Tag Archives: Media

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

Changes in broker ratings over the past week have returned to the recent trend of downgrades outnumbering upgrades, with the eight brokers in the FNArena database lifting just five ratings while cutting 11 recommendations in the period. Total Buy ratings now stand at 49.07%.

Alumina ((AWC)) was one to be upgraded, BA Merrill Lynch moving to a Neutral rating from Underweight while suggesting news Chinalco is to cut output will be a positive in terms of bringing the global aluminium market into better balance. Other positives for the stock in the broker's view are some improvements on costs and improved value following recent share price weakness.

Views on Alumina were not all positive however, as JP Morgan downgraded to Underweight from Neutral on the view the current tough aluminium market conditions mean there are a lack of positive catalysts to drive the share price shorter-term. The broker is also concerned margin pressure could see dividends cut.

While a review saw RBS Australia lower earnings forecasts and price target for Billabong ((BBG)), the view is new management should be able to run the business more appropriately going forward. As well, RBS sees good relative value in the stock following recent share price weakness and so has upgraded to a Buy rating from Hold.

UBS has upgraded DuluxGroup ((DLX)) to Buy from Hold following the pre-release of full year earnings from potential target Alesco ((ALS)). The Alesco result showed enough that UBS estimates a successful acquisition by Dulux would be around 7% earnings accretive, while recent share price moves have improved the value offering at current levels.

Following changes to oil price assumptions JP Morgan has adjusted its model for Woodside ((WPL)), the result being a modest increase in price target. With improved valuation support the broker has upgraded to an Overweight rating from Neutral previously.

The changes to JP Morgan's expectations were not positive across the sector, as both Aurora Oil and Gas ((AUT)) and Beach Energy ((BPT)) were downgraded to Underweight ratings from Neutral previously on the changes to earnings expectations and price targets stemming from revised oil price forecasts.

On the downgrades side of the ledger, Ten network ((TEN)) as the only stock to suffer multiple downgrades with both BA-ML and UBS cutting ratings to Sell from Hold. The changes follow the decision by Ten Network to raise capital for programming and to strengthen the balance sheet.

UBS suggests the stock is now expensive at current levels given a soft earnings outlook, while BA-ML's view is the attempt to copy Seven's ((SWM)) strategy isn't working and a return to being a low cost broadcaster would be appropriate. Targets and earnings for Ten Network were cut across the market on news of the capital raising.

While Alesco's pre-released earnings were reasonably well received recent share price moves have the stock trading in line with valuation for Deutsche Bank. As a result, rating is downgraded to Neutral from Buy.

Macquarie was also busy with downgrades during the week, cutting Echo Entertainment ((EGP)), Qantas ((QAN)) and Telecom New Zealand ((TEL)) to Neutral recommendations from previous Buy ratings.

For Echo, a trading update saw Macquarie revise earnings forecasts and price target down modestly. A takeover could see a valuation of around $5.00 but a this suggests somewhat limited upside the broker has downgraded to a Neutral rating.

Qantas also lowered earnings guidance and Macquarie cut its numbers and price target accordingly. While seeing value at current levels Macquarie also sees few catalysts to suggest a share price rebound shorter-term, so rating is downgraded.

Increased competition remains an issue for Telecom New Zealand in Macquarie's view, as is an apparent lack of clear growth drivers. With this in mind valuation is fair rather than attractive in the broker's view.

Macquarie also downgraded Stockland ((SGP)) but to Sell from Neutral, suggesting the stock is now over-valued given consensus earnings forecasts appear too high for the medium-term. A review of assumptions sees minor cuts to earnings estimates.

Telstra ((TLS)) shares have enjoyed a solid run in recent months and in RBS Australia's view this reflects greater comfort with respect to future cash flows. The share price gains have probably run their course according to the broker, who downgrades to a Hold from Buy on valuation grounds.

While there were only minor positive changes in price targets over the week targets for both Qantas and Ten Network saw significant cuts, the former given lower earnings guidance and the latter as brokers adjusted their models for a capital raising.

From an earnings forecast perspective Whitehaven ((WHC)) and Goodman Group ((GMG)) saw brokers lift their expectations significantly, while Qantas, Ten and Echo were the stocks with the largest cuts in earnings estimates during the week.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	ALUMINA LIMITED	Sell	Neutral	BA-Merrill Lynch
2	BILLABONG INTERNATIONAL LIMITED	Neutral	Buy	RBS Australia
3	DULUX GROUP LIMITED	Neutral	Buy	UBS
4	QR NATIONAL	Neutral	Buy	Macquarie
5	WOODSIDE PETROLEUM LIMITED	Neutral	Buy	JP Morgan
Downgrade
6	ALESCO CORPORATION LIMITED	Buy	Neutral	Deutsche Bank
7	ALUMINA LIMITED	Neutral	Sell	JP Morgan
8	AURORA OIL AND GAS LIMITED	Neutral	Sell	JP Morgan
9	BEACH ENERGY LIMITED	Neutral	Sell	JP Morgan
10	ECHO ENTERTAINMENT GROUP LIMITED	Buy	Neutral	Macquarie
11	QANTAS AIRWAYS LIMITED	Buy	Neutral	Macquarie
12	STOCKLAND	Neutral	Sell	Macquarie
13	TELECOM CORPORATION OF NEW ZEALAND LIMITED	Buy	Neutral	Macquarie
14	TELSTRA CORPORATION LIMITED	Buy	Neutral	RBS Australia
15	TEN NETWORK HOLDINGS LIMITED	Neutral	Sell	BA-Merrill Lynch
16	TEN NETWORK HOLDINGS LIMITED	Neutral	Sell	UBS

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	WPL	50.0%	63.0%	13.0%	8
2	QRN	- 25.0%	- 13.0%	12.0%	8
3	ANZ	13.0%	25.0%	12.0%	8
4	HGG	40.0%	50.0%	10.0%	4

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	TEN	- 13.0%	- 38.0%	- 25.0%	8
2	EGP	38.0%	13.0%	- 25.0%	8
3	AUT	- 20.0%	- 40.0%	- 20.0%	5
4	SGP	57.0%	43.0%	- 14.0%	7
5	TEL	- 13.0%	- 25.0%	- 12.0%	8
6	TLS	50.0%	38.0%	- 12.0%	8
7	QAN	75.0%	63.0%	- 12.0%	8
8	LLC	71.0%	63.0%	- 8.0%	8
9	SGT	40.0%	33.0%	- 7.0%	6
10	VBA	86.0%	83.0%	- 3.0%	6

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	HGG	2.150	2.213	2.93%	4
2	TLS	3.460	3.485	0.72%	8
3	QRN	3.719	3.738	0.51%	8
4	AUT	3.870	3.874	0.10%	5

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	TEN	0.816	0.614	- 24.75%	8
2	QAN	2.120	1.638	- 22.74%	8
3	EGP	4.620	4.473	- 3.18%	8
4	LLC	9.089	8.896	- 2.12%	8
5	ANZ	24.404	24.256	- 0.61%	8
6	WPL	41.663	41.484	- 0.43%	8

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	WHC	6.957	10.371	49.07%	7
2	GMG	16.975	23.088	36.01%	8
3	IAG	25.163	25.538	1.49%	8
4	CTX	114.400	115.917	1.33%	6
5	AUT	27.953	28.168	0.77%	5
6	STO	70.088	70.625	0.77%	8
7	ALL	17.388	17.513	0.72%	8
8	PRY	23.050	23.200	0.65%	8
9	FWD	91.000	91.560	0.62%	5
10	AAX	32.860	33.040	0.55%	5

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	QAN	9.663	5.485	- 43.24%	8
2	TEN	3.525	2.328	- 33.96%	8
3	EGP	20.438	16.963	- 17.00%	8
4	SYD	5.700	5.200	- 8.77%	6
5	SGT	21.308	19.969	- 6.28%	6
6	WPL	254.843	241.337	- 5.30%	8
7	AIZ	3.211	3.056	- 4.83%	4
8	TCL	14.257	13.857	- 2.81%	7
9	BXB	40.345	39.914	- 1.07%	8
10	RIO	707.101	700.690	- 0.91%	8

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Rudi’s Response: Why Take On Too Much Risk?

By Rudi Filapek-Vandyck, Editor FNArena (back from traveling abroad)

I received the question below about Fairfax Media ((FXJ)) from FNArena subscriber Brad Mendel. I have decided this is one question and response worth sharing with other readers and subscribers.

QUESTION:

Hi Rudi, Would you please provide your thoughts on Fairfax Media. The spread of broker opinions on the company is quite staggering with price targets ranging from 60 cents (BA-Merrill) to $1.25 (RBS) and with a volatile range of price targets and recommendations in between. It is very rare for me to see one stock have such differences of opinions. Would you please provide your thoughts on the company and the reason why you think the broker opinions and valuations differ so greatly.

RESPONSE:

Hi Brad,

It goes without saying that Fairfax shares are cheap. For many stockbrokers this is simply one temptation too much. They simply have to have a Buy rating for the stock. For this particular reason.

What we as outsiders/investors have to assess is whether buying in at cheap prices is worth the risks. Risk is something that is very difficult to quantify and in my view this explains the wide variety in views and forecasts. At this level, small differences can make a huge change. So a little more optimistic forecasts can easily lead to a price target double today's share price.

The problem I personally have with stocks such as Fairfax is that, even if there will be a rally at some point on anticipation of better times ahead, the structural headwinds and challenges are so obvious and so fierce that I simply cannot even consider Fairfax as a potential "investment" - probably never ever again (unless my current view for the decade ahead has to be adjusted at some stage).

But what Stock Analysis and R-Factor do show is that, from a more trading oriented perspective, it could be worth at some point owning the stock because there's a lot, and I mean a lot, of upside rally potential.

It goes without saying that such an approach has little resemblance with "investing"; this is why I like to take the time to point out the difference.

From a timing perspective: I think such considerations are too early, still. There are far better stocks out there with better fundamentals, better outlooks and far lesser risks.

I hope all of the above assists,

Your Editor

Rudi Filapek-Vandyck

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The Short Report

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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.

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The Short Report

By Chris Shaw

For the week from May 1, cuts in short positions outweighed increases in shorts by around double based on a one percentage point cut-off measure. The largest change for the week was in Whitehaven Coal ((WHC)), where shorts fell to 1.72% from 5.61% the week before.

The change came post a quarterly production report that resulted in some cuts to earnings estimates in the market but prior to the company announcing a $1.00 per share bid for Coalworks ((CWK)). Success in the acquisition would offer potential for synergies at the Vickery project.

APA ((APA)) saw short positions fall to 1.44% from 3.8% the week before, this as the market continues to factor in a potential acquisition of Hastings Diversified Utilities ((HDF)). While the ACCC has raised some concerns with respect to the proposed acquisition, APA has responded with some revised undertakings that Credit Suisse suggests increases the likelihood the proposal receives regulatory approval.

Shorts in SingTel ((SGT)) declined to 3.97% from 5.89% in the week from May 1 as the market adjusted positions leading into the full year result, which largely met broker expectations. Paladin Energy ((PDN)) also saw a decline in shorts of more than one percentage point to 7.12%, this post the announcement of a convertible bond issue that brokers viewed as reducing refinancing risks for the company.

Beach Energy ((BPT)) delivered a better than expected March quarter production report and early shale fraccing is showing some promise, the report being followed by shorts in the stock declining for the week to 2.16% from 3.22%.

In terms of increases in short positions for the week from May 1, the largest was in David Jones ((DJS)) where total shorts rose to 10.83% from 8.88%. The change came as the stock continues to underperform, down almost 40% over the past year. The increase in shorts came before the announcement of some head office changes that should deliver some cost savings going forward.

The lift in short positions for David Jones confirms the company's place among the top-20 short positions on the Australian market. This list continues to be dominated by consumer discretionary stocks as the top 20 includes the likes of JB Hi-Fi ((JBH)), Myer ((MYR)), Billabong ((BBG)), Carsales.com ((CRZ)), Flight Centre ((FLT)) and Harvey Norman ((HVN)).

Also in the top 20 are media plays Fairfax ((FXJ)) and Ten Network ((TEN)), resource stocks Paladin and Iluka ((ILU)) and industrials such as CSR ((CSR)) and Gunns ((GNS)).

In terms of monthly changes from April 5, the largest increase is in Spark Infrastructure ((SKI)), positions rising to 6.29% from 1.43% previously. The market remains unconvinced of the benefits of the proposed acquisition of the Sydney Water Desalination plant, as while the deal would be earnings accretive management have little experience in the business.

The other largest monthly increase was in Paladin, where shorts rose to 7.12% from 3.92%. The increase comes after the company completed a convertible note issue to alleviate some refinancing risks but doesn't address some operational issues the company is dealing with.

Largest declines in shorts for the month from April 5 were in Beach Energy and Carsales.com. While the move to acquire a stake in Torpedo7 in New Zealand raised some questions about strategy for Carsales.com, brokers continue to expect solid growth in online display ads.

Among other changes in short positions, RBS Australia notes shorts in Leighton Holdings ((LEI)) have risen to 3.1% from 2.3% prior to the company releasing revised earnings guidance. A major issue for the company in the view of RBS is the group's capital position as there remains risk with respect to the need for further cash requirements.

RBS suggests Leighton will continue to underperform both its peers and the market and the broker recommends reducing exposure to the group.

Top 20 Largest Short Positions

Rank	Symbol	Short Position	Total Product	%Short
1	JBH	22332469	98850643	22.60
2	ISO	733044	5703165	12.85
3	MYR	67399279	583384551	11.56
4	FXJ	271035010	2351955725	11.55
5	DJS	56939484	524940325	10.83
6	COH	6118023	56929432	10.73
7	FLT	10009250	100031742	9.99
8	LYC	164111757	1714496913	9.58
9	CRZ	21143568	233684223	9.03
10	BBG	22990501	257888239	8.91
11	EGP	59491110	688019737	8.64
12	HVN	85880186	1062316784	8.07
13	ILU	32518188	418700517	7.75
14	GNS	61449507	848401559	7.23
15	PDN	59608465	835645290	7.12
16	CSR	33703822	506000315	6.64
17	SKI	83340340	1326734264	6.29
18	WTF	13114831	211736244	6.19
19	TEN	64363201	1045236720	6.16
20	TRS	1578168	26071170	6.07

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

IMPORTANT INFORMATION ABOUT THIS REPORT

Technical limitations

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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

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Good News Corp

- News Corp 3Q beats expectations
- Full year earnings guidance maintained
- Buyback increase leads to lift in FY13 earnings estimates

By Chris Shaw

Quarterly earnings from News Corporation ((NWS)) were well received by the market, the company reporting a 16% increase on underlying operating income to US$1.38 billion, which equates to normalised earnings per share (EPS) for the period of US37c. This compares favourably to consensus forecasts of a result around US31c.

Earnings guidance accompanying the quarterly result was for operating profit growth in the low-to-mid teens. Management has suggested the result is likely to be at the lower end of this range due to expected weakness in the Filmed Entertainment and Publishing divisions in the final quarter of FY12.

Given guidance has been maintained changes to earnings estimates have been modest, RBS Australia trimming its operating profit forecast by just 1% to US$5.64 billion ex charges relating to the phone hacking scandal in the UK.

Earnings estimates in FY13 have generally been lifted given the quarterly result was accompanied by news of an increased share buyback to be completed by June 2013. News Corp now intends to repurchase US$10 billion in shares, up from US$5 billion previously. As a result, RBS has lifted its EPS forecast for FY13 by 3%, while BA Merrill Lynch's forecast increases to US185c from US178c previously and Macquarie makes minor increases to its estimates.

While the expanded buyback is a positive, Deutsche Bank expects current strong earnings momentum will continue into FY13 as News enjoys further growth from its content business in particular. Along with the increased buyback, which Deutsche takes as a sign of confidence in the business, there is valuation upside in the stock in the broker's view.

Deutsche's price target reflects this, as the unchanged target of $25.30 is well above the current share price. RBS Australia is another in the market to lift its price target, to $21.00 from $20.50, but Deutsche remains well above the consensus price target according to the FNArena database of $22.75.

Given the valuation upside on offer relative to price targets both BA-ML and Deutsche retain Buy ratings on News Corp, while UBS, Macquarie and Credit Suisse rates the stock as a Hold. RBS Australia has joined the latter group, downgrading to a Hold rating post the quarterly report.

For RBS valuation is not an issue as the stock continues to trade at a discount of around 20% relative to the broker's price target. The issue is the ongoing phone hacking scandal in the UK is likely to hang over the stock for some time, meaning this valuation gap is not expected to close anytime soon. As well, RBS suggests the catalyst of the buyback announcement has now passed and much of the re-rating has now occurred, meaning outperformance from now is less likely.

UBS tends to agree shorter-term catalysts are lacking, as while the 3Q result was better than expected the fact full year guidance has been maintained suggests conditions will be tougher in the final quarter of the financial year.

For Macquarie the positive of the increased buyback only becomes apparent in an earnings sense from FY14. Given this and the fact the stock has had a strong run of late, no increase from a Neutral rating can be justified.

Shares in News Corp today are stronger in a slightly higher market and as at 10.25am the stock was up 13c at $20.29. This compares to a range over the past year of $13.32 to $20.44, the current share price implying upside of around 12% relative to the consensus price target in the FNArena database.

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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.

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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

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Weekly Broker Wrap: Not So Bad And Not So Wet

By Andrew Nelson

Aside from covering the run of interim earnings reports last week, stockbrokers took their turns addressing a number of sectors to discuss impacts ranging from wet weather to RBA policy. Earnings forecasts and stock strategies also featured, plus we’ll also look at a rundown of fund managers and the latest on print to web migration plans.

Last week Bank of America-Merrill Lynch came up with a new one, introducing the first issue of its new series of Fund Manager surveys. With this new service, the broker aims to get an idea as to Australian fund manager perceptions and positions on a quarterly basis.

The inaugural results show local investors are more overweight insurers than banks, although the gap isn’t that big between the two. Amongst the big financials, National Australia Bank ((NAB)) was best liked by those surveyed, with 31% saying it comprised the biggest chunk of their portfolio. Next was QBE ((QBE)) at 18%, while Commonwealth Bank ((CBA)) was the largest underweight stock followed by Macquarie ((MQG)).

Where investors saw the best potential for upside surprise was quite similar to their preferred holdings. QBE topped the list, with 36% of respondents expecting some sort of good news. CBA, with 25% of respondents led the list of likely downside surprisers, although Suncorp ((SUN)) came in second on this list with 18% expecting bad news. Those surveyed also believed that the market in general was being a little too optimistic about the prospects of Macquarie and weren’t paying enough attention to Westpac ((WBC)). Note all this was before some of the banks, including Westpac, released interim market updates.

60% of those surveyed thought that insurance sector EPS growth estimates will be lifted by somewhere between 1%-10% in the next 6 months, while 43% were expecting EPS forecasts for the banks to fall the same amount. About 36% expected no material changes to forecasts.

Margin contraction was identified as the largest threat to bank earnings, with slowing credit growth coming in second. Low interest rates and the premium rate cycle were seen as the biggest threats to insurers. Most believed bank and insurer capital positions were sufficient and that dividends would remain sustainable across both sectors.

As you’ll recall, the RBA cut its cash rate by 50pbs last week, with the reduction coming in bigger than most in the market were expecting. The analyst team from JP Morgan pointed out that general insurers are going to be impacted by the rate cut, with IAG ((IAG)) the most likely to take the biggest hit.

The broker points out that where IAG will feel the pinch is on new business and on shareholder funds. On the broker’s numbers, a 50bp reduction in yields on assets held would hit FY13 insurance profits by $36m pre tax, or 3.2% of the company’s pre tax earnings. Suncorp also feature’s in JP Morgan’s assessment for the same reasons, with the broke estimating the same size reduction in yields will hit group pre tax earnings by 2.9%, while QBE would lose 1.5% on the same measures.

There was some good news from Citi, whose analysts are predicting FY12 earnings downgrades for Australian companies will be lower than what’s been seen in recent years. As we’ve tended to see this time of year over the last few years, quarterly production reports, retailer sales and funds under management numbers from fund managers start guiding for lower FY earnings. Last week was no different.

Citi notes that earnings have also been hit by wet weather and subdued macro conditions outside of the resources sector, but other trends have been favorable. The broker cites factors like improved financial markets and what has been a more stable Australian dollar. If you follow Citi, expect downward FY earnings revisions of about 5%. Stocks considered at risk of larger downgrades by Citi include: Incitec Pivot ((IPL)), Fairfax ((FXJ)), Aristocrat ((ALL)), Sigma Pharmaceutical ((SIP)), Lend Lease ((LLC)), CSR ((CSR)), Downer EDI ((DOW)), Crown ((CWN)), Orica ((ORI)), Harvey Norman ((HVN)), Billabong ((BBG)), and Cochlear ((COH)).

For FY13, the broker is penciling in growth of 5-10%, predicting that some of the current negative influences, like wet weather could well pass, while some of the favorable trends could continue on. This FY’s limited downgrading and earnings growth in FY13 underpins the broker’s forecast for the ASX200 to reach 4750 by end 2012.

The analyst team at Deutsche is of a similar opinion, saying despite downgrades to company earnings forecasts outnumbering upgrades by about 2:1 last week, the size of the downgrades remains quite subdued. Ultimately, the broker thinks the lack of earnings upside is well captured in market prices, given Australia already has been underperforming global markets for the last 6 months.

The big difference for Australia is that it has not been earnings, but rather valuations that are causing the problem. Thus, Australia has only re-rated only 2/3 as much as the rest of World, according to the broker.

Deutsche predicts local shares will see some support coming from bond yields, which it notes are testing new lows. This mean that dividend yields are now higher than bond yields, an occurrence that has only happened 3% of the time over the past 40 years.

Goldman Sachs took out the calculator last week to start adding up the damage caused by unseasonal wet weather on Queensland coal production. All up, volumes for the March 2012 quarter were down 11% on the December Quarter, which the broker notes will unsurprisingly take the biggest toll on earnings of Engineering and Construction companies leveraged to coal production.

Thus, the broker has moved to downgrade forecasts for both Emeco ((EHL)) and Sedgman ((SDM)), given they have the largest exposure to Queensland coal production in the broker’s coverage. FY12-14 EPS cuts for Emeco are 4.4%, 2% and 2%, while Sedgman’s FY12 forecasts slips 3.8%, although the price target is lifted a little on recent increases in the stock’s market multiple. Bradken ((BKN)) and Imdex ((IMD)) are also covered by Goldman’s and are also exposed to Queensland coal, but the broker had already re-based its FY12 forecasts for these post recent market updates.

There was better weather news for insurers from JP Morgan, who notes weather forecasts for the 2012 Atlantic hurricane season are milder than recent years. In fact, if the current forecasts pan out, it would be a big positive for QBE given 41% gross earned premiums come from the US. The broker also notes forecasts out of the US for a neutral La Nina risk, with an increasing chance of moving to El Nino, which is a positive for IAG and Suncorp.

Lastly, Goldman Sachs has tweaked its online migration model, accelerating the forecast pace of classifieds moving from print to online across the real estate, employment and autos verticals. As a result, online’s share of classified dollars goes up and print’s goes down. Earnings estimates and price targets for Carsales ((CRZ)), Realestate.com, ((REA)) and Seek ((SEK)) were lifted last week and earnings estimates were lowered for Fairfax ((FXJ)) and APN News and Media ((APN)). Realestate.com and Seek remain at Buy, while APN sits at Sell.

A final word of wisdom from Goldman’s when looking at the media space: Stick with structural winners, or companies that boast strong franchise and/or business model and that possess a differentiated and/or sustainable competitive advantage. Avoid structural losers, such as companies that are facing mounting structural headwinds, despite the perceived value that may seem to be on offer.

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The Short Report

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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

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