Tag Archives: Health Care and Biotech

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

Over the past week the changes in recommendations by the eight brokers in the FNArena database have been fairly evenly spread between upgrades and downgrades. The changes bring total Buy ratings to 49.13%.

Among the stocks upgraded were three companies in the oil and gas sector, where Citi has reviewed ratings following recent share price underperformance. For both Aurora Oil and Gas ((AUT)) and Beach Energy ((BPT)) Citi has upgraded to Neutral ratings from Sell previously, while Oil Search ((OSH)) has been upgraded to Buy from Neutral.

In all three cases valuation has improved despite a weakening share price, the analysts assure. They like Oil Search in particular for its low risk growth and the upside from LNG projects being developed.

Elsewhere, Macquarie has upgraded Bendigo and Adelaide Bank ((BEN)) to Outperform from Neutral, as while earnings estimates and price target are unchanged, the broker sees margin concerns for the regional lender as being overplayed by the market at present. This implies value at current levels.

Macquarie has also upgraded a number of other ratings, moving to Outperform from Neutral on Ramsay Health Care ((RHC)) post a review of private health expectations. Revenue growth and margin expansion should continue and given this Macquarie has lifted earnings estimates and price target, which supports the upgrade.

Royal Wolf ((RWH)) has expanded its rental fleet and this has prompted Macquarie to adjust earnings forecasts and price target. The changes have improved the value on offer and sees the broker upgrade to an Outperform rating. On valuation grounds Macquarie has also upgraded QBE Insurance ((QBE)) to Outperform from Neutral.

While still seeing BlueScope ((BSL)) as a high risk play, BA Merrill Lynch has upgraded to a Buy rating from Hold previously. The shift to a more positive view reflects current increases in steel margins, an improved balance sheet and an improvement in downside risk scenarios.

James Hardie ((JHX)) beat Deutsche Bank's forecasts with its full year profit result, by enough so the broker has lifted estimates and its price target for the stock. Growth potential from a recovery in the US economy has prompted Deutsche to upgrade to a Buy rating from Neutral.

JP Morgan has reviewed the Australian media sector and the result is changes to earnings estimates and price targets across the sector. For Prime Media ((PRT)) specifically the stockbroker's price target has increased slightly, which justifies a shift to an Outperform rating from Neutral previously.

Following the sale of its 50% stake in the Port of Portland, Deutsche sees risk Australian Infrastructure ((AIX)) uses the proceeds to internalise management. The asset sale generates an increase in price target but on valuation grounds the broker downgrades to Hold from Buy.

Campbell Brothers ((CPB)) delivered a solid profit result but Macquarie continues to see risk of a pullback in exploration spending by junior resources companies. This has the potential to impact on Campbell's minerals division earnings and this suggests limited scope for outperformance. To reflect this Macquarie downgrades to a Hold rating from Buy previously.

Macquarie has also downgraded to a Hold rating on Westpac ((WBC)) given lower margin expectations for banks in general. The resulting changes in forecasts saw the broker lower its price target for the stock.

Interim earnings for Elders ((ELD)) disappointed relative to Citi's expectations, a major issue being the lack of progress evident in operations in the core rural services business. Cuts to earnings forecasts and price target support the broker's downgrade in rating (to Neutral from Buy, High Risk).

Citi also downgraded Graincorp ((GNC)) to Hold from Buy post interim profit results, though in this case not because of any disappointment with the result. Rather, Citi was impressed and lifted earnings forecasts through the next three years on the back of the result; the downgrade in rating reflects the recent share price increase.

Weak earnings guidance from Ridley Corporation ((RIC)) was enough for RBS Australia to downgrade to Hold from Buy, as revised earnings forecasts suggest the stock is fair value around current levels. Price target was also adjusted lower following the earnings adjustments.

Still weak retail sales and the expected impact on volumes and margins for Myer ((MYR)) saw RBS also downgrade its rating to Hold from Buy. While management are doing a reasonable job in RBS's view, there is little that can counter the weak trading environment at present and this limits any scope for share price outperformance.

In terms of changes to price targets and earnings forecasts, the largest increase in target was for Panoramic Resources ((PAN)), while the largest cut was for Thorn Group ((TGA)) post the company's full year profit result.

With regards to earnings changes, Goodman Group ((GMG)) enjoyed the largest increases to forecasts as Macquarie revised its model, while the major cuts were experienced by Sydney Airport ((SYD)) given concerns over duty free sales and the upcoming expiry of a rental guarantee, and by Australian Infrastructure ((AIX)).

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	AURORA OIL AND GAS LIMITED	Sell	Neutral	Citi
2	BEACH ENERGY LIMITED	Sell	Neutral	Citi
3	BENDIGO AND ADELAIDE BANK LIMITED	Neutral	Buy	Macquarie
4	BLUESCOPE STEEL LIMITED	Neutral	Buy	BA-Merrill Lynch
5	JAMES HARDIE INDUSTRIES N.V.	Neutral	Buy	Deutsche Bank
6	OIL SEARCH LIMITED	Neutral	Buy	Citi
7	PRIME MEDIA GROUP LIMITED	Neutral	Buy	JP Morgan
8	QBE INSURANCE GROUP LIMITED	Neutral	Buy	Macquarie
9	RAMSAY HEALTH CARE LIMITED	Neutral	Buy	Macquarie
10	ROYAL WOLF HOLDINGS LIMITED	Neutral	Buy	Macquarie
Downgrade
11	AUSTRALIAN INFRASTRUCTURE FUND	Buy	Neutral	Deutsche Bank
12	Campbell Brothers Limited	Buy	Neutral	Macquarie
13	ELDERS LIMITED	Buy	Neutral	Citi
14	GRAINCORP LIMITED	Buy	Neutral	Citi
15	MYER HOLDINGS LIMITED	Buy	Neutral	RBS Australia
16	RIDLEY CORPORATION LIMITED	Buy	Neutral	RBS Australia
17	WESTPAC BANKING CORPORATION	Buy	Neutral	Macquarie

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	AUT	- 40.0%	- 20.0%	20.0%	5
2	PRT	50.0%	67.0%	17.0%	6
3	PAN	50.0%	67.0%	17.0%	3
4	BSL	43.0%	57.0%	14.0%	7
5	MND	20.0%	33.0%	13.0%	6
6	WOW	38.0%	50.0%	12.0%	8
7	PRY	38.0%	50.0%	12.0%	8
8	QBE	38.0%	50.0%	12.0%	8
9	OSH	88.0%	100.0%	12.0%	8
10	JHX	13.0%	25.0%	12.0%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	TGA	100.0%	33.0%	- 67.0%	3
2	GNC	50.0%	17.0%	- 33.0%	6
3	AIX	83.0%	67.0%	- 16.0%	6
4	WBC	25.0%	13.0%	- 12.0%	8
5	SGT	50.0%	40.0%	- 10.0%	5

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	PAN	2.070	2.300	11.11%	3
2	GNC	8.692	9.350	7.57%	6
3	WOW	27.129	27.450	1.18%	8
4	AIX	2.318	2.338	0.86%	6
5	PRT	0.807	0.813	0.74%	6
6	PRY	3.276	3.285	0.27%	8
7	AUT	3.864	3.870	0.16%	5

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	TGA	1.893	1.687	- 10.88%	3
2	RRL	4.548	4.480	- 1.50%	5
3	JHX	7.583	7.520	- 0.83%	8
4	WBC	23.441	23.259	- 0.78%	8
5	BSL	0.603	0.599	- 0.66%	7
6	MND	23.346	23.288	- 0.25%	6
7	QBE	14.661	14.636	- 0.17%	8

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	GMG	6.125	16.975	177.14%	8
2	GNC	92.200	102.600	11.28%	6
3	TWE	19.271	19.986	3.71%	7
4	MND	132.500	135.167	2.01%	6
5	CPU	46.431	47.120	1.48%	8
6	WHC	6.914	6.957	0.62%	7
7	RMD	16.343	16.442	0.61%	8
8	BRG	32.333	32.500	0.52%	3
9	TGA	20.400	20.500	0.49%	3
10	SUL	53.214	53.457	0.46%	7

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	SYD	6.450	5.700	- 11.63%	6
2	AIX	18.467	16.767	- 9.21%	6
3	JHX	39.061	37.093	- 5.04%	8
4	DUE	8.725	8.463	- 3.00%	8
5	ROC	4.916	4.781	- 2.75%	5
6	QBE	138.232	135.588	- 1.91%	8
7	RRL	15.875	15.620	- 1.61%	5
8	AUT	28.384	27.932	- 1.59%	5
9	EHL	10.972	10.805	- 1.52%	5
10	FXJ	8.738	8.613	- 1.43%	8

Technical limitations

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

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

Neuren Story Getting Better

- Neuren Pharma continues to develop drug for treating traumatic brain injury
- Oral version of compound an attraction for potential licensees
- Any licensing deal likely to see Neuren re-rated
- Bell Potter retains a Buy rating

By Chris Shaw

Late last year FNArena highlighted Neuren Pharmaceuticals ((NEU)) on the back of a report by Bell Potter indicating Neuren could be the only company offering a treatment for traumatic brain injuries (TBI) via its NNZ-2566 compound (See: Neuren Pharma Could Be The Only One).

At the time Bell Potter noted the TBI market was potentially worth as much as US$2 billion. Over the past six months Neuren has made progress in developing NNZ-2566, with an IV version of the drug now in Phase II trials for treating moderate-to-severe TBI.

The US Army is investing US$23 million in the trial and Bell Potter expects data will become available in 2013. Bell Potter expects if Phase II is successful only a single Phase III trial will be required for Neuren to file for regulatory approval.

At the same time Neuren is working on an oral version of NNZ-2566 and is currently in Phase I, with a Phase II trial planned for mild TBI. The oral version of the compound should also open up other opportunities in the view of Bell Potter, as the broker suggests the drug could also be useful in the treatment of Rett Syndrome, a disorder of the nervous system that leads to developmental reversals.

This has the potential to open up a larger market in Autism Spectrum Disorders and leads Bell Potter to suggest the oral version of NNZ-2566 is likely to be the key driver of growth for Neuren as the company should be able to get orphan designation for the drug. Given the drug would fill a previously unmet need premium pricing should be achievable.

An oral version of the compound also increases the attractiveness for a licensee, so any subsequent licensing deal for NNZ-2566 is likely to act as a catalyst for the Neuren share price in Bell Potter's view.

Neuren is also developing Motiva, which is a drug for treating Post Stroke Apathy. Enrolment for a Phase IIb trial should be completed by the end of 2013 and funding is coming via a grant from the Australian government. Bell Potter notes trials to date have shown the compound to be safe and efficient.

Other potential developments being pursued by Neuren include a strong pre-clinical pipeline for NNZ-2591, a compound for treatment of Parkinson's and peripheral neuropathy. A subsidiary of Neuren, Perseis Therapeutics, is also working on anti-cancer antibodies.

Given the growth potential from NNZ-2566 in particular but also Neuren's product pipeline in general, Bell Potter sees the stock as undervalued at current levels. The broker's price target of 17c, up from 12c previously, reflects this as it is a substantial premium to the current share price of around 2.3c.

Supporting this view is the fact Neuren is well funded for its current stage of clinical development, as Bell Potter points out with the US and Australian governments funding the company's two lead molecules cash burn has been less than $300,000 per month over the past year.

Post its latest review Bell Potter retains a Buy rating on Neuren, with price target set in line with a base case valuation on Neuren of 17c per share. This valuation rises to 20c per share when more optimistic assumptions are factored into the broker's model.

Shares in Neuren closed yesterday at 2.3c, which compares to a range over the past year of 1.3c to 3.7c. At current levels Neuren has a market capitalisation of around $27 million.

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

.ref1 {background-color:#B8E3F8;}

By Chris Shaw

The week commencing May 9 saw a number of changes in short positions on both sides of the ledger and on stocks from a number of different industries.

The largest increase for the week was in CSR ((CSR)), where total positions rose to 6.78% from 4.87% prior to the company's full year profit result. While headline earnings for CSR were better than expected the result was helped by a low tax rate and post result broker opinions on the stock remain mixed.

Shorts in Mirabela Nickel ((MBN)) rose to 4.99% from 3.57% in the week, the increase coming ahead of the announcement of a $120 million capital raising that is hoped will address concerns over the company's liquidity levels as projects such as Santa Rita continue to be developed.

Primary Health Care ((PRY)) saw shorts essentially double in the week from May 9 to 2.8% from 1.44% previously, despite little in the way of news from the company. The most recent update has been the announcement an existing co-payment initiative will be reversed given it flattened growth rates and impacted on referrals.

APN News & Media ((APN)) is undertaking a review of its New Zealand assets but this has not prevented shorts in the stock rising to 3.96% from 2.84% previously, while shorts in Nufarm ((NUF)) increased to 2.06% from less than 1.0% previously as tough operating conditions in markets outside of Australia persist.

While there had been some concerns about slower growth in some of Boral's ((BLD)) Asian markets post site visits to the region, the major news is the current CEO has announced plans to step down. This comes after shorts in the stock rose to 5.61% in the week from May 9 from 4.54% previously.

Among the falls in short positions were Spark Infrastructure ((SKI)), where total positions declined sharply to 2.61% from 5.24% as brokers reiterated the stock is a Buy at current levels given an attractive valuation. The potential acquisition of the Sydney Desalination Plant remains a key issue for the company in the market's view.

Among retail plays both Myer ((MYR)) and David Jones ((DJS)) saw shorts fall in the week from May 9, for Myer to 9.76% from 11.65% previously and for David Jones to 9.5% from 10.32%. This followed a further cut in interest rates by the Reserve Bank of Australia.

Despite the falls in positions retail stocks continue to dominate the top 20 list of short positions, with Myer and Davis Jones joined on the list by the likes of JB Hi-Fi ((JBH)), Harvey Norman ((HVN)), Billabong ((BBG)) and The Reject Shop ((TRS)). The top 20 also contains stocks exposed to discretionary spending such as Carsales.com ((CRZ)) and Wotif.com ((WTF)), media plays Fairfax ((FXJ)) and Ten Network ((TEN)), resource stocks Lynas Corporation ((LYC)), Paladin ((PDN)) and Iluka ((ILU)) and others such as Cochlear ((COH)) and Gunns ((GNS)).

While fund flows remain lacklustre, Henderson Group ((HGG)) enjoyed a fall in short positions in the week from May 9, total shorts declining to 1.65 from 2.91% previously. Unlike the increase in CSR's shorts there was a decline in total positions for James Hardie ((JHX)) in the week, the fall to 2.98% from 3.54% previously.

In terms of monthly changes the largest increase has been in Paladin, where shorts for the month from April 16 rose to 8.6% from 5.1%. The view of brokers is cash flows and balance sheet issues will be the main driver of the stock in coming months given upcoming refinancing commitments.

Aside from Myer the largest monthly decline in shorts was in Atlas Iron ((AGO)), where the total fell to 0.5% from 1.59% previously. This change came ahead of an update on development plans for the Horizon 1 project, which suggested lower capex than the market had been expecting.

Elsewhere in the market, RBS Australia notes shorts in Echo Entertainment Group have been building since Crown ((CWN)) acquired a 10% stake in February, increasing by nearly two percentage points in that time.

In RBS's view Crown took the stake to extract required concessions for the Barangaroo development and is not a precursor to a takeover for Echo. As well, the broker expects the Star redevelopment will fall short of guidance in FY14, which implies some downside risk to Echo.

In general terms, RBS notes average short interest across the SAP/ASX200 index is presently at a record high of 2.25%. Shorts have been building in the resources, capital goods, gold and building materials sectors.

Top 20 Largest Short Positions

Rank	Symbol	Short Position	Total Product	%Short
1	JBH	23598659	98850643	23.86
2	MYR	70790766	583384551	12.13
3	CRZ	27174114	233684223	11.63
4	COH	6599878	56929432	11.57
5	FXJ	270611364	2351955725	11.53
6	FLT	11294232	100031742	11.28
7	DJS	57621335	528655600	10.87
8	LYC	169785266	1714596913	9.93
9	HVN	95229443	1062316784	8.95
10	BBG	22629088	257888239	8.77
11	EGP	59945003	688019737	8.70
12	PDN	68555693	835645290	8.20
13	WTF	15483681	211736244	7.33
14	GNS	61511210	848401559	7.24
15	ILU	27769260	418700517	6.61
16	CSR	33219739	506000315	6.56
17	TRS	1561062	26071170	5.99
18	GWA	17288975	302005514	5.76
19	TEN	60037329	1045236720	5.75
20	SGT	8823031	158218641	5.58

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

IMPORTANT INFORMATION ABOUT THIS REPORT

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

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

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

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

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

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

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

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

Technical limitations

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

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

ResMed Announces Dividend Payments

- ResMed announces the introduction of dividends
- Yield viewed as a positive for some investors
- Move also seen as a sign of fewer growth options

By Chris Shaw

Having previously resisted the idea of paying out funds to shareholders, sleep disorder group ResMed ((RMD)) last week surprised the market to some extent by announcing it would commence paying dividends from the first quarter of 2013.

The payout will stat at US17c per share of common stock, which RBS Australia estimates will translate to a payment of around 6.9c per share in Australia. Assuming a full year dividend of US68c the payout would be a ratio of around 35%.

The reaction to the dividend announcement by brokers covering the stock has been mixed. Deutsche Bank is generally positive, viewing the announcement as evidence cash generation for ResMed remains strong and company earnings are sustainable.

Citi has similarly reacted positively to the news, seeing the commencement of dividends as an attraction for new shareholders who avoided the stock given a lack of yield and a means for the company to put excess capital to use. The combination of dividends and further share buybacks should be a positive in Citi's view.

BA Merrill Lynch also sees some positives in that the dividend is a tangible unlocking of ResMed's balance sheet, which is healthy given a net cash position of $540 million as of the third quarter of this year and around US$80 million in free cash flow each quarter.

But RBS took a more neutral view, suggesting some investors will be positive on the move as it is a case of management acknowledging the company has more money than it needs, while also suggesting other investors may take the view the move to dividend payments is a sign ResMed's business is maturing and growth options are fading. UBS similarly saw a split reaction to the dividend news as likely.

Factoring the dividend into broker models results in minor changes to earnings estimates, which translates to modest changes in price targets. The FNArena database shows a consensus target for ResMed now of $3.57.

What hasn't changed is broker ratings, the database showing ResMed is rated as Buy and Hold four times each. Citi sums up the Buy argument by noting ResMed currently trades on a 12-month forward earnings multiple of 14 times, which is considered attractive given forecast earnings per share (EPS) growth of 13% this year, 30% in FY13 and 20% in FY14.

RBS argues the value in ResMed isn't as attractive based on normalised EPS growth forecasts of around 8% this year, 14% in FY13 and 7% in FY14. With global medical technology companies offering three-year EPS growth of about 15% and trading on more attractive earnings multiples than ResMed at present, RBS suggests upside from current levels is limited.

BA-ML sides with RBS, suggesting while the addition of a yield is a positive for ResMed shareholders the total return is still not enough to justify a more positive rating than the broker's current Neutral recommendation.

Shares in ResMed as at 10.50amare down 3c at $3.23 in a stronger overall market. Over the past year ResMed has traded in a range o $2.36 to $3.44, the current share price implying upside of around 10% relative to the consensus price target in the FNArena database.

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

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

In the past week downgrades to recommendations from the eight brokers in the FNArena database have again outweighed upgrades to the tune of 14 to eight, the result being total Buy ratings now stand at 49.16%.

Among the positive ratings changes was RBS Australia shifting to a Buy rating on Campbell Brothers ((CPB)) from Hold previously, the broker taking the view there is now a buying opportunity in the stock given recent macro-driven selling across the market. Supporting the upgrade is RBS's expectation the upcoming full year result will include some positive commentary from management.

Gloucester Coal ((GCL)) has been upgraded by Macquarie to Neutral from Underweight previously, this a valuation call following changes to the broker's forex and commodity price assumptions. Similarly Macquarie has been busy changing ratings elsewhere among resource plays, with Paladin ((PDN)), Western Areas ((WSA)) and Whitehaven Coal ((WHC)) also upgraded post the review. Paladin is lifted to a Neutral recommendation, while both Western Areas and Whitehaven have been upgraded to Outperform from Neutral.

Macquarie also made a change among industrial stocks by upgrading Woolworths ((WOW)) to Buy from Neutral, this as the broker sees potential upside now the company is putting together a solid strategy to deal with increased competition from the Wesfarmers ((WES)) owned Coles. Along with the upgrade Macquarie lifted its price target for Woolworths.

For JP Morgan, GPT ((GPT)) is now worthy of a Buy rating following relative underperformance against the REIT sector of late and given potential from the unlisted wholesale funds market. Some changes to earnings estimates mean an increase in price target.

Primary Health Care ((PRY)) is well placed to enjoy some margin recovery given improved market dynamics in the view of BA Merrill Lynch, and with the stock offering value at current levels the broker has upgraded to a Buy from Neutral previously. Price target has been lifted slightly.

On the downgrades side Toll Holdings ((TOL)) caught most attention, both UBS and Deutsche Bank lowering ratings to Hold from Buy following updated profit guidance from the company. Tough market conditions mean greater earnings volatility and UBS in particular doesn't see this as likely to attract investors at present. The revision to guidance saw brokers across the market adjust earnings estimates and price targets for Toll.

A below expectations quarterly from Alacer Gold ((AQG)) saw BA-ML lower earnings estimates and cut its price target, while the broker also downgraded to a Neutral rating from Buy previously given some uncertainty with respect to future capital allocation decisions.

Valuation was behind Macquarie downgrading both Cabcharge ((CAB)) and Coca-Cola Amatil ((CCL)) to Neutral ratings from Outperform previously, while earnings estimates for the latter were trimmed post a trading update.

Macquarie also downgraded Charter Hall Retail ((CQR)) to Sell from Buy on a similar valuation basis as the stock is now trading above the broker's price target, while Dexus (DXS)) was another property play to be downgraded by the broker on valuation grounds following recent gains. Macquarie has moved to a Neutral rating on Dexus from Buy.

Recent share price moves were also behind UBS's decision to downgrade Hastings Diversified ((HDF)) to Neutral from Buy, while Credit Suisse has made the same change for Industrea ((IDL)) as the share price has responded to a proposed takeover offer from GE of the US.

A lack of earnings certainty with respect to Pacific Brands ((PBG)) has prompted Credit Suisse to downgrade the stock to Hold from Buy, a change reinforced by management cutting off potential M&A talks.

Sonic Health Care ((SHL)) has acquired some additional pathology assets and the deal itself is a positive in the view of Credit Suisse, but again valuation has driven a downgrade to a Neutral rating from Buy previously. It is a similar story with SP Ausnet ((SPN)), Credit Suisse happy enough with the recent full year earnings result and capital raising but downgrading its rating to reflect recent share price gains.

Given Incitec Pivot ((IPL)) is more exposed to soft explosives demand at present and following a somewhat lower quality profit result JP Morgan has downgraded to a Sell rating from Neutral previously, while others to cover the stock have generally trimmed earnings forecasts and price targets.

Over the week the most significant increase in price target was enjoyed by Cabcharge, while the largest cuts were for Toll, Alacer, CSR and Lynas Corporation ((LYC)). Centro Retail has seen earnings forecasts increased the most, while CSR, Toll Holdings and Australian Infrastructure ((AIX)) have experienced the most significant reductions in earnings estimates across the market.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup Suisse,Deutsche<br>Bank,JP<br>Morgan,Macquarie,RBS<br>Australia,UBS&b0=118,99,109,102,79,140,151,122&h0=76,107,89,118,97,86,138,116&s0=41,22,25,6,32,32,11,15" 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	Campbell Brothers Limited	Neutral	Buy	RBS Australia
2	GLOUCESTER COAL LTD	Sell	Neutral	Macquarie
3	GPT	Neutral	Buy	JP Morgan
4	PALADIN ENERGY LTD	Sell	Neutral	Macquarie
5	PRIMARY HEALTH CARE LIMITED	Neutral	Buy	BA-Merrill Lynch
6	WESTERN AREAS NL	Neutral	Buy	Macquarie
7	WHITEHAVEN COAL LIMITED	Neutral	Buy	Macquarie
8	WOOLWORTHS LIMITED	Neutral	Buy	Macquarie
Downgrade
9	ALACER GOLD CORP	Buy	Neutral	BA-Merrill Lynch
10	CABCHARGE AUSTRALIA LIMITED	Buy	Neutral	Macquarie
11	CHARTER HALL RETAIL REIT	Buy	Sell	Macquarie
12	COCA-COLA AMATIL LIMITED	Buy	Neutral	Macquarie
13	CSR LIMITED	Buy	Neutral	UBS
14	DEXUS PROPERTY GROUP	Buy	Neutral	Macquarie
15	HASTINGS DIVERSIFIED UTILITIES FUND	Buy	Neutral	UBS
16	INCITEC PIVOT LIMITED	Neutral	Sell	JP Morgan
17	INDUSTREA LIMITED	Buy	Neutral	Credit Suisse
18	PACIFIC BRANDS LIMITED	Buy	Neutral	Credit Suisse
19	SONIC HEALTHCARE LIMITED	Buy	Neutral	Credit Suisse
20	SP AUSNET	Neutral	Sell	Credit Suisse
21	TOLL HOLDINGS LIMITED	Buy	Neutral	UBS
22	TOLL HOLDINGS LIMITED	Buy	Neutral	Deutsche Bank

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	CRF	17.0%	50.0%	33.0%	6
2	WHC	83.0%	100.0%	17.0%	7
3	WSA	33.0%	50.0%	17.0%	6
4	CQO	- 40.0%	- 25.0%	15.0%	4
5	GPT	14.0%	29.0%	15.0%	7
6	PDN	29.0%	43.0%	14.0%	7
7	PRY	38.0%	50.0%	12.0%	8
8	MGX	13.0%	25.0%	12.0%	8
9	WOW	38.0%	50.0%	12.0%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	CQR	17.0%	- 17.0%	- 34.0%	6
2	TOL	43.0%	14.0%	- 29.0%	7
3	NWS	57.0%	29.0%	- 28.0%	7
4	HDF	75.0%	50.0%	- 25.0%	4
5	CAB	60.0%	40.0%	- 20.0%	5
6	LYC	100.0%	80.0%	- 20.0%	5
7	AQG	86.0%	71.0%	- 15.0%	7
8	DXS	29.0%	14.0%	- 15.0%	7
9	IPL	63.0%	50.0%	- 13.0%	8
10	CCL	38.0%	25.0%	- 13.0%	8

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	CAB	6.000	6.532	8.87%	5
2	SPN	1.003	1.030	2.69%	8
3	CRF	1.958	2.005	2.40%	6
4	SHL	13.324	13.559	1.76%	8
5	NWS	22.407	22.750	1.53%	7
6	CCL	12.911	13.100	1.46%	8
7	WOW	27.129	27.450	1.18%	8
8	WSA	5.858	5.908	0.85%	6
9	WHC	6.342	6.393	0.80%	7
10	GPT	3.353	3.364	0.33%	7

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	CSR	2.279	1.983	- 12.99%	8
2	TOL	5.766	5.087	- 11.78%	7
3	AQG	10.196	9.067	- 11.07%	7
4	LYC	1.933	1.740	- 9.98%	5
5	PDN	2.084	1.956	- 6.14%	7
6	NAB	26.314	26.103	- 0.80%	8
7	CQO	3.502	3.478	- 0.69%	4
8	IPL	3.530	3.519	- 0.31%	8
9	CQR	3.313	3.310	- 0.09%	6

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	CRF	8.850	10.367	17.14%	6
2	TWE	19.271	19.986	3.71%	7
3	AMP	31.463	32.225	2.42%	8
4	NWS	131.424	133.151	1.31%	7
5	MIO	22.575	22.833	1.14%	4
6	CWN	57.363	57.900	0.94%	8
7	WPL	252.592	254.595	0.79%	8
8	CQO	24.667	24.860	0.78%	4
9	CPA	7.514	7.557	0.57%	7
10	BHP	323.398	325.065	0.52%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	CSR	17.488	14.775	- 15.51%	8
2	TOL	42.388	38.438	- 9.32%	7
3	AIX	18.467	16.933	- 8.31%	6
4	SUN	67.425	63.975	- 5.12%	8
5	WHC	7.267	6.914	- 4.86%	7
6	AQG	66.642	64.050	- 3.89%	7
7	IPL	27.275	26.456	- 3.00%	8
8	SWM	35.525	34.513	- 2.85%	8
9	PBG	7.688	7.475	- 2.77%	7
10	ILU	208.063	203.525	- 2.18%	8

Technical limitations

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

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

Brain Explosion

- Brain Resource has world's largest brain function database
- Commercial options are being developed
- Bell Potter sees the company as a pioneer in certain markets
- Rates Brain Resource as a Buy

By Chris Shaw

Brain Resource ((BRC)) is based in San Francisco in the US and has the world's largest database of brain function. The company is now benefiting by creating value from this database through commercial products in areas such as the diagnosis and management of mental disorders and the maintenance of brain fitness.

Bell Potter notes a number of commercial products are now growing revenue for Brain Resource, to the extent the group has been EBIT (earnings before interest and tax) positive since FY09. Despite this, the stock continues to trade around its 2001 IPO price of 25c per share.

The main products of Brain Resource are WebNeuro, a clinical decision support product, and MyBrainSolutions, which is a suite of brain training solutions. Bell Potter notes both are web-based and highly scalable.

WebNeuro is a clinical decision support product used to evaluate patients for depression and ADHD. Once a client completes an online suite of tasks Brain Resource's processing centre issues a report, with the company being paid for each report issued.

Bell Potter estimates there is a US$2 billion market for WebNeuro's use in depression in the US alone. Support for the product likely given it provides an evaluation for which healthcare payers will reimburse and boosts practice work flow efficiencies for clinicians.

The idea behind MyBrainSolutions is that by exercising the brain through games and activities, individuals can boost memory and attention while increasing 'positivity' and reducing stress. Aside from individuals, MyBrainSolutions is becoming increasingly attractive to businesses looking to get more productivity from employees and in Bell Potter's view this addresses a US$300 million market that continues to grow quickly.

The potential of MyBrainSolutions has already been identified, Bell Potter pointing out Brain Resource has signed Aetna as a distribution partner. Discussions are also underway with three other potential Managed Care distributors.

Offering a potential boost to both major products is the iSPOT (International Study to Predict Optimised Treatment) trial. Bell Potter points out this will be the world's largest trial to predict response to depression and ADHD, while also potentially offering a new treatment and response prediction engine.

If iSPOT is successful WebNeuro would transform from a decision support tool to a depression and ADHD diagnostic and treatment response prediction engine. This would significantly boost the value of the product in the view of Bell Potter. With this in mind, Brain Resource is seeking US FDA approval this year, while preparations are under way for the next iSPOT studies on other psychiatric disorders.

This should ensure growth in WebNeuro continues as Brain Resource develops the product to address new disorders and treatment options. Bell Potter also suggests regulatory drivers such as the need for health plans above a certain size to provide coverage for mental health services should also drive increased use of the product.

To reflect this Brain Resource is employing more sales people in the US to market WebNeuro, while adding new functionality such as account management.

Future developments for Brain Resource include the establishment of an ADHD web portal via a partnership with Och-Ziff, as at present there is nothing in the online space that provides parents with all the information needed to help manage a child's condition. Given the ADHD drug market is rising, drug developers are also likely to find such a site useful in the view of Bell Potter.

Given the expectation of a strong increase in WebNeuro business from FY13, Bell Potter expects solid earnings growth for Brain Resource from FY13. Forecasts in earnings per share (EPS) terms stand at 1.9c this year and 5.1c in FY13, rising to 13.6c in FY14.

This is enough for Bell Potter to derive a base valuation for Brain Resource of $0.79, rising to $1.18 under more optimistic assumptions. Price target has been set at $0.85. Given a market capitalisation for Brain Resource of less than $20 million at present there is little in the way of comparative figures as none of the brokers in the FNArena database offer coverage on the company.

The upside potential for Brain Resource is enough for Bell Potter to rate the stock as a Buy.

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

It has been much different in most weeks so far in 2012, but recommendation upgrades and downgrades in broker ratings were nearly equally balanced in the week past, the FNArena database showing recommendations were lifted in 13 cases against 11 cuts. Buy ratings now account for 49.43% of all recommendations. Also the fact that upgrades actually outnumbered downgrades has so far remained the mere exception in 2012.

Among those upgrades were Centro Retail ((CRF)), with both Macquarie and UBS moving to Buy recommendations from Neutral previously on news the company has settled a class action. While the settlement amount was larger than most in the market had forecast, the brokers suggest a more positive view is justified as uncertainty has now been removed.

Downer EDI ((DOW)) also scored a number of upgrades over the week, Macquarie, JP Morgan and Deutsche Bank all moving to Buy ratings from Hold previously and Credit Suisse to a Neutral recommendation from Sell.

The upgrades follow an update by the company at its annual investor day that saw full year earnings guidance reiterated and brokers take greater confidence in the idea a turnaround in operations remains on track. Improved value following recent share price weakness was another factor supporting some of the upgrades.

Also in mining services, Monadelphous ((MND)) enjoyed an upgrade to Outperform from Neutral by Macquarie, this given some increases to earnings estimates pushing up the broker's price target as well as a change in analyst covering the stock.

Despite announcing further write-downs on some problem contracts over the past week Leighton Holdings ((LEI)) has been upgraded to Neutral from Sell by Deutsche Bank. The call is largely valuation driven following recent share price weakness, Deutsche acknowledging there remains some downside risk to earnings relative to full year expectations.

An upgrade for Mount Gibson ((MGX)) to a Neutral from Sell by Macquarie is equally the result of recent share price weakness, which has the stock trading in line with the broker's price target. Similarly Macquarie has upgraded Qube Logistics (QUB)) to Neutral from Sell post recent share price falls.

A change in analyst has resulted in JP Morgan upgrading to a Neutral rating on Spark Infrastructure ((SKI)) from Sell previously, as changes to its model see the broker lift its price target for the stock. Shares price moves are behind BA-Merrill Lynch's upgrade on Tabcorp ((TAH)) to Neutral from Sell, while Macquarie has upgraded to a Buy rating on Wotif.com ((WTF)) following a share price fall of about 15% in recent weeks.

Among the downgrades were Aristocrat Leisure ((ALL)), RBS Australia moving to a Neutral rating from Buy as while the earnings outlook continues to improve, a gain in the share price of about 50% since last September means this is now priced into the stock, explains the stockbroker.

Shares price performance is also the driver for UBS's downgrade to a Sell rating from Neutral on Australian Pharmaceutical Industries ((API)), while Credit Suisse has for similar reason downgraded Dexus Property ((DXS)) to Neutral from Buy.

Citi notes Caltex ((CTX)) has endured a slow start to 2012 and has cut its earnings estimates and price target accordingly. An exit from refining operations would result in minimal value creation in Citi's view and given this and the changes to its model, the broker moves to a Sell rating from Hold previously.

Recent share price strength leaves Discovery Metals ((DML)) priced for perfection in Citi's view and as a result the broker downgrades to a Sell rating. Supporting the move is a reduction in earnings estimates and price target given changes to Citi's cost and capex assumptions.

RBS had been hoping for a better second half performance from Engenco ((EGN)) than is now considered likely and so while the group's turnaround continues the broker suggests some patience is required by investors. To reflect this, the rating is downgraded to Neutral from Buy while the price target has also been cut.

Higher expenditure expectations have resulted in UBS cutting earnings forecasts and price target for Ivanhoe Australia ((IVA)). Add in increased risk of project development delays and UBS sees limited short-term upside, downgrading to a Neutral rating from Buy as a result.

While News Corporation ((NWS)) delivered a better than expected 3Q result there was no lift in full year guidance, which implies a tougher final quarter of the year. RBS sees value at current levels but the UK phone hacking issue is expected to overhang the share price, so the broker has downgraded to a Neutral rating.

Recent share price performance has been enough for RBS to downgrade Seek ((SEK)) to Hold from Buy, a move supported by ongoing weak advertising conditions. Less attractive valuation relative to the sector is the view of JP Morgan following a change in analyst for SP Ausnet ((SPN)), the broker downgrading to an Underweight rating from Neutral previously as a result. UBS sees a fair valuation for Ten Network ((TEN)) at current levels, so the broker has moved to a Neutral rating from Buy previously.

With respect to changes in price targets over the past week the most significant increases were in Super Retail ((SUL)) and Breville ((BRG)), the former coming after a well received trading update. The largest cut in price target was for Discovery Metals, with UBS joining Citi in lowering its numbers for the company.

Earnings estimates rose the most for Centro Retail given the company's settlement of the class action against it, while earnings forecasts were cut the most for Qantas ((QAN)) given changed capacity growth assumptions, Whitehaven Coal ((WHC)) to reflect the proposed acquisition of Coalworks ((CWK)) and Horizon Oil ((HZN)) post the company's quarterly production report.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	CENTRO RETAIL AUSTRALIA	Neutral	Buy	Macquarie
2	CENTRO RETAIL AUSTRALIA	Neutral	Buy	UBS
3	DOWNER EDI LIMITED	Neutral	Buy	Macquarie
4	DOWNER EDI LIMITED	Neutral	Buy	JP Morgan
5	DOWNER EDI LIMITED	Sell	Neutral	Credit Suisse
6	DOWNER EDI LIMITED	Neutral	Buy	Deutsche Bank
7	LEIGHTON HOLDINGS LIMITED	Sell	Neutral	Deutsche Bank
8	MONADELPHOUS GROUP LIMITED	Neutral	Buy	Macquarie
9	Mount Gibson Iron Limited	Sell	Neutral	Macquarie
10	QUBE LOGISTICS	Sell	Neutral	Macquarie
11	SPARK INFRASTRUCTURE GROUP	Sell	Neutral	JP Morgan
12	TABCORP HOLDINGS LIMITED	Sell	Neutral	BA-Merrill Lynch
13	WOTIF.COM HOLDINGS LIMITED	Neutral	Buy	Macquarie
Downgrade
14	ARISTOCRAT LEISURE LIMITED	Buy	Neutral	RBS Australia
15	AUSTRALIAN PHARMACEUTICAL INDUSTRIES	Neutral	Sell	UBS
16	CALTEX AUSTRALIA LIMITED	Neutral	Sell	Citi
17	DEXUS PROPERTY GROUP	Buy	Neutral	Credit Suisse
18	DISCOVERY METALS LIMITED	Neutral	Sell	Citi
19	ENGENCO LIMITED	Buy	Neutral	RBS Australia
20	IVANHOE AUSTRALIA LIMITED	Buy	Neutral	UBS
21	NEWS CORPORATION	Buy	Neutral	RBS Australia
22	SEEK LIMITED	Buy	Neutral	RBS Australia
23	SP AUSNET	Neutral	Sell	JP Morgan
24	TEN NETWORK HOLDINGS LIMITED	Buy	Neutral	UBS

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	DOW	14.0%	71.0%	57.0%	7
2	WHC	67.0%	86.0%	19.0%	7
3	CRF	17.0%	33.0%	16.0%	6
4	CQO	- 40.0%	- 25.0%	15.0%	4
5	SKI	43.0%	57.0%	14.0%	7
6	IAG	25.0%	38.0%	13.0%	8
7	WTF	13.0%	25.0%	12.0%	8
8	TAH	38.0%	50.0%	12.0%	8
9	CPU	71.0%	75.0%	4.0%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	BRG	100.0%	67.0%	- 33.0%	3
2	WBC	50.0%	25.0%	- 25.0%	8
3	CMJ	50.0%	29.0%	- 21.0%	7
4	API	40.0%	20.0%	- 20.0%	5
5	DML	40.0%	20.0%	- 20.0%	5
6	SEK	43.0%	29.0%	- 14.0%	7
7	SUL	57.0%	43.0%	- 14.0%	7
8	NWS	57.0%	43.0%	- 14.0%	7
9	DXS	43.0%	29.0%	- 14.0%	7
10	BXB	88.0%	75.0%	- 13.0%	8

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	SUL	7.449	7.877	5.75%	7
2	BRG	3.967	4.133	4.18%	3
3	WBC	22.833	23.441	2.66%	8
4	CMJ	2.990	3.061	2.37%	7
5	SKI	1.449	1.481	2.21%	7
6	TAH	3.295	3.355	1.82%	8
7	NWS	22.180	22.573	1.77%	7
8	EGP	4.523	4.570	1.04%	8
9	IAG	3.630	3.666	0.99%	8
10	SEK	7.163	7.191	0.39%	7

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	DML	1.700	1.640	- 3.53%	5
2	AMP	4.771	4.675	- 2.01%	8
3	DXS	0.965	0.958	- 0.73%	7
4	CQO	3.502	3.478	- 0.69%	4
5	CRF	1.958	1.953	- 0.26%	6

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	CRF	8.850	10.367	17.14%	6
2	DOW	40.288	41.188	2.23%	7
3	SKI	12.775	13.013	1.86%	7
4	AAD	11.800	12.000	1.69%	6
5	WBC	202.313	205.338	1.50%	8
6	AQG	66.021	66.651	0.95%	7
7	CQO	24.667	24.860	0.78%	4
8	MIO	22.668	22.811	0.63%	4
9	SIP	4.686	4.714	0.60%	7
10	CPA	7.471	7.514	0.58%	7

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	QAN	11.925	9.663	- 18.97%	8
2	WHC	8.817	7.267	- 17.58%	7
3	HZN	1.120	0.946	- 15.54%	4
4	AIZ	3.317	3.011	- 9.23%	4
5	ILU	224.113	208.063	- 7.16%	8
6	BBG	25.700	24.488	- 4.72%	8
7	NCM	152.625	146.688	- 3.89%	8
8	ARP	54.260	52.760	- 2.76%	5
9	SWM	36.213	35.525	- 1.90%	8
10	VAH	2.786	2.743	- 1.54%	7

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

By Chris Shaw

Changes in short positions for the week from April 24 were modest, only five companies seeing their total short positions change by more than 1.0 percentage point. Increases slightly outweighed decreases by three to two.

Among the increases was a 1.25 percentage point lift in Cochlear's ((COH)) shorts to 11.17% from 9.92% previously, which came ahead of a conference that led UBS to conclude the company's market share is likely to come under pressure in coming years as competitors introduce new products.

Shorts in Billabong ((BBG)) also rose for the week, climbing to 9.65% from 8.63% the week prior despite no new news from the company. Other discretionary retailers such as Harvey Norman ((HVN)) have struggled and delivered weak sales data in recent weeks, so the top short positions in the market continue to be dominated by stocks in this sector of the market.

As examples, the top 20 short positions include JB Hi-Fi ((JBH)), Myer ((MYR)), Flight Centre ((FLT)), David Jones ((DJS)) and Wotif.com ((WTF)). The media sector is also well represented with both Fairfax ((FXJ)) and Ten Network ((TEN)) in the top 20, while resource stocks are also included in the top 20 via the likes of Lynas Corporation ((LYC)), Iluka ((ILU)) and Paladin ((PDN)).

While not in the top 20, shorts rose in M2 Telecommunications Group ((MTU)) to 2.06% from 1.06% in the week from April 24 as the market adjusted to an entitlement offer from the company to help finance the acquisition of Primus Telecom Holdings.

Among the declines in short positions for the week the largest was in Carsales.com ((CRZ)), where total positions fell to 9.19% from 11.5%. This adjustment in positions came prior to a better than expected update on online advertising revenues, which was enough for Credit Suisse to lift earnings estimates modestly.

Shorts in Whitehaven Coal ((WHC)) declined to 5.61% from 6.87% previously, brokers such as Citi remaining positive on the company given Whitehaven is now a rare breed as an independent coal producer with exposure to seaborne prices, making it the go to stock in the sector in that regard in the broker's view.

Monthly changes in shorts were more significant, both Paladin ((PDN)) and Spark Infrastructure ((SKI)) seeing increases of more than 4.0 percentage points for the month from March 30. For Paladin the changes were likely a reaction to a convertible note issue that helps address some short-term funding concerns, while for Spark the market continues to have mixed views on the proposed move to acquire the Sydney desalination plant.

Among the top 20, Myer, David Jones and Carsales.com (((CRZ)) all saw shorts decline by 1.5-2.1 percentage points in the month, while Wesfarmers partly protected shares ((WESN)) have seen shorts decline from more than 2.5% the month before to 0.1% now.

Beach Energy ((BPT)) saw shorts fall to 3.22% from 5.43% from the month before, this prior to better than expected March quarter production. On the flip side, some in the market viewed Beach's exploration performance during the March quarter as disappointing.

As noted, Ten Network is among the top 20 short positions on the market and RBS Australia sees this as reflective of ongoing TV ad market weakness and poor ratings for the network. The broker recently lowered earnings estimates to reflect these issues, which reinforced a Sell rating on the stock.

Top 20 Largest Short Positions

ank	Symbol	Short Position	Total Product	%Short
1	JBH	21969268	98850643	22.21
2	ISO	725044	5703165	12.71
3	COH	6368476	56929432	11.17
4	MYR	64755077	583384551	11.10
5	FXJ	257611720	2351955725	10.96
6	FLT	10014423	100024697	10.00
7	BBG	24947895	257888239	9.65
8	LYC	159919500	1714496913	9.33
9	CRZ	21511549	233684223	9.19
10	DJS	46526079	524940325	8.88
11	EGP	57950189	688019737	8.41
12	PDN	69893003	835645290	8.36
13	GNS	61609897	848401559	7.25
14	HVN	76815948	1062316784	7.17
15	ILU	26640399	418700517	6.33
16	WTF	13180059	211736244	6.22
17	TEN	64330218	1045236720	6.13
18	CSR	30892376	506000315	6.09
19	TRS	1543849	26071170	5.93
20	SGT	9725769	165074137	5.89

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

IMPORTANT INFORMATION ABOUT THIS REPORT

Aside from all the above reasons as to why it would be a potential misconception to draw simple 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.

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

Among brokers in the FNArena database the onset of earnings confessions season has seen downgrades far outweigh upgrades, with 11 ratings being lifted compared to 35 being lowered. Total Buy ratings have dipped below the 50% mark and currently stand at 49.22%.

Energy producer AWE ((AWE)) was the only stock to be upgraded by more than one broker, both Citi and Credit Suisse moving to Buy recommendations from Hold previously. For Credit Suisse the upgrade is simply a valuation call after recent share price weakness, while Citi points out the stock also offers material upside if drilling in the Perth Basin proves to be successful. Others in the market adjusted earnings estimates and price targets for AWE post the company's quarterly production report.

JP Morgan's upgrade of Commonwealth Bank ((CBA)) to Overweight from Neutral is also largely a value call as the stock appears attractive at current levels, this from both a yield perspective and given scope for some improvement in earnings growth.

Recent share price weakness has improved the value on offer in both Emeco Holdings ((EHL)) and Jetset Travelworld ((JET)) and this has been enough to prompt upgrades from BA Merrill Lynch and Deutsche Bank respectively, while a strong balance sheet and strong cash flow generation are enough for Citi to upgrade Mount Gibson ((MGX)) to Buy from Hold despite ongoing concerns related to relatively short mine life.

ResMed ((RMD)) delivered better margins in higher volume products and some gains in market share and this prompted an upgrade to Overweight from Neutral by JP Morgan, though at the same time BA-ML downgraded to a Hold rating given a view there is limited upside from current levels at present. Credit Suisse also downgraded its rating on the stock.

Credit Suisse has started to see some value in Stockland ((SGP)) following share price weakness this year and so has upgraded to a Buy rating, while UBS has similarly upgraded Wotif.com ((WTF)) to a Buy rating on valuation grounds.

JP Morgan can no longer justify anything below a Neutral rating on Woodside ((WPL)) following the company's sale of a stake in the Browse project, the positive read through for valuation and the potential of the project the transaction implies.

With respect to downgrades in ratings, the Australian banks featured prominently this week. ANZ Banking Group ((ANZ)) saw its rating cut by both RBS Australia and UBS, the former to Hold from Buy and the latter to Sell from Hold. Valuation and some emerging earnings headwinds are the reasons for the change by RBS, while recent strength has UBS suggesting now is time to take some profits in the stock.

A strategic review of its UK operations by National Australia Bank ((NAB)) was broadly as the market had expected, but concerns about provisioning levels were enough for JP Morgan to downgrade to a Neutral rating. Deutsche made a similar move given its view there remains some downside risk to earnings. Westpac ((WBC)) was equally not immune to downgrades among the banks as UBS cut its rating to Neutral, this also a valuation call given recent share price gains.

Consolidated Media Holdings ((CMJ)) also saw two downgrades (just as ANZ did), both to Hold from Buy by Macquarie and Citi. Market speculation James Packer will sell his stake in the group has driven trading of late but as Citi notes, at current levels it is difficult to justify the value the market is ascribing to the company even allowing for some corporate premium.

DuluxGroup's ((DLX)) proposed acquisition of Alesco ((ALS)) saw both RBS and JP Morgan move to Neutral ratings from Buy previously, RBS noting the move would take some time to deliver a positive earnings boost and JP Morgan seeing the current time as a good one to pull back its rating given good share price performance over the past year. Alesco was also downgraded to Hold by Credit Suisse given the potential for corporate activity has the stock fairly valued for this stage of the cycle.

March quarter earnings for Imdex ((IMD)) were disappointing, especially given an upbeat update from the company in February, so both RBS and BA-ML downgraded ratings to Hold from Buy. The changes also reflect adjustments to earnings estimates and price targets for the stock.

Credit Suisse made the same move on Super Retail ((SUL)) for the same reasons, noting while the company is a rarity in that it is a well performed retail stock at present, share price gains suggest little upside scope shorter-term.

SAI Global ((SAI)) also suffered at the hands of brokers post revisions to earnings guidance, RBS, Citi and JP Morgan all cutting ratings to Hold from Buy. RBS suggests valuation now looks stretched given revised earnings expectations, while JP Morgan is less bullish given the stock is clearly being subject to macro conditions at present.

Downgrades for the likes of Discovery Metals ((DML)), AMP ((AMP)) and Goodman Fielder ((GFF)), all to Hold recommendations from Buy previously, are also valuation driven calls, while low volumes from a tough operating environment and the ongoing threat of increased competition have caused Citi to downgrade ASX ((ASX)) to Neutral from Buy.

As far as changes in earnings estimates go, energy companies dominate this week's table of positive changes, alongside office property funds Investa ((IOF)) and CPA, while Ardent Leisure ((AAD)) and ResMed equally joined the positive crew post well-received market updates.

On the negative side, miners and energy producers equally dominate, alongside Jetset Travelworld, Air New Zealand ((AIZ)), SAI Global and Imdex ((IMD)).

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	AWE LIMITED	Neutral	Buy	Citi
2	AWE LIMITED	Neutral	Buy	Credit Suisse
3	COMMONWEALTH BANK OF AUSTRALIA	Neutral	Buy	JP Morgan
4	EMECO HOLDINGS LTD	Neutral	Buy	BA-Merrill Lynch
5	JETSET TRAVELWORLD LIMITED	Buy	Buy	Deutsche Bank
6	Mount Gibson Iron Limited	Neutral	Buy	Citi
7	RESMED INC	Neutral	Buy	JP Morgan
8	STOCKLAND	Neutral	Buy	Credit Suisse
9	TAP OIL LIMITED	Neutral	Buy	Credit Suisse
10	WOODSIDE PETROLEUM LIMITED	Sell	Neutral	JP Morgan
11	WOTIF.COM HOLDINGS LIMITED	Neutral	Buy	UBS
Downgrade
12	ALESCO CORPORATION LIMITED	Buy	Neutral	Credit Suisse
13	AMP LIMITED	Buy	Neutral	Macquarie
14	ASX LIMITED	Buy	Neutral	Citi
15	ATLAS IRON LIMITED	Buy	Neutral	UBS
16	AUSTRALIA & NEW ZEALAND BANKING GROUP	Buy	Neutral	RBS Australia
17	AUSTRALIA & NEW ZEALAND BANKING GROUP	Neutral	Sell	UBS
18	BRAMBLES LIMITED	Buy	Neutral	Macquarie
19	BREVILLE GROUP LIMITED	Buy	Neutral	UBS
20	BT INVESTMENT MANAGEMENT LIMITED	Buy	Neutral	Credit Suisse
21	CALTEX AUSTRALIA LIMITED	Neutral	Neutral	BA-Merrill Lynch
22	CFS RETAIL PROPERTY TRUST	Buy	Neutral	UBS
23	COMMONWEALTH PROPERTY OFFICE FUND	Neutral	Sell	Deutsche Bank
24	CONSOLIDATED MEDIA HOLDINGS LIMITED	Buy	Neutral	Macquarie
25	CONSOLIDATED MEDIA HOLDINGS LIMITED	Buy	Neutral	Citi
26	CUSTOMERS LIMITED	Neutral	Sell	Credit Suisse
27	DISCOVERY METALS LIMITED	Buy	Neutral	UBS
28	DULUX GROUP LIMITED	Buy	Neutral	RBS Australia
29	DULUX GROUP LIMITED	Buy	Neutral	JP Morgan
30	GOODMAN FIELDER LIMITED	Buy	Neutral	Credit Suisse
31	IMDEX LIMITED	Buy	Neutral	RBS Australia
32	IMDEX LIMITED	Buy	Neutral	BA-Merrill Lynch
33	INDEPENDENCE GROUP NL	Buy	Neutral	Credit Suisse
34	JETSET TRAVELWORLD LIMITED	Buy	Neutral	RBS Australia
35	MIRVAC GROUP	Buy	Neutral	Credit Suisse
36	Mount Gibson Iron Limited	Neutral	Neutral	JP Morgan
37	NATIONAL AUSTRALIA BANK LIMITED	Buy	Neutral	JP Morgan
38	NATIONAL AUSTRALIA BANK LIMITED	Buy	Neutral	Deutsche Bank
39	RESMED INC	Buy	Neutral	BA-Merrill Lynch
40	RESMED INC	Buy	Neutral	Credit Suisse
41	SAI GLOBAL LIMITED	Buy	Neutral	RBS Australia
42	SAI GLOBAL LIMITED	Buy	Neutral	Citi
43	SAI GLOBAL LIMITED	Buy	Neutral	JP Morgan
44	SUPER RETAIL GROUP LIMITED	Buy	Neutral	Credit Suisse
45	WATPAC LIMITED	Buy	Neutral	RBS Australia
46	WESTPAC BANKING CORPORATION	Buy	Neutral	UBS

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	AWE	29.0%	57.0%	28.0%	7
2	CBA	- 13.0%	13.0%	26.0%	8
3	TAP	50.0%	75.0%	25.0%	4
4	EHL	60.0%	80.0%	20.0%	5
5	BPT	- 40.0%	- 20.0%	20.0%	5
6	OZL	38.0%	50.0%	12.0%	8
7	WPL	38.0%	50.0%	12.0%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	IMD	100.0%	33.0%	- 67.0%	3
2	SAI	100.0%	63.0%	- 37.0%	8
3	BRG	100.0%	67.0%	- 33.0%	3
4	ANZ	38.0%	13.0%	- 25.0%	8
5	JET	75.0%	50.0%	- 25.0%	4
6	NAB	50.0%	25.0%	- 25.0%	8
7	WBC	50.0%	25.0%	- 25.0%	8
8	IGO	80.0%	60.0%	- 20.0%	5
9	DML	60.0%	40.0%	- 20.0%	5
10	ALS	50.0%	33.0%	- 17.0%	6

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	RMD	3.213	3.560	10.80%	8
2	ALS	1.698	1.830	7.77%	6
3	SUL	7.403	7.877	6.40%	7
4	BPT	1.320	1.402	6.21%	5
5	ANZ	23.255	24.524	5.46%	8
6	BRG	3.967	4.133	4.18%	3
7	WPL	40.286	41.579	3.21%	8
8	WBC	22.833	23.441	2.66%	8
9	BXB	7.715	7.834	1.54%	8
10	CSL	37.761	38.191	1.14%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	JET	0.890	0.768	- 13.71%	4
2	AGO	3.688	3.426	- 7.10%	8
3	OZL	12.236	11.634	- 4.92%	8
4	SAI	5.525	5.318	- 3.75%	8
5	WSA	6.067	5.858	- 3.44%	6
6	DML	1.740	1.700	- 2.30%	5
7	IGO	5.134	5.018	- 2.26%	5
8	NAB	26.630	26.314	- 1.19%	8
9	AMP	4.771	4.733	- 0.80%	8
10	IMD	2.887	2.867	- 0.69%	3

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	AWE	2.800	7.929	183.18%	7
2	AGO	5.738	11.975	108.70%	8
3	IOF	4.986	7.100	42.40%	7
4	BPT	8.540	9.420	10.30%	5
5	ROC	4.600	4.911	6.76%	5
6	WPL	239.591	252.379	5.34%	8
7	RMD	15.675	16.307	4.03%	8
8	CPA	7.243	7.514	3.74%	7
9	CTX	121.000	124.000	2.48%	6
10	AAD	11.800	12.000	1.69%	6

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	IGO	3.740	2.240	- 40.11%	5
2	HZN	1.120	0.945	- 15.63%	4
3	JET	7.525	6.600	- 12.29%	4
4	WHC	9.750	8.650	- 11.28%	6
5	AUT	31.852	28.324	- 11.08%	5
6	OZL	79.914	71.888	- 10.04%	8
7	AIZ	3.313	3.007	- 9.24%	4
8	SAI	26.500	24.375	- 8.02%	8
9	IMD	25.300	23.633	- 6.59%	3
10	TAP	3.275	3.100	- 5.34%	4

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

.ref1 {background-color:#B8E3F8;}

By Chris Shaw

Increases in short positions outweighed decreases for the week from April 16, with shorts in both Spark Infrastructure ((SKI)) and Whitehaven ((WHC)) rising by more than 4.0 percentage points.

For Spark Infrastructure shorts now stand at 5.28% from 0.5% the week prior, this as the company announced the intention to bid for the Sydney desalination plant in a move to expand away from electricity assets.

While Whitehaven is now a go-to coal play given the lack of independent coal producers listed on the ASX, Citi is cautious on the group's ramp-up ambitions as these plans appear very optimistic. Shorts in Whitehaven have increased to 7.08% from 2.86% previously.

Despite a lack of news in recent weeks shorts in Mesoblast ((MSB)) rose in the week from April 16 to 5.43% from 2.72% previously, enough to push Mesoblast into the top 20 short positions list. At the same time shorts in Carsales.com ((CRZ)) increased to 11.68% from 9.12% the week before in a continuation of the recent trend of rising shorts in the stock.

The increase cements Carsales.com in the top 20 largest short positions on the Australian market, a list that continues to be dominated by companies exposed to the consumer discretionary sector. Others in the sector making the list include JB Hi-Fi ((JBH)), where those holding short positions would be happy given recently revised down earnings guidance, Myer ((MYR)), David Jones ((DJS)), Billabong ((BBG)) and Harvey Norman ((HVN)).

Other stocks in the top 20 list cover a range of sectors, with the likes of Cochlear ((COH)) in the healthcare sector, Ten Network ((TEN)) and Fairfax ((FXJ)) among media plays, Echo Entertainment ((EGP)) in the gaming sector and Iluka ((ILU)) and Lynas Corporation ((LYC)) among commodity plays.

The largest decline in short positions for the week from April 16 was in SingTel ((SGT)), where positions declined to 4.05% from 5.72% despite no major announcements from the company.

With respect to monthly changes the biggest increases have come in Whitehaven, Spark Infrastructure, Bathurst Resources ((BTU)), Carsales.com and Independence Group ((IGO)). The increase in shorts for Bathurst came ahead of a quarterly production report indicating a slower ramp-up in production, while for Independence Group the major upcoming catalyst is the first gold pour at Tropicana continues to get closer.

Among the falls in short positions over the month from March 23, Billabong has seen total positions decline to 9.37% from 11.3% the month prior, while shorts also declined by more than 1.5 basis points in (FMS)), Wesfarmers Partly Protected shares ((WESN)) and Western Areas ((WSA)). Of those only Western Areas has a significant level of short positions at 3.58%, which may not be impacted by this week's quarterly production report that was broadly in line with expectations.

Elsewhere, RBS Australia notes short positions in Westpac ((WBC)) have risen by 35 basis points over the past month to a level of around 2.0%. Leading into bank reporting season this month the increase makes sense in the broker's view, as Westpac has delivered below peer loan book growth over the past year and has the greatest reliance on wholesale funding markets of the major banks. This leaves Westpac most exposed to any increase in eurozone tensions, something RBS expects will occur in coming months.

Top 20 Largest Short Positions

Rank	Symbol	Short Position	Total Product	%Short
1	JBH	22928391	98850643	23.20
2	MYR	75404121	583384551	12.90
3	ISO	723617	5703165	12.69
4	CRZ	27277138	233684223	11.68
5	FXJ	273373404	2351955725	11.64
6	COH	6311333	56929432	11.10
7	FLT	10065499	100024697	10.06
8	DJS	52157507	524940325	9.96
9	LYC	161692161	1714496913	9.45
10	BBG	24223691	257888239	9.37
11	EGP	57361567	688019737	8.34
12	HVN	77576325	1062316784	7.26
13	GNS	61598376	848401559	7.25
14	WHC	35728428	502668417	7.08
15	WTF	13857249	211736244	6.53
16	ILU	26940403	418700517	6.42
17	TEN	62009646	1045236720	5.91
18	TRS	1528794	26071170	5.89
19	CSR	29662405	506000315	5.85
20	MSB	15445890	284478361	5.43

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.