Tag Archives: Health Care and Biotech

article 3 months old

ResMed Wakes Up

 - ResMed quarterly better than expected
 - Brokers revise up earnings an price target expectations
 - Ratings on the stock still mixed

By Chris Shaw

ResMed ((RMD)) delivered March quarter net profit after tax of US$64.6 million, an increase of 21% in year-on-year terms. The increase in profit outpaced an 11% increase in revenues to US$349.1 million for the period and was above market consensus.

A highlight for Macquarie was strong cost control during the period, this stemming from the achievement of additional operational efficiencies. Gross margin for the period of 60.3% was 90 basis points higher than Macquarie had expected thanks to product mix tailwinds, manufacturing improvements and additional supply chain efficiencies.

At the same time, UBS points out while forex moves during the period were a negative for ResMed this was more than offset by strong mask and high end flow sales and generated a better than expected result. UBS expects ResMed's March quarter performance will continue into the June quarter before a more volatile FY13.

JP Morgan was similarly positive, viewing the result as evidence of a more convincing trend in terms of ResMed regaining market share in the Bi-levels market in particular. Growth in the home sleep testing market has also come faster than JP Morgan had expected and supports the move to lift earnings estimates post the quarterly result.

BA Merrill Lynch was a little less positive on the ReMed quarterly, noting earnings in the period were helped by a lower than expected tax rate and better interest income. While the broker has lifted earnings estimates post the result revenue expectations are largely unchanged given tougher comparable numbers in coming periods and no near-term recovery in the EU market expected.

Even allowing for tougher comparable numbers, ResMed should continue to deliver solid earnings growth. Citi suggests double digit earnings growth is virtually guaranteed in coming years, especially given average mask growth of around 20% in the US market over the past 16 quarters.

Changes in earnings forecasts across the market for ResMed mean consensus EPS estimates according to the FNArena database now stand at US16.2c this year and US19.3c in FY13. Based on these forecasts the consensus price target for ResMed stands at $3.50, up from $3.21 prior to the result. Targets range from RBS Australia at $3.05 to Citi at $4.46.

The FNArena database shows ResMed is rated as Buy five times and Hold three times, with BA-ML downgrading to a Hold rating post the result and JP Morgan upgrading to a Buy. For the former a Neutral rating is now appropriate given the expectation of tougher comparable numbers in coming quarters and the fact the extent of any EU weakness remains unknown.

In contrast, an upgrade to an Outperform rating is justified in the view of JP Morgan as the combination of an impressive net cash position, an ongoing share buyback and potentially more benign funding issues suggest better share price performance.

Also supportive according to JP Morgan is more stabilised underlying market growth of 6-8% in the US, this after several quarters of diminishing growth. While the rest of the world remains challenging for ResMed given current macroeconomic conditions, JP Morgan notes both Germany and the UK delivered encouraging growth during the period.

Despite a stronger market today shares in ResMed have weakened slightly and as at 11.30am the stock was down 1c at $3.25. This compares to a range over the past year of $2.36 to $3.28 and implies upside of a little more than 7% relative to the consensus price target in the FNArena database.

 
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article 3 months old

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

In a relatively quieter week for rating changes, brokers in the FNArena database upgraded five recommendations while downgrading a further nine, extending 2012's trend in favour of more downgrades. Total Buy ratings currently stand at 50.57%.

Commonwealth Bank ((CBA)) was among the upgrades, Deutsche Bank moving to a Buy recommendation from Hold previously. The change reflects better relative value in the stock compared to the other major banks, this as CBA's traditional premium to the sector has been eroded somewhat in recent weeks.

The remainder of the upgrades were in resource stocks, with Citi upgrading Kingsgate Consolidated ((KCN)) to Neutral from Sell post the company's quarterly production report. The call is a valuation one given recent share price weakness, as Citi has trimmed earnings estimates and price target to reflect updated commodity price and foreign exchange assumptions. Others in the market have similarly adjusted earnings forecasts and price targets for Kingsgate without changing ratings.

Citi also upgraded Western Areas ((WSA)) to Buy from Neutral post what was regarded as a solid quarterly production report. Higher grades boosted production in the period and Citi continues to have a bullish view on nickel prices.

Not all in the market are as optimistic as Citi, as Credit Suisse downgraded Western Areas to Neutral from Outperform given lower nickel prices impacted on earnings for the company. In Credit Suisse's view there is limited valuation upside from current levels at present.

Oil Search ((OSH)) scored an upgrade to an Overweight rating from Neutral previously by JP Morgan, the broker suggesting successful appraisal at P'nyang offers greater certainty with respect to a third train at the PNG LNG project. This implies share price upside from current levels. The entire market is not in agreement, as Citi downgraded Oil Search to Neutral from Buy on valuation grounds to reflect recent share price performance.

OZ Minerals ((OZL)) was upgraded to Outperform from Neutral by Credit Suisse on valuation grounds, this reflecting recent share price weakness. Helping justify the upgrade in rating was a quarterly production report viewed as solid by the broker.

A downgrade to Hold from Buy by Deutsche Bank reflects the broker's view ASX ((ASX)) is running out of steam at current levels, as recent data suggest trading and capital raising volumes are failing to respond to recent stock market upside. Minor cuts to earnings estimates saw Deutsche trim its price target, a move matched by others in the market.

Citi downgraded AWE ((AWE)) to Neutral from Buy, this given the view while there remains significant upside potential in the stock, there is also a higher level of associated risk. The change comes after further delays to the BassGas project were announced.

Issues in its rail division were enough for Macquarie to downgrade its rating on Bradken ((BKN)) to Neutral from Outperform, while earnings forecasts and targets were also lowered across the market to reflect the revised guidance from management. Achieving new guidance will still be a challenge in Macquarie's view, while gearing is also something the broker sees as worth watching.

Valuation was the driver of Deutsche's downgrade for CSL ((CSL)) to Hold from Buy, as it comes at the same time as the broker lifted earnings forecasts and price target for the stock to reflect greater Ig market share.

For the same valuation reason, RBS Australia has downgraded Orica ((ORI)) to Hold from Buy, while the broker also sees potential for new management to clear the decks at the interim profit result next month.

Downgraded earnings guidance from Seven West Media ((SWM)) was not well received, as both UBS and Citi downgraded to Hold recommendations from Buy ratings previously. UBS sees the stock as fully valued based on its revised forecasts and price target, while higher cost expectations also played a role in Citi's downgrade in rating.

A better than expected interim result saw price targets increase solidly for Australian Pharmaceutical Industries ((API)), this on the back of changes to broker earnings estimates. Post its quarterly production report, Mincor enjoyed some increases to earnings estimates and price targets, while lower earnings guidance saw forecasts reduced for Boral ((BLD)).

 

 

Total Recommendations
 Recommendation Changes

 

Broker Recommendation Breakup

 

Broker Rating

Order Company Old Rating New Rating Broker
Upgrade
1 COMMONWEALTH BANK OF AUSTRALIA Neutral Buy Deutsche Bank
2 KINGSGATE CONSOLIDATED LIMITED Sell Neutral Citi
3 OIL SEARCH LIMITED Neutral Buy JP Morgan
4 OZ MINERALS LIMITED Neutral Buy Credit Suisse
5 WESTERN AREAS NL Neutral Buy Citi
Downgrade
6 ASX LIMITED Buy Neutral Deutsche Bank
7 AWE LIMITED Buy Neutral Citi
8 BRADKEN LIMITED Buy Neutral Macquarie
9 CSL LIMITED Buy Neutral Deutsche Bank
10 OIL SEARCH LIMITED Buy Neutral Citi
11 ORICA LIMITED Buy Neutral RBS Australia
12 SEVEN WEST MEDIA LIMITED Buy Neutral Citi
13 SEVEN WEST MEDIA LIMITED Buy Neutral UBS
14 WESTERN AREAS NL Buy Neutral Credit Suisse
 

Recommendation

Positive Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 SBM - 67.0% - 33.0% 34.0% 3
2 API 20.0% 40.0% 20.0% 5
3 CHC 80.0% 100.0% 20.0% 5
4 UGL 71.0% 86.0% 15.0% 7
5 PNA 63.0% 75.0% 12.0% 8
6 OZL 38.0% 50.0% 12.0% 8
7 ASL 80.0% 83.0% 3.0% 6

Negative Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 SWM 75.0% 50.0% - 25.0% 8
2 ASX 29.0% 14.0% - 15.0% 7
3 AWE 43.0% 29.0% - 14.0% 7
4 SKI 57.0% 43.0% - 14.0% 7
5 BKN 100.0% 86.0% - 14.0% 7
6 AMP 63.0% 50.0% - 13.0% 8
7 BLD 25.0% 13.0% - 12.0% 8
8 CSL 75.0% 63.0% - 12.0% 8
9 ORI 75.0% 63.0% - 12.0% 8
10 MCC - 25.0% - 33.0% - 8.0% 3
 

Target Price

Positive Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 API 0.330 0.378 14.55% 5
2 SBM 2.197 2.300 4.69% 3
3 CSL 37.758 38.061 0.80% 8
4 CHC 2.505 2.518 0.52% 5
5 MCC 16.113 16.150 0.23% 3
6 ORI 28.824 28.864 0.14% 8

Negative Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 BLD 4.345 4.069 - 6.35% 8
2 SWM 4.170 3.913 - 6.16% 8
3 BKN 9.286 8.779 - 5.46% 7
4 OZL 12.236 11.634 - 4.92% 8
5 AMP 4.834 4.771 - 1.30% 8
6 ASX 32.943 32.579 - 1.10% 7
7 PNA 4.005 3.980 - 0.62% 8
8 AWE 2.067 2.064 - 0.15% 7
 

Earning Forecast

Positive Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 MCR 2.300 2.967 29.00% 3
2 OSH 12.193 13.836 13.47% 8
3 ROC 4.599 4.908 6.72% 5
4 WPL 225.366 239.631 6.33% 8
5 SBM 35.800 37.867 5.77% 3
6 WSA 30.833 32.250 4.60% 6
7 API 4.114 4.240 3.06% 5
8 CGF 46.329 47.729 3.02% 7
9 TAP 3.200 3.275 2.34% 4
10 CWN 55.850 57.113 2.26% 8

Negative Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 WHC 12.467 9.750 - 21.79% 6
2 BKN 70.900 58.286 - 17.79% 7
3 AWE 3.400 2.800 - 17.65% 7
4 BLD 21.450 18.038 - 15.91% 8
5 PAN 5.050 4.325 - 14.36% 4
6 OZL 79.914 71.888 - 10.04% 8
7 NCM 168.625 152.625 - 9.49% 8
8 SKI 13.938 12.775 - 8.34% 7
9 SWM 38.888 36.213 - 6.88% 8
10 FMG 49.096 46.547 - 5.19% 8
 

Technical limitations

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article 3 months old

Weekly Broker Wrap: Bank Result Previews And Macro Themes

 - GS strategists identify dominant macro market themes
 - Stockbrokers preview major banks' interim results
 - RBA rate cuts to have little market impact, predicts JP Morgan
 - BA-ML updates views of London clients

By Chris Shaw

While 2012 has delivered a relatively positive start in terms of equity market performance, Goldman Sachs expects a number of macro themes will continue to influence sector and stock selection for the Australian market.

The key macro themes expected to dominate Australian stock performance over the next 12 months are a US economy recovery, China's ongoing industrialisation and growth, mining capital investment, mining volumes and the domestic interest rate cycle.

Of note, Goldman Sachs points out the China industrialisation and growth plus the mining investment themes are highly correlated and have been the dominant drivers of performance over the past year. At the same time, domestic cyclicals have underperformed the market since the end of 2010, though performance within this group has been mixed given weak building material performance and outperformance from the transport sub-sector.

The US economic recovery theme has modestly outperformed since the end of the GFC and has gained momentum since late last year. Goldman Sachs notes a strong Australian dollar rally since the middle of 2010 has reduced the attractiveness of this theme for domestic investors.

Looking ahead, Goldman Sachs continues to view the US recovery themes as one of the more attractive given its long duration potential and the added benefit of offering a currency hedge against any Australian dollar weakness. Preferred stocks for such a theme are Amcor ((AMC)), Brambles (BXB)), Computershare ((CPU)), CSL ((CSL)), James Hardie ((JHX)), News Corp ((NWS)) and Sims ((SGM)).

Domestic cyclicals offer attractive earnings leverage to lower interest rates and the sector offers some value in the view of Goldman Sachs, but improved performance will require the easing of structural headwinds such as an increase in household savings and the recent strength in the Australian dollar. Preferred exposures for the domestic cyclicals at present include OneSteel ((OST)), Super Retail ((SUL)) and Qantas ((QAN)).

In exposure to Chinese growth and its impact on mining investment, Goldman Sachs expects coming years will see the resource sector move from a “delta price” to a “delta volume” environment, which would move most key commodities into surplus conditions. This leaves Goldman Sachs increasingly cautious on the ability of the resources sector to maintain its outperformance relative to the market. 

Assuming mining volumes increase, exposure to a strong capital investment cycle and an increase in volumes is preferred. Goldman Sachs likes Asciano ((AIO)), Orica ((ORI)) and UGL ((UGL)) for playing this theme. 

May means major banks reporting season in Australia and brokers have been updating expectations for the sector in anticipation of the results in coming weeks. Results are expected for ANZ Banking Group on May 2, Westpac ((WBC)) on May 3 and National Australia Bank ((NAB)) on May 10. Commonwealth Bank ((CBA)) will provide a trading update on May 17.

Of particular interest has been the outlook for margin pressures, cost out progress and the source of business loan growth. In general, Macquarie expects the results from ANZ, Westpac and National Australia Bank will show marginal earnings growth.

This reflects a subdued outlook for the sector, as while a mix of out-of-cycle interest rate rises and the retention of rate cuts may help control margins, it will come at the expense of increased risks with respect to softer loan growth in Macquarie's view.

Dividends are also a concern, as while payouts are sustainable, Macquarie suggests softer earnings growth is likely to see dividends decline at the absolute level. Bad debts may exacerbate this trend in the broker's view.

With respect to bad debt levels, Macquarie's review of asset quality suggests the major banks are well provisioned against a slight deterioration in the broader economy. It would take further deterioration for there to be any further significant impact on impairments in the broker's view.

Macquarie expects margins among the banks to come under pressure from higher wholesale and deposit costs eroding retail and business margins, while there is also the view institutional growth is hiding some very soft business and retail SME loan growth numbers.

Currently improving mortgage loan growth may prove to be temporary, suggests Macquarie, while wealth operations are also expected to continue to struggle given still weak market conditions. Macquarie's order of preference is ANZ and Westpac as its preferred plays, while National Australia Bank is rated as Neutral given its exposure to the poorly performing UK economy.

UBS also expects solid interim earnings results for the major banks, the major drivers being subdued loan growth and solid deposits, net interest margin, a potential bounce-back in trading income, more aggressive cost management and patchy bad debt outcomes.

Given this backdrop, UBS has looked at where bank earnings could surprise in 1H12. On a bank by bank basis, UBS expects ANZ will show good net interest margin performance, a trading rebound and 4% revenue growth, while the major question will be return on equity from the bank's Asian assets.

For National Australia Bank the expectation of UBS is for pressure on net interest margin, weak personal banking revenue but strength in the business bank operations. For Westpac, UBS sees a trading rebound in the second quarter, subdued asset growth and cost pressures.

In terms of forecasts for the upcoming bank results, Macquarie is forecasting cash profit for ANZ of $2,964 million, which would equate to cash earnings per share (EPS) of 107c. UBS is a little higher, forecasting cash EPS for ANZ of 112.6c. Macquarie suggests an institutional rebound and cost containment in New Zealand are potential sources of upside in the result. 

For National Bank UBS expects cash EPS of 125.2c, while Macquarie is forecasting cash EPS of 123c. The latter sees the maintaining of margins, reasonable asset growth and continued momentum in the wealth operations as potential sources of upside to the result.

Westpac is expected to report cash EPS of 103.1c for the period according to UBS, while Macquarie's forecast stands at 101c. Good cost containment, solid margin performance and a rebound in trading profits offer possible sources of upside surprise in the view of Macquarie.

Post a recent rally the major Australian banks are not cheap in the view of UBS, as the sector is trading on a price to book ratio of 1.7 times, a FY12 earnings multiple of 11 times and a 6.8% dividend yield.

In contrast, RBS Australia expects European tensions will escalate over the next few months and under such a scenario the Australian banks are attractive given relative earnings certainty and yield support. The banks are also expected to benefit from further cuts to interest rates in Australia given pricing power should moderate the effect of funding cost headwinds.

Order of preference for RBS is National Bank and ANZ as most preferred, this due to their better positioning for structurally lower mortgage credit growth and cyclical improvement in business credit growth. As well, RBS sees NAB and ANZ as having less reliance on wholesale funding markets, while both appear better positioned for the new Basel III regulations. 

In terms of the market's overall view on Australian banks, the FNArena database shows Sentiment Indicator readings of 0.5 for National Bank and Westpac, 0.4 for ANZ, and minus 0.1 for CBA. 

In the view of JP Morgan, a low March quarter CPI outcome in Australia opens the door for a Reserve Bank of Australia (RBA) easing of interest rates, but this is unlikely to lift the domestic equity market out of its current range as a lot of easing is already priced in.

The benign CPI number changes the policy settings needed to hit the RBA's objective of keeping the non-mining economy cornered to keep medium-term inflation risks at bay. This makes an easing likely, but JP Morgan points out the market is already factoring in three rate cuts this year. As a result, the broker suggests the exact level of the cash rate is a secondary issue for equities.

JP Morgan agrees official interest rates are likely going to come down but this implies some earnings risk, particularly because of the ongoing struggles in the Australian housing market. On the flip side, JP Morgan suggests the bank sector is not the correct way to play a move to lower interest rates, as if the unemployment rate rises fast enough to move interest rates to a lower level than already anticipated, there will be an increase in loan quality risks. This would likely be enough to offset any potential upside in credit growth.

An alternative would be a play on the currency, but again JP Morgan notes the market is already well down this path. While there is logic to such an approach the broker suggests finding value using this approach is a more difficult issue at present.

JP Morgan continues to lean towards stocks and sectors with value drivers largely independent of the macro environment or are priced for low expectations. This includes Insurance, Energy and companies struggling from cyclical factors but with a reasonable industry structure. These include the likes of Computershare ((CPU)), Boral ((BLD)), Sims ((SGM)) and Aristocrat Leisure ((ALL)). 

In a recent meeting with its London clients, BA Merrill Lynch notes the dominant view on the market at present is a continuation of the current trading range. This reflects a lack of conviction and willingness to take risks, though investors are looking to add rather than subtract risk as their next move.

There remains some concern over the pace of US economic activity, while BA-ML notes growth in Europe is viewed as a disaster everywhere except Germany. On a more positive note, a soft landing in China is seen as offsetting the weak European outlook.

A majority of clients continue to expect QE3, but BA-ML notes this is only likely after a sharp turn lower in data. There was some interest on the part of clients in BA-ML's favourite trade for the June quarter, which is long China and short US consumer discretionary.


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article 3 months old

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

The past week has been a busy period for changes in broker ratings as the eight brokers in the FNArena database have upgraded recommendations on 12 stocks while downgrading a further 14. This means the trend of more downgrades than upgrades continues. Total Buy ratings now stand at 50.59%.

The only stock receiving multiple upgrades was Energy Resources of Australia ((ERA)), where both BA Merrill Lynch and UBS have moved to Buy ratings from Sell previously. The rating upgrades reflect a more positive view post an update by the company on the progress of operations at Ranger.

BA-ML has also upgraded Alacer Gold ((AQG)) to Buy from Sell, reflecting the broker's view the market is at present too concerned about the group's Australian assets, to the point value is emerging at current levels.

Interim earnings from Australian Pharmaceutical ((API)) were good enough for Macquarie to lift earnings estimates and its price target, the latter change enough to justify an upgrade to a Buy rating from Neutral previously. Across the market earnings estimates and price targets were adjusted post the result.

Following a strategy update by the bank UBS has upgraded Commonwealth Bank ((CBA)) to Buy from Neutral, as the broker sees strategy execution delivering relative outperformance. UBS has also lifted its price target post the update.

UBS similarly upgraded CSL ((CSL)) to Buy from Neutral on news Baxter faces delays with its HyQ product that should provide something of an earnings boost to CSL. Other brokers covering the stock have revised earnings expectations and price targets on the news.

News Fleetwood ((FWD)) will build an accommodation village in Gladstone was enough for RBS to upgrade to a Buy rating from Hold previously, as the expectation is this will deliver an earnings boost from FY14.

Credit Suisse sees value in Perseus ((PRU)) post a solid quarterly production report where output was solid and costs fell, while increases to earnings estimates for Tatt's ((TTS)) from higher win rates on fixed odd bets are enough for the broker to move to a Neutral rating from Sell previously.

While not changing its earnings forecasts Macquarie has upgraded UGL ((UGL)) to Buy from Neutral, the broker suggesting ongoing contract wins and the continued integration of DTZ will act as catalysts for the stock in coming months.

On the downgrades side, UBS has cut its rating on AMP ((AMP)) to Neutral from Buy on valuation grounds post a review of its model, while JP Morgan has similarly downgraded Aristocrat Leisure ((ALL)) on the back of recent share price strength.

For the same reason RBS has downgraded Automotive Holdings ((AHE)) to Hold from Buy, while Credit Suisse has similarly downgraded Caltex ((CTX)) to Neutral from Buy given recent share price strength.

Centro Retail ((CRF)) has been downgraded to Neutral from Overweight by JP Morgan on news the company is to sell some of its assets, as while the group's balance sheet will be strengthened overall asset quality will be reduced, in the view of JP Morgan.

BA-ML suggests it is getting tougher for Newcrest ((NCM)) to achieve production guidance this year and this implies consensus earnings estimates are too high. For the broker this is enough reason to downgrade to Neutral from Buy. Newcrest will release its March quarter production report in the week ahead.

While domestic market conditions are supportive, conditions for Nufarm ((NUF)) in other markets are more difficult and this has prompted Citi to downgrade its rating to Sell from Neutral, while Spark Infrastructure's ((SKI)) proposed expansion away from electricity via (an attempt to) taking a stake in the Sydney desalination plant is not a great move in the view of Macquarie. The broker downgrades to Neutral from Buy.

The most downgrades were applied to Westfield Group (WDC)) as UBS, Credit Suisse and Deutsche Bank have all lowered ratings to Neutral from Buy. Westfield has announced plans to sell non-core assets and this news has been well received, but valuation has been the key driver behind the cuts in ratings.

 

Total Recommendations
 Recommendation Changes

 

Broker Recommendation Breakup

 

Broker Rating

Order Company Old Rating New Rating Broker
Upgrade
1 ALACER GOLD CORP Sell Buy BA-Merrill Lynch
2 AUSTRALIAN PHARMACEUTICAL INDUSTRIES Neutral Buy Macquarie
3 COMMONWEALTH BANK OF AUSTRALIA Neutral Buy UBS
4 CSL LIMITED Neutral Buy UBS
5 ENERGY RESOURCES OF AUSTRALIA Sell Buy BA-Merrill Lynch
6 ENERGY RESOURCES OF AUSTRALIA Sell Buy UBS
7 FLEETWOOD CORPORATION LIMITED Neutral Buy RBS Australia
8 PERSEUS MINING LIMITED Neutral Buy Credit Suisse
9 ST BARBARA LIMITED Sell Neutral Macquarie
10 TATTS GROUP LIMITED Sell Neutral Credit Suisse
11 UGL LIMITED Neutral Buy Macquarie
12 WOODSIDE PETROLEUM LIMITED Neutral Buy Credit Suisse
Downgrade
13 AMP LIMITED Buy Neutral UBS
14 ARISTOCRAT LEISURE LIMITED Buy Neutral JP Morgan
15 AUTOMOTIVE HOLDINGS GROUP LIMITED Buy Neutral RBS Australia
16 BANK OF QUEENSLAND LIMITED Sell Sell Macquarie
17 CALTEX AUSTRALIA LIMITED Buy Neutral Credit Suisse
18 CENTRO RETAIL AUSTRALIA Neutral Neutral JP Morgan
19 COMMONWEALTH BANK OF AUSTRALIA Sell Sell Macquarie
20 NEWCREST MINING LIMITED Buy Neutral BA-Merrill Lynch
21 NUFARM LIMITED Neutral Sell Citi
22 PALADIN ENERGY LTD Sell Sell Macquarie
23 SPARK INFRASTRUCTURE GROUP Buy Neutral Macquarie
24 WESTFIELD GROUP Buy Neutral UBS
25 WESTFIELD GROUP Buy Neutral Credit Suisse
26 WESTFIELD GROUP Buy Neutral Deutsche Bank
 

Recommendation

Positive Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 ERA - 63.0% - 13.0% 50.0% 8
2 SBM - 67.0% - 33.0% 34.0% 3
3 AQG 57.0% 86.0% 29.0% 7
4 PRU 20.0% 40.0% 20.0% 5
5 FWD 20.0% 40.0% 20.0% 5
6 WPL 25.0% 38.0% 13.0% 8
7 DJS - 63.0% - 50.0% 13.0% 8
8 CBA - 25.0% - 13.0% 12.0% 8
9 PNA 63.0% 75.0% 12.0% 8
10 CSL 63.0% 75.0% 12.0% 8

Negative Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 SVW 75.0% 50.0% - 25.0% 4
2 AHE 75.0% 50.0% - 25.0% 4
3 CTX 33.0% 17.0% - 16.0% 6
4 EGP 63.0% 50.0% - 13.0% 8
5 AMP 63.0% 50.0% - 13.0% 8
6 NCM 75.0% 63.0% - 12.0% 8
 

Target Price

Positive Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 ERA 1.394 1.580 13.34% 8
2 CSL 36.273 37.758 4.09% 8
3 SBM 2.197 2.267 3.19% 3
4 SVW 10.925 11.235 2.84% 4
5 AQG 10.219 10.504 2.79% 7
6 AHE 2.655 2.710 2.07% 4
7 VAH 0.473 0.476 0.63% 7
8 EGP 4.498 4.523 0.56% 8
9 CBA 51.030 51.301 0.53% 8
10 FWD 13.512 13.546 0.25% 5

Negative Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 PRU 3.414 3.304 - 3.22% 5
2 NCM 40.003 38.753 - 3.12% 8
3 PNA 4.095 3.980 - 2.81% 8
4 AMP 4.834 4.771 - 1.30% 8
 

Earning Forecast

Positive Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 MCR 1.100 2.967 169.73% 3
2 TCL 13.443 14.386 7.01% 7
3 WPL 225.310 238.645 5.92% 8
4 STO 67.488 71.288 5.63% 8
5 IAG 24.075 25.100 4.26% 8
6 TAP 3.100 3.200 3.23% 4
7 API 4.114 4.214 2.43% 5
8 PNA 34.769 35.316 1.57% 8
9 CGF 46.329 47.014 1.48% 7
10 SBM 35.800 36.300 1.40% 3

Negative Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 GBG 0.800 - 0.943 - 217.88% 6
2 BOQ 28.938 15.663 - 45.87% 8
3 BCI 48.767 41.100 - 15.72% 3
4 CRF 10.383 8.850 - 14.76% 6
5 WHC 14.383 12.467 - 13.32% 6
6 GRR 10.900 9.467 - 13.15% 6
7 SVW 87.780 79.960 - 8.91% 4
8 PRU 15.940 14.533 - 8.83% 5
9 ILU 241.900 224.113 - 7.35% 8
10 VAH 3.033 2.857 - 5.80% 7
 

Technical limitations

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article 3 months old

Weekly Broker Wrap: Earnings Confessions Season Is Near

 - Risk-off for markets
 - Value sectors in the Australian market
 - Confession season for corporate earnings
 - Small Cap preferences updated
 - Citi reviews its metals and mining expectations

By Chris Shaw

BA Merrill Lynch has developed a Global Financial Stress Index (GFSI), which represents a measure of stress in financial markets. By using the index BA-ML has developed a Critical Stress Signal to detect when markets move into risk-off mode.

In the broker's view the GFSI CSS signalled markets had entered risk-off mode on April 11. In terms of what this means for the Australian market, BA-ML's research shows the domestic market traditionally outperforms the US when the GFSI CSS is triggered. In part this reflects the shock-absorbing nature of the Australian dollar, which tends to depreciate during periods of stress.

Under such periods of risk-off BA-ML notes banks underperform resource stocks, while defensives outperform and small miners underperform. The latter is due somewhat to small miners being takeover targets in better times but losing this premium when times turn tougher, as well as the fact the ability of such stocks to raise capital becomes tougher as financial markets come under pressure.

Citi suggests many of the most sold down stocks of last year have recovered somewhat this year as equities improved. With valuations now closer to normal ranges this increases the risk some of these stocks are increasingly at risk of fading and potentially rolling over again. This is because further gains are likely to require signs of respectable earnings growth, predict the analysts.

Looking at where the market currently offers greater earnings growth potential, Citi suggests looking beyond the banks and resource sector so those sectors where growth is picking up and where share price are not yet overvalued.

For Citi this means the general insurance, engineering and construction and healthcare sectors. This leaves Citi's sector preferences in order as financials ex banks/REITs, industrials, resources, banks, REITs, consumer sectors and defensive sectors.

Citi's review means some changes to its recommended portfolio, with Suncorp ((SUN)), Insurance Australia ((IAG)), Boart Longyear ((BLY)) and CSL ((CSL)) being added, while Dexus ((DXS)), Myer ((MYR)), Seven West Media ((SWM)) and Lend Lease ((LLC)) have been removed from the portfolio.

Goldman Sachs has in turn focused on the so-called confession season for earnings, noting around 25% of annual profit warnings since 2000 have come during the months of May and June. From current forecasts of 6% earnings per share growth for industrials in FY12 the expectation is this number continues to trend lower, this reflecting still tight domestic financial conditions.

A review sees Goldman Sachs list its stocks in the ASX100 with both the largest downside earnings risk and the greatest upside risk heading into May and June. The former includes Atlas Iron ((AGO)), Asciano ((AIO)), ASX ((ASX)), Alumina Ltd ((AWC)), BHP Billiton ((BHP)), Boral ((BLD)), CSR ((CSR)), Caltex ((CTX)), Fortescue ((FMG)), Fairfax ((FXJ)), Harvey Norman ((HVN)), Incitec Pivot ((IPL)), JB Hi-Fi ((JBH)), Lend Lease, Myer, National Australia Bank ((NAB)), Qantas ((QAN)), QR National ((QRN)), Sims ((SGM)), Seven West, Sydney Airport ((SYD)) and Transurban ((TCL)).

Stocks with the greatest upside earnings risk in the view of Goldman Sachs include CFS Retail ((CFX)), Campbell Brothers ((CPB)), CSL, Crown ((CWN)), Downer EDI ((DOW)), Dexus, Graincorp ((GNC)), Iluka ((ILU)), Monadelphous ((MND)), Macquarie Group ((MQG)), Orica ((ORI)), Oil Search ((OSH)), PanAust ((PNA)), Spark Infrastructure ((SKI)), Santos ((STO)) and Woodside ((WPL)).

Following a review of its quantitative analysis model, Credit Suisse suggests investors at present should be long quality stocks, long value plays and neutral on momentum plays. Quality plays should do well given there are material hard landing risks, while value should do well given de-leveraging pressures are not yet out of hand.

On the other hand, momentum factors have so far failed to pick up the recent inflection point in the global growth cycle and will probably miss the next major inflection point as well.

With respect to sector allocation Credit Suisse prefers high yielding defensives to cyclicals given expectations of slower growth ahead, while rate-sensitive cyclicals are preferred to mining stocks given better relative value.

Under such a screening process Credit Suisse notes high yielding defensives such as Telstra ((TLS)), Stockland ((SGP)), Challenger ((CGF)), Tabcorp ((TAH)) and Metcash ((MTS)), banks such as Bendigo and Adelaide ((BEN)), National Australia Bank, Westpac ((WBC)), ANZ Banking Group ((ANZ)) and Commonwealth Bank ((CBA)), and consumer discretionary stocks such as JB Hi-Fi, Myer, Seven West Media and Fairfax dominate the long-end.

In the short basket are metals mining and energy stocks such as Alumina Ltd, BlueScope ((BSL)), Oil Search, Santos, Atlas Iron, Newcrest ((NCM)), OZ Minerals ((OZL)) and Sims as well as selected US dollar exposures such as James Hardie ((JHX)), News Corporation ((NWS)) and ResMed ((RMD)).

According to Citi, the equity market rally in March means value is now harder to identify in the small industrials end of the market, as current earnings multiples appear to paint a true picture of value. In relative terms the current multiple for the sector is below average levels of the past 10 years, which suggests further relative outperformance is possible.

Factoring in recent price movements, Citi has removed Forge ((FGE)), Henderson Group ((HGG)), Super Retail ((SUL)) and Sandfire Resources ((SFR)) from its top picks list, while Mirabella ((MBN)) has also been removed given less conviction on the part of the broker. Ratings for Forge, Henderson Group and Sandfire have all been lowered in recent weeks to Neutral from Buy previously, while GWA Group ((GWA)) has also been downgraded by Citi; to Sell from Neutral. 

To replace these stocks Citi has added Flight Centre ((FLT)) and Adelaide Brighton ((ABC)) to the list of key small cap calls, the rest of the list being Miclyn Express Offshore ((MIO)), McMillan Shakespeare ((MMS)), NIB Holdings ((NHF)), NRW Holdings ((NWH)) and Southern Cross Media ((SXL)) among the industrials and Medusa Mining ((MML)), Resource Generation ((RES)) and Regis Resources ((RRL)) among resource plays.

A Buy for Credit Suisse among small cap plays is Webjet ((WEB)), which has recently guided to FY12 earnings growth of at least 18%, up from at least 10% previously. On the back of this guidance Credit Suisse lifted its earnings forecasts and reiterated an Outperform rating on the stock, expecting further gains as growth continues to come through over the next 12 months.

Despite its positive view, Credit Suisse doesn't list Webjet among its top five small caps, which are made up of Alliance Aviation Services ((AQZ)), Mermaid Marine ((MRM)), Carsales.com ((CRZ)), SAI Global ((SAI)) and Flexigroup ((FXL)).

Deutsche's review of emerging companies has focused on stocks where there may be a 2H12 earnings skew and or a cyclical recovery is factored in FY13 forecasts. This gives a list of stocks offering earnings risk in coming periods and a list of companies offering potential earnings upside.

Among companies in the former category, Deutsche suggests Salmat ((SLM)) has the most risk to consensus forecasts and guidance given still tough operating conditions. Emeco Holdings ((EHL)) also offers some risk from the potential wet weather impact on operations in Queensland and northern New South Wales, while Bradken's ((BKN)) risks relate to the timing and execution of any increases in output.. The latter was confirmed by a profit warning from company management last week.

If retail conditions don't improve there are risks around earnings expectations for Pacific Brands ((PBG)) given around 80% of Deutsche's forecast earnings growth in FY13 is tied to a cyclical recovery, while it is a similar story for Spotless ((SPT)) in that a large portion of expected earnings improvement is related to an improvement in market conditions. For Navitas ((NVT)) the risk is any delay to a recovery in any of the group's divisions.

Deutsche has Hold ratings on all of these companies with the exception of Bradken, which is rated as a Buy.

With respect to companies offering upside earnings potential Deutsche includes Flight Centre given continued strong international travel numbers and easier comparable numbers in the second half of FY12.

Also included is Skilled Group ((SKE)) given scope for further improvement in key labour markets, while digital media is seen as a driver of stronger earnings for STW Communications ((SGN)). All three stocks are rated as Buy by Deutsche Bank.

Post its review of the emerging companies Deutsche has revised its top picks. Among the emerging company cyclicals the broker now prefers Ardent Leisure ((AAD)), Flight Centre, Programmed Maintenance ((PRG)), Prime Media ((PRT)), Skilled and Transpacific Industries ((TPI)). Both Adelaide Brighton ((ABC)) and GWA ((GWA)) have been removed from the broker's top picks among the cyclicals.

In the mining services sector Deutsche likes Ausenco ((AAX)), Ausdrill ((ASL)) and NRW Holdings, while also among the broker's top picks are SAI Global and IOOF Holdings ((IFL)).

In the view of Goldman Sachs the likelihood of a depreciating Australian dollar relative to the US dollar has risen. Given this, the broker has reviewed stocks to ascertain those companies with the most significant earnings sensitivity to a movement in the currency.

Among industrial stocks, Goldman Sachs suggests those with the highest positive earnings per share (EPS) impact in a depreciating AUD/USD scenario as measured by largest to smallest impact are OneSteel ((OST)), Select Harvests ((SHV)), Incitec Pivot, CSR, Aristocrat Leisure ((ALL)), Sims, Matrix Composites ((MCE)), Bradken, Macquarie Group, Campbell Brothers, Treasury Wine Estates ((TWE)), Orica and BlueScope. 

Among resource stocks the largest EPS impacts on the same basis according to Goldman Sachs would be felt by Independence Group ((IGO)), Kagara ((KZL)), Whitehaven Coal ((WHC)), OZ Minerals, AWE Ltd ((AWE)), Western Areas ((WSA)), Energy Resources of Australia ((ERA)), Aditya Birla ((ABY)), Mount Gibson Iron ((MGX)), Sandfire and Evolution Mining ((EVN)). 

Of those companies reporting in US dollars, Goldman Sachs sees the largest impacts of a depreciating AUD/USD as being felt by Brambles ((BXB)), News Corporation, Ansell ((ANN)), James Hardie, ResMed, Computershare ((CPU)), QBE Insurance ((QBE)) and Boart Longyear. 

Goldman Sachs has also assessed those stocks with the highest negative correlation of total excess returns to AUD/USD changes, this list comprising Woolworths ((WOW)), CSL, ResMed, CFS Retail ((CFX)), Westfield Group ((WDC)), SP Ausnet ((SPN)), Coca-Cola Amatil ((CCL)), SingTel ((SGT)), Telstra, Spark, Tatt's Group ((TTS)), Amcor ((AMC)) and BWP Trust ((BWP)).

Citi has also reviewed expectations for the metals and mining sectors, its analysis showing low cost producers and those that deploy capital efficiently remain the preferred exposures. Citi expects industrial commodity prices in general will be somewhat range bound over the medium-term, while precious and base metals are preferred to the bulk commodities.

Within the commodities spectrum, Citi's key picks are in palladium, nickel and gold on the bullish side, while the broker remains bearish on both copper and silver.

Changes to Citi's commodity price assumptions mean adjustments to earnings estimates for resource stocks under coverage, though there have been no changes in ratings. Key picks listed in Australia remain BHP and Rio Tinto.

 

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article 3 months old

The Short Report

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By Chris Shaw

With the Easter break impacting on trading the week from April 3 was relatively quiet in terms of changes in short positions on the Australian market. Few stocks saw changes of more than one percentage point, with an increase to total shorts of 5.75% from 3.75% for SingTel ((SGT)) the largest change for the period and the only increase of more than one percentage point. The increase came despite little recent news from the company, other than a structural streamlining of the international divisions.

On the side of decreases in short positions for the week from April 3, David Jones ((DJS)) topped the list with total shorts declining to 9.63% from 10.82% previously. This change has come as the market has had time to digest the group's interim earnings result from late March.

David Jones was not the only stock exposed to the consumer discretionary sector where short positions fell, as shorts in Myer ((MYR)) for the week declined to 11.57% from 12.39% and for Specialty Fashion Group ((SFH)) to 0.56% from 1.09% previously.

Consumer discretionary stocks continue to dominate the top 20 list of short positions, led by JB Hi-Fi ((JBH)) at 22.3%, followed by Myer, Carsales.com ((CRZ)) at 11.48%, Flight Centre ((FLT)) at 9.9%, David Jones, and Billabong ((BBG)) at 9.4%.

Aside from consumer discretionary stocks, short positions remain elevated across a number of sectors as the top 20 includes the likes of Fairfax ((FXJ)), Gunns ((GNS)), Iluka ((ILU)) Beach Energy ((BPT) and CSR ((CSR)). Note that CSR is one of the worst performers in the Australian share market this calendar year.

Bank of Queensland ((BOQ)) also saw shorts decline to 3.4% from 4.56% the previous week as the market has now factored in the capital raising announced by the bank in late March. The raising has improved the bank's balance sheet, which supports some Buy ratings among brokers in the FNArena database.

Monthly changes in short positions from March 9 have highlighted some more significant changes, the largest on the increase side being an jump in shorts for Carsales.com to 11.48% from 6.31% previously. Deutsche Bank recently noted total inventory growth for Carsales.com remains subdued, while brokers continue to reassess the outlook for the company post a move away from its traditional classifieds business via an investment in Torpedo7.

Shorts also increased by more than three percentage points for both Bathurst Resources ((BTU) and Cochlear ((COH)), the former as a market update indicated delays to the Escarpement appeals process and the latter as the recall process has meant the market no longer sees Cochlear as more reliable than its peers.

With respect to monthly declines in short positions the largest was a fall to 0.49% from 3.55% for Rialto Energy ((RIA)), which comes as the company is in the early stages of a three well drilling program.

Shorts in Alkane Resources ((ALK)) fell to 2.09% from 4.24% for the month from March 9, this as the market factored in both an increase in resource at the Tomingly gold project and a entitlement offer to shareholders to raise additional funds.

Elsewhere, shorts in Nufarm ((NUF)) have risen over the past month and now stand at a little above 2.2%. In the view of RBS this increase reflects the fact while earnings upgrades are needed to generate a share price re-rating this is unlikely given current market conditions. With pricing pressures still in place, RBS recommends investors reduce their exposure to Nufarm, rating the stock as a Hold.

 

Top 20 Largest Short Positions

Rank Symbol Short Position Total Product %Short
1 JBH 22050937 98850643 22.30
2 ISO 708915 5703165 12.43
3 MYR 67569627 583384551 11.57
4 CRZ 26850070 233684223 11.48
5 COH 6460956 56929432 11.33
6 FXJ 255882163 2351955725 10.90
7 FLT 9903258 100024697 9.90
8 LYC 169429683 1714496913 9.90
9 DJS 50636631 524940325 9.63
10 BBG 23994166 255102103 9.39
11 EGP 54003153 688019737 7.83
12 GNS 61543147 848401559 7.24
13 HVN 76887590 1062316784 7.22
14 WTF 14314910 211736244 6.75
15 ILU 27218206 418700517 6.50
16 BPT 72923928 1199253779 6.11
17 CSR 30579008 506000315 6.04
18 TRS 1563710 26071170 6.01
19 TEN 61329693 1045236720 5.86
20 SGT 9486159 165074137 5.75

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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article 3 months old

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

Downgrades to stock broker ratings for individual stocks continue far outweighing upgrades and the past week proved once again no exception. The eight brokers in the FNArena database lifted recommendations on just four companies while downgrading 24 stocks. Total Buy ratings now stand at just 50.56%, the lowest level for some time despite the share market effectively moving sideways.

Among the upgrades was Aurora Oil and Gas ((AUT)), where JP Morgan lifted its rating to Neutral from Sell. While full year earnings saw both UBS and Credit Suisse downgrade to Neutral ratings from Buy previously, JP Morgan factored in its findings from a recent site visit and lifted its valuation and price target. This was enough for the broker to lift its rating to the same level as UBS and CS.

OM Holdings ((OMH)) was also upgraded to Neutral from Sell by RBS Australia, a valuation call as downside risks to earnings from lower manganese prices now appears priced into the stock following a share price fall of around 70% over the past year.

Deutsche Bank has upgraded Oz Minerals ((OZL)) to Buy from Hold following changes to commodity price and foreign exchange assumptions. While the changes meant a trimming in price target, the broker sees improved value at current levels and upgrades accordingly.

The final upgrade of the week was Telstra ((TLS)), where BA Merrill Lynch has lifted its rating to Neutral from Underperform. There is increased scope for capital management and a more stable earnings outlook in general in the broker's view, which justifies the upgrade.

So to recap: only four upgrades were issued and only one out of these four led to a Buy rating.

Among the 24 downgrades Aurora was not the only stock where ratings were lowered by more than one broker, as Leighton Holdings ((LEI)), QBE Insurance ((QBE)) and Transfield Services ((TSE)) also received multiple downgrades.

Both Deutsche Bank and Macquarie Moved to Sell ratings on Leighton from Hold previously, this given further credibility issues arising from further write-downs to problem contracts. The other issues according to Deutsche is the potential for balance sheet issues and a weak medium-term growth outlook.

Valuation is the issue for QBE, as both Citi and JP Morgan have moved to Neutral ratings on the back of recent share price strength. The insurer's AGM this week showed earnings drivers for the company have turned more positive in recent months.

With respect to Transfield, the downgrades from JP Morgan, RBS Australia and Macquarie reflect concerns over problem contracts that go beyond April's profit warning.

Post management's revised guidance, earnings estimates and price targets for Transfield have been adjusted across the market.

Elsewhere, Macquarie downgraded Boral ((BLD)) to Neutral from Buy as earnings revisions meant a cut in price target, while UBS moved to neutral from Buy on CSL ((CSL)) on valuation grounds after factoring in some changes to forex assumptions.

The changes to forecasts that saw Deutsche upgrade Oz Minerals have also seen the broker downgrade Fortescue ((FMG)), Iluka ((ILU)), Paladin ((PDN)) and Sandfire ((SFR)), as revised earnings estimates have impacted on total return expectations.

While OrotonGroup ((ORL)) remains a retail favourite of Credit Suisse, the broker has downgraded to Neutral from Buy on valuation grounds. Primary Health Care ((PRY)) has similarly been downgraded by the broker on the same basis.

Valuation has also been behind RBS Australia downgrading Pharmaxis ((PXS)) to Hold from Buy, while JP Morgan has downgraded Qantas ((QAN)) to Neutral from Overweight given the in-house view consensus earnings estimates for the airline remain too high.

A stretched valuation and some concerns over domestic ad volumes have seen BA-ML downgrade Seek to Sell from Hold, while recent share price gains have been enough for Citi to downgrade Sonic Health ((SHL)) to Neutral from Buy.

The risk of earnings and sentiment downside from current levels has prompted UBS to move to a Neutral rating on Virgin Australia ((VAH)), while Macquarie has moved to a Sell rating on Westfield Group ((WDC)) from Neutral previously as the group's shopping mall property assets business re-positioning is expected to take some time.

Price target adjustments during the week have not resulted in any changes of more than 10%, while earnings adjustments during the period were most significant in terms of increases for Macquarie Bank ((MQG)) and James Hardie ((JHX)) and cuts for Alumina Ltd ((AWC)), Leighton and Bank of Queensland ((BOQ)). 

 

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 JP Morgan
2 OM HOLDINGS LIMITED Sell Neutral RBS Australia
3 OZ MINERALS LIMITED Neutral Buy Deutsche Bank
4 TELSTRA CORPORATION LIMITED Sell Neutral BA-Merrill Lynch
Downgrade
5 AURORA OIL AND GAS LIMITED Buy Neutral UBS
6 AURORA OIL AND GAS LIMITED Buy Neutral Credit Suisse
7 BORAL LIMITED Buy Neutral Macquarie
8 CSL LIMITED Buy Neutral UBS
9 FORTESCUE METALS GROUP LTD Buy Neutral Deutsche Bank
10 ILUKA RESOURCES LIMITED Buy Neutral Deutsche Bank
11 LEIGHTON HOLDINGS LIMITED Buy Sell Macquarie
12 LEIGHTON HOLDINGS LIMITED Neutral Sell Deutsche Bank
13 Metcash Limited Buy Neutral Credit Suisse
14 OROTONGROUP LIMITED Buy Neutral Credit Suisse
15 PALADIN ENERGY LTD Buy Neutral Deutsche Bank
16 Pharmaxis Ltd Buy Neutral RBS Australia
17 PRIMARY HEALTH CARE LIMITED Buy Neutral Credit Suisse
18 QANTAS AIRWAYS LIMITED Buy Neutral JP Morgan
19 QBE INSURANCE GROUP LIMITED Buy Neutral Citi
20 QBE INSURANCE GROUP LIMITED Buy Neutral JP Morgan
21 SANDFIRE RESOURCES NL Buy Neutral Deutsche Bank
22 SEEK LIMITED Neutral Sell BA-Merrill Lynch
23 SONIC HEALTHCARE LIMITED Buy Neutral Citi
24 TRANSFIELD SERVICES LIMITED Neutral Sell RBS Australia
25 TRANSFIELD SERVICES LIMITED Buy Neutral Macquarie
26 TRANSFIELD SERVICES LIMITED Buy Neutral JP Morgan
27 VIRGIN AUSTRALIA HOLDINGS LIMITED Buy Neutral UBS
28 WESTFIELD GROUP Neutral Sell Macquarie
 

Recommendation

Positive Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 CER 50.0% 67.0% 17.0% 3
2 RRL 33.0% 50.0% 17.0% 4
3 OZL 25.0% 38.0% 13.0% 8
4 PNA 50.0% 63.0% 13.0% 8
5 TLS 38.0% 50.0% 12.0% 8
6 SKI 50.0% 57.0% 7.0% 7
7 IFN 57.0% 60.0% 3.0% 5

Negative Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 LEI 25.0% - 13.0% - 38.0% 8
2 PXS 100.0% 67.0% - 33.0% 3
3 QBE 63.0% 38.0% - 25.0% 8
4 ORL 40.0% 20.0% - 20.0% 5
5 AUT - 20.0% - 40.0% - 20.0% 5
6 VAH 60.0% 40.0% - 20.0% 5
7 CGF 86.0% 71.0% - 15.0% 7
8 PDN 43.0% 29.0% - 14.0% 7
9 MQG 43.0% 29.0% - 14.0% 7
10 SEK 57.0% 43.0% - 14.0% 7
 

Target Price

Positive Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 AUT 3.430 3.758 9.56% 5
2 QBE 13.351 14.443 8.18% 8
3 PXS 1.700 1.800 5.88% 3
4 SKI 1.405 1.449 3.13% 7
5 SEK 6.970 7.134 2.35% 7
6 SHL 13.098 13.281 1.40% 8
7 TLS 3.398 3.435 1.09% 8
8 RRL 4.413 4.460 1.07% 4
9 ORL 8.856 8.936 0.90% 5
10 CSL 35.998 36.273 0.76% 8

Negative Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 LEI 23.633 21.998 - 6.92% 8
2 PNA 4.206 4.095 - 2.64% 8
3 CGF 5.039 4.953 - 1.71% 7
4 BLD 4.425 4.364 - 1.38% 8
5 OZL 12.406 12.236 - 1.37% 8
6 BOQ 8.150 8.069 - 0.99% 8
7 FMG 7.101 7.064 - 0.52% 8
8 VAH 0.480 0.478 - 0.42% 5
9 MQA 1.858 1.854 - 0.22% 5
10 PRY 3.289 3.283 - 0.18% 8
 

Earning Forecast

Positive Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 MQG 211.229 291.229 37.87% 7
2 JHX 30.803 39.009 26.64% 8
3 PRG 25.414 30.386 19.56% 7
4 SGT 18.750 21.297 13.58% 6
5 CSR 15.750 17.800 13.02% 8
6 PRU 14.350 15.940 11.08% 5
7 QBE 132.729 137.164 3.34% 8
8 TGA 19.867 20.400 2.68% 3
9 BPT 8.660 8.860 2.31% 5
10 IAG 23.700 24.013 1.32% 8

Negative Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 AWC 0.143 - 0.096 - 167.13% 8
2 LEI 187.550 128.550 - 31.46% 8
3 BOQ 39.450 28.938 - 26.65% 8
4 WHC 17.217 14.383 - 16.46% 6
5 VAH 3.300 2.940 - 10.91% 5
6 QAN 13.775 12.363 - 10.25% 8
7 BCI 55.000 49.567 - 9.88% 3
8 IGO 4.080 3.740 - 8.33% 5
9 ROC 4.977 4.577 - 8.04% 5
10 SBM 38.300 35.800 - 6.53% 3
 

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article 3 months old

Weekly Broker Wrap: Getting Better, With Ongoing Headwinds

By Chris Shaw

Global equity markets have risen by nearly 20% over the past four months, UBS attributing the gains to a combination of positive developments to the economic backdrop and some relief the European debt crisis has not worsened.

While the improvements are encouraging UBS continues to see headwinds to growth and returns, enough to warrant the continuation of a balanced investment approach. As cyclical earnings growth slows, and UBS expects earnings growth in the low single digit range this year, yield and valuation will become more meaningful as drivers of total returns.

In defining quality, UBS looks for strong returns on capital, the appropriate use of leverage, strength and sustainability of a company's earnings, strong dividend policies and valuation.

Among Australian stocks under coverage by UBS, only CSL ((CSL)) and BHP Billiton ((BHP)) make the broker's global equity strategy high quality stock list. UBS rates BHP as a Buy and CSL as Neutral, having downgraded from a Buy this week on valuation grounds.

Having assessed the outlook for Australian equities relative to bonds, Goldman Sachs argues equity prices are currently discounting unrealistically low growth rates into the future, valuations remain attractive across equities as determined by a number of valuation metrics and annualised four-year returns are currently cycling the worst period for equities since the early to mid 1970s.

This follows an extended period of outperformance by Australian bonds, a trend that has been consistent with other markets around the world. This has meant the bond yield to equities earnings yield has moved to an extreme level.

This leads Goldman Sachs to suggest the prospects for future returns in equities relative to bonds are as good as they have been for many years (echoing similar sentiment as expressed by colleagues in Europe). Favoured stocks are those with low earnings volatility given strong operational strategies. Goldman Sachs also recommends investors increase their US dollar exposure across portfolios.

Key picks in terms of solid earnings profiles are Wesfarmers ((WES)), Brambles ((BXB)), News Corporation ((NWS)) and CSL. Among mining stocks preferred exposure is companies exposed to increases in volumes and those with low risk LNG expansion opportunities. For Goldman Sachs these include Orica ((ORI)), Asciano ((AIO)), Oil Search ((OSH)), Woodside ((WPL)) and WorleyParsons ((WOR)).

Among the deep-value plays Goldman Sachs suggest cyclical stocks offer the greatest upside leverage to improving markets. In this category the broker's key picks are Qantas ((QAN)), Lend Lease ((LLC)), Suncorp ((SUN)) and OneSteel ((OST)).

Goldman Sachs continues to favour banks over resources at present, this reflecting the increasing risk profile for resource stocks as earnings growth drivers move from price to volumes. Preferred major bank exposures for Goldman Sachs are National Australia Bank ((NAB)) and ANZ Banking Group ((ANZ).

In the view of JP Morgan, the US GDP story is starting to wane in terms of being a positive story for equity markets as the good news is now well known and fiscal policy continues to limit the potential for upside surprises.

At the same time, JP Morgan's view is investors should not assume US corporate returns offer further upside, especially given corporate margins are already quite high. This implies US exposure in an Australian portfolio should be more selective going forward, especially given the still strong Australian dollar (even despite last week's sell-off).

JP Morgan suggests investors focus on companies that stand to gain in profit terms from an improvement in US activity and where this is not priced into the stock at present. Examples of this scenario include Sims Metal ((SGM)), Aristocrat Leisure ((ALL) and Computershare ((CPU)).

At the other end of the spectrum, JP Morgan suggests a cautious view on James Hardie ((JHX)), as despite the recovery potential of the US housing market the broker sees risks from cost and capital intensity increases and higher levels of competition going forward.

JP Morgan has Overweight ratings on Sims, Aristocrat and Computershare and rates James Hardie as Underweight, these ratings are equivalents respectively of "Buy" and "Sell".

As part of an update on the Small Cap end of the market, Credit Suisse listed its top five picks as rated by expected total shareholder return. The top five are Alliance Aviation ((AQZ)), Mermaid Marine ((MRM)), SAI Global ((SAI)), Carsales.com ((CRZ)) and Flexigroup ((FXL)).

Oroton ((ORL)) has been rated a Buy but Credit Suisse recently downgraded to a Neutral rating on the back of share price outperformance. While a strong brand and management should deliver superior earnings and returns, the stock now appears fair value in the broker's view. The analysts do advise investors should look to buy into dips as the good news story is likely to continue.

Citi notes Australian LNG exports are expected to increase from around 20 million tonnes per year last year to more than 80 million tonnes annually by 2018 as measured by approved projects only. This will make Australia one of the world's major LNG exporters.

Citi estimates the direct contribution of approved LNG capex to GDP growth in the first four years of this decade at around two percentage points or 0.5% per year, but could add as much as 3.5 percentage points in 2015-2019. This equates to around 20% of economic growth over these five years.

Capex and exports associated with LNG projects will put a floor under Australia's economic outlook according to Citi, increasing the likelihood the 20-year expansion of the economy can continue through the end of the decade.

PNG projects shifting from the capex phase to the export phase should be reflected in faster productivity growth in the mining and energy sectors, which should benefit the economy overall. As Citi suggests, if other sectors can also lift their productivity in coming years, the impact of any prospective loss of national income as commodity prices and the terms of trade normalise can be moderated.

Assessing the market overall, Deutsche Bank notes the ASX200 index is 10% lower than its level both one year and two years ago. Fortunately for investors looking to re-enter, further gains are expected this year. Deutsche is forecasting a year end level for the index of 4,700.

This is despite earnings still being under pressure, which is not a major issues in Deutsche's view. The reason is a lack of earnings momentum hasn't impacted on equity markets globally, as gains over the past six months have come entirely from PE re-ratings as forward earnings have fallen.

As well, Deutsche notes equity market rallies driven by PE re-ratings have been the historical norm for Australia, as in 1993, 2003 and 2009 a rising earnings multiple has delivered 75% of the market gains in the first six months of the rally. In the resource sector this impact is even more pronounced as a rising multiple has delivered around 95% of the gains over the first six months.

The underperformance in Australia of late can likely be explained by a lack of conviction earnings will recover anytime soon in Deutsche's view. This negative view is likely overstating the case, as Deutsche notes industrial earnings have been impacted by factors such as natural disasters and falling financial markets, which are not permanent factors.

As well, Deutsche notes a range of indicators suggest Chinese and global economies should accelerate in coming months, which should see commodity prices edge higher. This would be a further boost for Australian equities.

With earnings multiples across the market being compressed, Deutsche suggests the market overall is on the cheap side, which means it won't require the cheapest sectors to do all the work in terms of lifting the index.

Given an optimistic view of the market outlook and applying this to its model portfolio, Deutsche Bank is most overweight the Energy, Mining and Contractors sectors, while underweight positions are largest in the Telcos, property and food retailing sectors.


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article 3 months old

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

Out of 14 changes to ratings from brokers in the FNArena database over the past week only three were upgrades, which continues the recent trend of downgrades outweighing increases in ratings. Two of the three stocks upgraded were also downgraded by brokers elsewhere in the market. Total Buy recommendations now stand at 51.30%.

Among the upgrades was Aurora Oil and Gas ((AUT)), where JP Morgan has moved to a Neutral rating from Underweight previously. The upgrade reflects the broker factoring in lower risk assumptions for enhanced recoveries from the group's shale assets and an associated increase in valuation and price target.

At the same time as JP Morgan upgraded Aurora both UBS and Credit Suisse downgraded the stock to Neutral ratings from Buy previously. The change in both cases is a valuation call as Aurora's share price has risen more than 30% over the past two months. Price targets and earnings estimates for Aurora have also been adjusted across the market post the group's full year profit result.

News of a capital raising from Bank of Queensland ((BOQ)) has been followed by Deutsche Bank upgrading the stock to Buy from Neutral. In Deutsche's view new management has cleared the decks with respect to bad debts and moved to address balance sheet issues, so the stock offers value at current levels.

Again this is not a universal view as Macquarie has reacted to news of the raising by downgrading Bank of Queensland to Sell from Neutral. Macquarie continues to see a challenge for the regional lender in earning its cost of equity going forward, so the current premium to peers implies limited value in the broker's view.

The final upgrade during the week was Macquarie moving to Buy from Neutral on Tabcorp ((TAH)). The lift in rating is another valuation call, as recent share price weakness has the stock trading below the broker's valuation estimate.

Among stocks downgraded was Nufarm ((NUF)), with both Macquarie and BA Merrill Lynch lowering ratings to Neutral from Buy previously. A mixed interim result was enough for Macquarie to pull back earnings estimates and its price target, the changes enough to prompt the cut in rating. BA-ML's downgrade was a valuation call as the broker sees limited upside in the stock at current levels.

Forge Group ((FGE)) has also suffered a downgrade to Neutral from Buy, this coming from Citi. Forge shares have risen almost 40% year-to-date, which limits the valuation appeal in the broker's view. This is despite a new contract causing Citi to lift its earnings estimates and price target.

Having previously rated Leighton Holdings ((LEI)) as Outperform, Macquarie has shifted to an Underperform rating post a further write-down on problem contracts as part of yet another profit warning from management.

The issue for Macquarie is management credibility, particularly as the update comes only a couple of months after the last update. While there is value at current levels market scepticism is likely to limit share price performance shorter-term in Macquarie's view.

As with Leighton, Stockland ((SGP)) has also lowered earnings guidance and the market has reacted by adjusting earnings forecasts and price targets. For BA-ML this is enough to justify a downgrade to Neutral from Buy, especially given few obvious catalysts to drive the share price in the shorter-term.

While Oroton ((ORL)) delivered a good profit result, Credit Suisse has downgraded to Neutral from Buy. The price target has been increased and good earnings growth should continue, but the broker simply sees less upside following recent share price gains.

With respect to changes in earnings forecasts, Sigma ((SIP)) enjoyed the largest increases following what was generally regarded as a solid full year profit result. Among the larger cuts in forecasts were those associated with brokers factoring in Bank of Queensland's capital raising, while estimates for both David Jones ((DJS)) and Kathmandu ((KMD)) were cut post interim profit results.

 

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 JP Morgan
2 BANK OF QUEENSLAND LIMITED Neutral Buy Deutsche Bank
3 TABCORP HOLDINGS LIMITED Neutral Buy Macquarie
Downgrade
4 AURORA OIL AND GAS LIMITED Buy Neutral UBS
5 AURORA OIL AND GAS LIMITED Buy Neutral Credit Suisse
6 BANK OF QUEENSLAND LIMITED Neutral Sell Macquarie
7 FORGE GROUP LIMITED Buy Neutral Citi
8 LEIGHTON HOLDINGS LIMITED Buy Sell Macquarie
9 MACQUARIE GROUP LIMITED Buy Neutral RBS Australia
10 NUFARM LIMITED Buy Neutral Macquarie
11 NUFARM LIMITED Buy Neutral BA-Merrill Lynch
12 OROTONGROUP LIMITED Buy Neutral Credit Suisse
13 STOCKLAND Buy Neutral BA-Merrill Lynch
 

Recommendation

Positive Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 CER 50.0% 67.0% 17.0% 3
2 TAH 25.0% 38.0% 13.0% 8
3 ALS 40.0% 50.0% 10.0% 6
4 SKI 50.0% 57.0% 7.0% 7

Negative Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 AUT - 20.0% - 40.0% - 20.0% 5
2 ORL 40.0% 20.0% - 20.0% 5
3 BTT 50.0% 33.0% - 17.0% 3
4 CFX 71.0% 57.0% - 14.0% 7
5 MQG 43.0% 29.0% - 14.0% 7
6 SGP 71.0% 57.0% - 14.0% 7
7 MAP 33.0% 20.0% - 13.0% 5
8 PRU 33.0% 20.0% - 13.0% 5
9 QRN - 13.0% - 25.0% - 12.0% 8
10 MYR 25.0% 13.0% - 12.0% 8
 

Target Price

Positive Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 AUT 3.430 3.758 9.56% 5
2 SKI 1.405 1.449 3.13% 7
3 ALS 1.656 1.705 2.96% 6
4 ORL 8.856 8.936 0.90% 5
5 TAH 3.264 3.283 0.58% 8
6 MQG 29.437 29.523 0.29% 7
7 CFX 1.959 1.964 0.26% 7

Negative Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 FKP 0.760 0.726 - 4.47% 5
2 PRU 3.628 3.494 - 3.69% 5
3 SGP 3.639 3.507 - 3.63% 7
4 MYR 2.441 2.368 - 2.99% 8
5 MAP 3.225 3.134 - 2.82% 5
6 BTT 2.230 2.170 - 2.69% 3
7 CMJ 2.710 2.672 - 1.40% 6
8 TOL 5.783 5.723 - 1.04% 7
9 SEK 7.184 7.156 - 0.39% 7
10 EHL 1.283 1.280 - 0.23% 5
 

Earning Forecast

Positive Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 SIP 3.886 4.686 20.59% 7
2 IGO 4.080 4.340 6.37% 5
3 RRL 16.375 16.800 2.60% 4
4 NVT 20.457 20.614 0.77% 6
5 QBE 131.820 132.719 0.68% 8
6 SEK 36.125 36.325 0.55% 7
7 NCM 174.000 174.750 0.43% 8
8 AAX 34.140 34.260 0.35% 5
9 BWP 13.225 13.250 0.19% 4
10 MIO 22.586 22.621 0.15% 4

Negative Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 BOQ 95.513 28.938 - 69.70% 8
2 DJS 22.538 20.263 - 10.09% 8
3 KMD 13.266 12.005 - 9.51% 5
4 ROC 4.979 4.577 - 8.07% 5
5 QAN 14.625 13.575 - 7.18% 8
6 BPT 9.440 8.860 - 6.14% 5
7 ALS 17.850 16.871 - 5.48% 6
8 AQG 75.548 72.146 - 4.50% 7
9 SGP 31.886 30.771 - 3.50% 7
10 QRN 16.138 15.663 - 2.94% 8
 

Technical limitations

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article 3 months old

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

Over the past week brokers in the FNArena database have upgraded three ratings while downgrading seven stocks. Total Buy ratings now stand at 51.66%.

Among the upgrades were David Jones ((DJS)), where Macquarie moved to a Buy rating from Neutral previously. This reflects the view a relief rally is possible as the downgraded earnings outlook is now in the price and issues on the credit card side of the business have now become exposed. This has driven down the share price and leaves scope for a bounce in the broker's view.

Others in the market reacted to the interim profit result and weak guidance far more harshly, with UBS, Deutsche Bank and RBS Australia all downgrading to Sell recommendations from Neutral ratings previously.

UBS continues to see downside earnings risk and suggests there is limited value at current levels given this risk. Deutsche Bank also sees some execution risk as David Jones attempts to restructure its operations, while RBS Australia suggests the re-basing of earnings over the next few years is not fully priced into the stock at present.

Macquarie also upgraded News Corporation ((NWS)) during the week, lifting its rating to Neutral from Sell as the sale of NDS was factored into its model. For Macquarie the sale is a positive for the valuation of News, which when added to the removal of a discount for regulatory uncertainty sees the broker move to a less negative view.

Sigma Pharmaceuticals ((SIP)) reported full year earnings this week and while metrics improved, the consensus view is the industry outlook remains difficult. Deutsche is the only broker in the database to rate Sigma as a Buy, seeing scope for additional earnings growth and capital management in coming periods.

Neutral and Sell ratings continue to dominate for Sigma, with brokers adjusting forecasts and price target post the full year result.

Among the other downgrades over the past week was RBS Australia cutting its recommendation on Graincorp ((GNC)) to Neutral from Buy. Potential for the company to be involved in corporate activity given consolidation in the sector is a potential positive for valuation, but in RBS's view this is priced in at current levels. The downgrade in rating is therefore a valuation call.

RBS also lowered its rating on Nexus Energy ((NXS)) to Neutral from Buy post the group's Longtom field review. The downgrade in reserves creates uncertainty, while the downgrade is also a valuation call given the impact on value and price target resulting from the reduction in reserves at the project.

While Reckon ((RKN)) will save some royalties from the ending of its relationship with international (ex) partner Intuit, the flip side in Macquarie's view is Reckon will need to spend more on R&D going forward to compete with peers. There is also the risk of some customer leakage from the decision, which reinforces the broker's downgrade to a Sell rating from Neutral previously.

For UBS, the de-merger of Telecom New Zealand ((TEL)) being completed means the market should now focus on the growth outlook, which is not overly positive in the broker's view. While mobiles are performing well, this won't be enough to offset broader declines. This implies the market is overpaying for growth at current levels. This has seen UBS downgrade to a Sell rating from Neutral previously.

Significant changes in price targets were limited to the downside over the past week, with targets for David Jones falling significantly as brokers adjusted their models to reflect lower earnings guidance. Fellow retailer Kathmandu ((KMD)) suffered a similar fate, as again brokers lowered forecasts and price targets to reflect a weak interim profit result.

Aside from Kathmandu and David Jones, the most significant cuts in earnings estimates were seem in Atlas Iron ((AGO)), the changes reflecting lost production due to Cyclone Lau causing operations to be shut down.

Beach Energy ((BPT)) enjoyed the most significant increases in earnings estimates, this as brokers adjusted their models to reflect the group's Egypt project commencing production earlier than had been expected.

 

Total Recommendations
 Recommendation Changes

 

Broker Recommendation Breakup

 

Broker Rating

Order Company Old Rating New Rating Broker
Upgrade
1 DAVID JONES LIMITED Neutral Buy Macquarie
2 NEWS CORPORATION Sell Neutral Macquarie
3 Sigma Pharmaceuticals Ltd Buy Buy Deutsche Bank
Downgrade
4 DAVID JONES LIMITED Neutral Sell UBS
5 DAVID JONES LIMITED Neutral Sell Deutsche Bank
6 DAVID JONES LIMITED Neutral Sell RBS Australia
7 GRAINCORP LIMITED Buy Neutral RBS Australia
8 NEXUS ENERGY LIMITED Buy Neutral RBS Australia
9 RECKON LIMITED Neutral Sell Macquarie
10 TELECOM CORPORATION OF NEW ZEALAND LIMITED Neutral Sell UBS
 

Recommendation

Positive Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 NWS 43.0% 57.0% 14.0% 7
2 CSR 13.0% 25.0% 12.0% 8
3 ALS 40.0% 50.0% 10.0% 6
4 TNE 67.0% 75.0% 8.0% 4

Negative Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 DJS - 38.0% - 75.0% - 37.0% 8
2 KMD 60.0% 40.0% - 20.0% 5
3 RRL 50.0% 33.0% - 17.0% 3
4 GNC 67.0% 50.0% - 17.0% 6
5 PRU 33.0% 20.0% - 13.0% 5
6 PRY 63.0% 50.0% - 13.0% 8
7 GMG 75.0% 63.0% - 12.0% 8
8 SGT 57.0% 50.0% - 7.0% 6
 

Target Price

Positive Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 NWS 20.547 21.663 5.43% 7
2 RRL 4.210 4.413 4.82% 3
3 ALS 1.656 1.705 2.96% 6
4 TNE 1.220 1.240 1.64% 4

Negative Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 KMD 1.920 1.357 - 29.32% 5
2 DJS 2.604 2.248 - 13.67% 8
3 PRU 3.628 3.494 - 3.69% 5
4 CSR 2.435 2.379 - 2.30% 8
5 PRY 3.314 3.289 - 0.75% 8
 

Earning Forecast

Positive Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 BPT 8.060 9.440 17.12% 5
2 ROC 4.713 4.978 5.62% 5
3 HZN 1.147 1.194 4.10% 4
4 STO 66.138 67.250 1.68% 8
5 OSH 11.677 11.845 1.44% 8
6 TOX 18.133 18.367 1.29% 3
7 FMG 48.489 49.091 1.24% 8
8 SIP 3.886 3.929 1.11% 7
9 TNE 7.200 7.275 1.04% 4
10 AUT 31.681 31.944 0.83% 5

Negative Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 KMD 16.591 11.990 - 27.73% 5
2 DJS 26.813 20.950 - 21.87% 8
3 AGO 7.300 5.863 - 19.68% 8
4 ALS 17.850 16.871 - 5.48% 6
5 ORL 66.420 64.300 - 3.19% 5
6 SYD 7.082 6.885 - 2.78% 6
7 AQG 75.592 73.544 - 2.71% 7
8 GMG 6.200 6.125 - 1.21% 8
9 MYR 24.525 24.288 - 0.97% 8
10 RIO 750.659 745.251 - 0.72% 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.