cricket Academy. Not only has Australia now stopped winning matches and subsequent financial bonuses, but professional international Twenty20 has pushed salary requirements even higher, and aggressive competition between sports in Australia has pushed the cost of stadium hire up as gate takings for cricket have fallen.

Australia did not invent one-day (50-50) cricket but it did turn that “lite” form of the game into a cash cow in the 1980s. It is thus surprising that CA failed to see the financial possibilities of Twenty20 on the one hand, and the threat it posed to traditional cricket on the other, in moving too slowly to embrace and exploit this even shorter, more razzle-dazzle form of the game. CA hopes to make up ground next season when the local Big Bash competition relaunches in its new, highly professional format. As for the other forms of the game, CA is optimistic.

“As far as the test team is concerned,” CA media spokesperson Courtney Fyshe told FNArena this morning, “Australia has been here before. The collective retirement in the 1980s of veterans such as Greg Chappell, Dennis Lillee and Rod Marsh ushered in a low point for Australia's test stocks in a similar fashion to recent retirements. But under young leaders like Alan Border, and then Mark Taylor, and then Steve Waugh we rose to be the best team in the world. It can happen again.”

And that is why CA feels a listing on the stock exchange at this time will find popular support given investors have the opportunity to enter at a low in the cycle, with what CA sees as plenty of upside. The board has looked to the stock market success of the Brisbane Broncos over the past several years as an incentive.

CA is believed to have engaged three of Australia's leading (but as yet unnamed) stock brokers as lead managers for its initial public offering. The size of the offering is yet to be confirmed but some details have been determined upfront. CA will target a listing price of $1.00 and offer minimum investment of as low as $500 to encourage widespread retail interest. Future gate-take cashflows will be used to provide a dividend stream, but yield will be enhanced through the payment of special dividends in the event of substantial win bonuses – such as winning a major test series or ODI or T20 World Cup.

Shareholders will also be enticed with other incentives, such as preferential and discount tickets, invitations to meet-the-players functions, and opportunities for children to participate in elite coaching clinics.

FNArena contacted one stock analyst for his opinion this morning. He cannot be named due to research restrictions. “It's a compelling package,” the analyst admitted, “but it will all come down to pricing. It hasn't helped that Michael Clarke has been elevated to captain with a $1.5m salary while Ponting remains on contract at a still significant cost. But it's hard not to argue we could well be seeing the bottom of the cycle in earnings if CA makes good on its intentions to bolster T20 rather than fight it, which includes providing more opportunity for short-form specialists to achieve CA contracts. The old model of 'one player fits all forms' is long dead.”

The real sleeper, the analyst suggested, lies in the ability for CA to follow the NRL and AFL models in legitimising and exploiting legal betting on Australian cricket matches. “Betting opportunities and permutations are far greater in cricket, particularly five-day cricket, than in the football codes,” he noted. “Pakistan may have brought the game into disrepute recently, but it has also proven that revenue opportunities are significant and CA has the chance to embrace those opportunities rather than resile from them.”

“On that basis,” he added, “a listed Cricket Australia could become a real challenger to the likes of Tabcorp ((TAH)) and Tatts ((TTS)) in the gaming space.”

CA spokesperson Courtney Fyshe obviously sees a wonderful opportunity for Australia's cricket loving public to become “owners of their brand”, to use unfortunate twenty-first century parlance. “Cricket Australia has been caught out,” she admits, “or in cricket terms 'out caught'. But the board believes fortunes can be turned around and turned around in a short space of time. The new leadership team [Clark and vice captain Shane Watson] will usher in a new era”.

A listing date has not yet been determined, and clearly there are details to work through and investor appetite yet to assess at both the retail and institutional level. But CA has announced that interested parties can register to receive a prospectus when it becomes available, and by doing so receive “first-in” advantage on subsequent share allocation.

CA has established a dedicated website for this purpose, www.outcaught.com.au.

Aristocrat: Is There Any Light In The Tunnel?

By Chris Shaw

There had been some expectations in the market that gaming machines group Aristocrat Leisure ((ALL)) would cut earnings guidance for 2010 (year to December), but when the downgrade to guidance came through on Friday the reality was worse than had been anticipated.

Management now expects earnings for 2010 will be in a range of $50-$60 million, well below the market's consensus estimate of a result of about $90 million. As Deutsche Bank notes, the downgrade to guidance implies second half net profit of just $13-$23 million.

Deutsche Bank points out the downgrade stems primarily from weakness in both the Australian and US markets, while results for Japan were also a little lower than its recently revised forecasts. The issues in the Australian market include a loss of both market share and margins, RBS Australia attributing some of this to lower conversions given Aristocrat provides less new game support to its old platforms.

To counter this a number of new game releases are planned for the Australian market in 2011, but in the view of RBS Australia any turnaround in the domestic market is likely to take some time. More competitive products are also needed to improve performance in the Japanese market according to the broker.

Citi's take on the downgrade to earning guidance is that as it comes only one month from the end of the year, management had clearly been betting on some large orders that have failed to materialise. This highlights how earnings for Aristocrat continue to be volatile, something expected to continue going forward.

There are a couple of other complicating factors as well according to Citi, as the stockbroker notes while Aristocrat management expect market share gains in Australia in 2011, the emergence of new entrants into that market gives little reason to be confident these gains can be achieved given current market conditions.

As well, Citi notes the Australian dollar remains a significant headwind, as in the first half of this year the currency averaged around US88c but in the first half of 2011 the broker forecasts an average of US102c.

On the back of the new guidance from management, earnings forecasts across the market have been cut, with JP Morgan reducing its earnings per share (EPS) estimates by 37% in 2010, 39% in 2011 and 15% in 2012. This leaves the broker with EPS forecasts of 14.6c, 27.3c and 37.6c respectively.

UBS has cut its EPS forecasts by 33%, 23% and 13% for 2010-2012 respectively and is now forecasting outcomes of 10c, 15.2c and 30.3c, while both Credit Suisse and Citi see 2011 being just as tough as 2010 and so offering little in the way of EPS growth. Consensus EPS forecasts for Aristocrat according to the FNArena database now stand at 13c for 2010 and 14.3c in 2011.

The changes to earnings estimates mean reductions in price targets, with Deutsche Bank lowering its target to $3.40 from $4.20 and Citi to $2.90 from $3.40. These represent the range of price targets according to the FNArena database, with the consensus target now standing at $3.74. This is down from $4.07 prior to Friday's update from management.

What hasn't changed are recommendations for Aristocrat, the database showing four Buys, three Holds and one Sell rating. The Buy argument is that Aristocrat offers strong leverage to an eventual recovery in market conditions, meaning the stock offers good long-term value at current levels.

UBS is one to continue with its Buy rating, even allowing for the expectation it is likely to be 2012 at the earliest before there is is any substantial recovery in earnings. JP Morgan offers a similarly positive view on valuation grounds, even though the latest downgrade to guidance and ongoing tough market conditions are likely to make it very difficult for Aristocrat shares to outperform relative to expectations in the broker's view.

For Deutsche Bank the earnings problems evident in the latest downgrade to guidance mean the market has lost confidence in the stock, so while it also sees value, the broker retains a Hold rating on Aristocrat.

Citi is also neutral on the stock, pointing out the current weak conditions mean there is a growing chance Aristocrat will need to raise capital to fund increased demand on working capital when the market does return to growth.

There is some scope for merger and acquisition activity involving the company in Citi's view given there does appear to be long-term value, but the broker tempers this by pointing out current family shareholder arrangements could prove to be a roadblock to any corporate moves on Aristocrat.

Shares in Aristocrat today are stronger and as at 11.10am the stock was up 6c at $2.76. Over the past year the stock has traded in a range of $2.62 to $4.73 and the current share price implies upside of around 40% to the consensus price target in the FNArena database. This easily explains why half of the stockbrokers stick to their Buy rating (it's a valuation assessment, not a momentum indicator).

Note also, Aristocrat has been one of the standouts when it comes to short positions in the Australian share market, as observed and commented upon by FNArena editor Rudi Filapek-Vandyck in his market analysis on November 10, 2010; "Rudi's View: ASIC's Stock Momentum Indicator". This could serve as an indication that those short positions were speculating on another downward surprise by the company before year-end, and they were correct in this assumption.