Tag Archives: Other Industrials

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup Suisse,Deutsche<br>Bank,JP<br>Morgan,Macquarie,RBS<br>Australia,UBS&b0=124,121,128,106,90,147,195,158&h0=74,92,80,118,87,94,106,80&s0=39,16,14,6,27,21,7,12" style="border-bottom: #000000 1px solid; border-left: #000000 1px solid; border-top: #000000 1px solid; border-right: #000000 1px solid" />

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	BLUESCOPE STEEL LIMITED	Neutral	Buy	Macquarie
2	GOODMAN FIELDER LIMITED	Sell	Neutral	Macquarie
3	LEND LEASE CORPORATION LIMITED	Neutral	Buy	JP Morgan
4	SONIC HEALTHCARE LIMITED	Sell	Neutral	UBS
Downgrade
5	ASTON RESOURCES LIMITED	Buy	Neutral	Macquarie
6	Campbell Brothers Limited	Buy	Neutral	BA-Merrill Lynch
7	Campbell Brothers Limited	Buy	Neutral	UBS
8	COCA-COLA AMATIL LIMITED	Buy	Neutral	JP Morgan
9	COMMONWEALTH BANK OF AUSTRALIA	Neutral	Sell	Citi
10	ILUKA RESOURCES LIMITED	Buy	Neutral	RBS Australia
11	INCITEC PIVOT LIMITED	Buy	Neutral	Credit Suisse
12	JAMES HARDIE INDUSTRIES N.V.	Buy	Neutral	Citi
13	MACQUARIE AIRPORTS	Neutral	Sell	JP Morgan
14	Mount Gibson Iron Limited	Neutral	Sell	Macquarie
15	PEET & COMPANY LIMITED	Buy	Neutral	Macquarie
16	PEET & COMPANY LIMITED	Buy	Neutral	UBS

Recommendation

Positive Change Covered by > 2 Brokers

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

Negative Change Covered by > 2 Brokers

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

Target Price

Positive Change Covered by > 2 Brokers

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

Negative Change Covered by > 2 Brokers

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

Earning Forecast

Positive Change Covered by > 2 Brokers

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

Negative Change Covered by > 2 Brokers

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

Technical limitations

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Treasure Chest: Forging A Takeover

By Greg Peel

What?

While not without possible impediments, a full takeover of Forge Group ((FGE)) by 33% owner Clough Ltd ((CLO)) is a possibility DJ Carmicheal finds compelling for a number of clear reasons with the potential for a significant premium to be paid.

Why?

Forge Group provides engineering, construction and maintenance services to the mining and energy sectors in Australia and Ghana. It is 33% owned by Clough – a company of similar profile with exposures in Australia, South-East Asia and the US. Clough recognises the Forge stake in its accounts but is only a beneficiary of the investment through dividends paid. Clough does not, notes stock broker DJ Carmichael, have any access to or enjoy any benefit from the significant cashflows Forge's business generates.

How much might Clough be prepared to pay for these valuable cashflows? Well, DJC estimates that on an enterprise value over earnings basis, Clough is currently trading at a premium to Forge of some 83%. This provides room for Clough to pay a stiff control premium that would still imply significant earnings accretion. And it's not like Clough doesn't have the funds. The company was sitting on $63m in cash at end-FY11 and will be bagging around another $50m once the sale of its marine construction business is settled.

In March this year Forge announced a board and management transition and a new CEO is expected to be announced soon. Over time the outgoing Forge directors have been quietly offloading their shareholdings, as have some early investors, such that the company's share register is now wide open. DJC notes the second largest holding (beyond Clough) is only 3.6%.

All of the above provides reason enough for DJ Carmichael to see a compelling takeover possibility.

Why Not?

DJC also notes, however, some potential impediments. Clough itself is 62% owned by South African construction contractor Murray & Roberts Holdings and that company has been facing some liquidity “issues” of late. Clough's own CEO is also a newbie who took over the office early this month and DJC admits he may not want to entertain such a significant transaction five minutes in.

There have also been rumours Clough itself might be the target of takeover which might then delay any corporate action over Forge.

Either way, DJ Carmichael is content to believe that ultimately something is going to happen, and whatever that something may be it will be beneficial to Forge shareholders.

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Oz Manufacturing Dives Into The Red In September Quarter

- Oz manufacturing activity falls in September
- NAB Manufacturing Activity Index down sharply for the period
- Decline due primarily to lower business confidence and higher purchase costs

By Chris Shaw

National Australia Bank's Manufacturing Activity Index fell sharply in the third quarter of 2011, the decline primarily driven by a dive in business confidence and an increase in purchase costs.

For NAB chief economist Alan Oster the fall implies negative performance in the manufacturing sector, as businesses are dealing with the challenges of a strong dollar, higher costs and weak domestic consumption.

The Manufacturing Index, which replicates movements in activity in the manufacturing sector, fell to minus 0.9 points in the September quarter. This compares to relatively neutral readings over the previous nine months, the fall consistent with falls in manufacturing GVA (gross value added) during the period.

Oster notes business confidence in the manufacturing sector also fell sharply in the September quarter, so contributing the most to the downturn in the index. While confidence is falling purchase costs for manufacturers also continue to trend steadily higher, with the Chemical and metal products sectors among those most affected since the start of the year.

In terms of price growth, Oster notes recent trends are less encouraging as the sector experienced a sharp fall in the quarter to a zero reading. This is expected to impact on the Activity Index in coming quarters.

On the plus side Oster notes wage pressures for manufacturers have eased marginally over the past two quarters, though these remain at high levels relative to the post-GFC period.

The index results showed the disparity between individual sub-sectors narrowed a little in the September quarter, with activity indices for all sectors apart from Textiles, Clothing and Footwear sector deteriorating.

The largest declines in the period were experienced in the Printing and Non-metallic minerals sectors, both falling by more than one point. Similar falls were recorded by the Wood and Paper and Metal Products sectors. This compared to declines of less than one point for the Manufacturing, Food, Beverage and Tobacco and Machinery and Equipment sectors.

Running through the sectors, Oster notes the drift lower for the Food and Beverage sector was mainly due to higher purchase costs. This reflects the impact of currently high global food prices. Higher purchase costs also drove the Chemicals activity index lower.

Falling business confidence and growth in final prices were seen as the major factors driving the downturn in the Printing and Publishing sector, while mixed trends allowed the Textiles, Clothing and Footwear sector to deliver a relatively stable result.

Weaker business confidence was the major reason for the decline in the Wood Product sector in Oster's view, with allegations of dumping structural timber products into the Australian market a particular concern at the present time.

The Machinery and Equipment sector was also impacted by falling business confidence and a pull back in final price growth, while Oster suggests the Metal Product index continues to come under pressure from both lower confidence and higher purchase costs for raw materials.

Weaker demand was seen as a major factor leading to a fall in the Non-metallic minerals sector, while confidence fell from the third strongest sector in June to the second weakest in the quarter. Oster notes the stronger dollar has increased the level of competition in products not traditionally imported, which is adding to the pressures being faced by manufacturers in the sector.

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Deutsche Adds To Buy Ratings On Ausdrill

- Deutsche Bank initiates on Ausdrill with a Buy
- the stock now enjoys five positive ratings out of five
- Solid order book and valuation are supportive

By Chris Shaw

Mining services companies are well supported by equity brokers at the present point in the commodities boom, as evidenced by integrated mining services provider Ausdrill ((ASL)) scoring a perfect four-for-four Buy ratings according to the FNArena database.

Ausdrill has a core business of drill and blast, grade control and production drilling services in Australia and contract mining services in Africa. The company also provides exploration drilling, assaying, equipment hire, procurement and logistics services.

Research on Ausdrill has now increased to five brokers, with Deutsche Bank also picking up coverage by initiating on Tuesday with a Buy rating. Both valuation and a solid outlook support Deutsche's positive view.

With respect to the former, Deutsche's estimates imply an earnings multiple of 12 times for FY12 and 10 times for FY13, both of which are broadly in line with peer multiples. Deutsche's estimates are based on earnings per share (EPS) forecasts of 31c this year and 36c for FY13. These forecasts compare to consensus EPS estimates according to the FNArena database of 31.5c for FY12 and 36.4c for FY13.

In terms of the outlook for Ausdrill, Deutsche has confidence in its earnings estimates given work-in-hand currently stands at $1.6 billion and the order book is robust. An additional attraction for Deutsche is Ausdrill has a solid exposure to gold and iron ore, two sectors of the commodities market where the outlook is regarded as more favourable.

Ausdrill's work is predominately at the mine production and development stages of projects, Deutsche estimating this will account for about 85% of FY12 sales. This reduces risk in Deutsche's view, as later cycle stages are less at risk of experiencing cutbacks in a downturn when compared to exploration.

Analysis of the order book of Ausdrill suggests key projects are relatively low on the cash cost curve. Deutsche also views this positively, as it reduces risks associated with these projects being deferred or cancelled. Also reducing risk is the fact Ausdrill has a number of blue-chip clients on its books, an extensive fleet of more than 500 units and an integrated product offering.

Deutsche's earnings forecasts imply 3-year capitalised annual earnings growth of 12%. There is upside risk to this estimate in the broker's view, this stemming from material contract wins or earnings accretive acquisitions.

A solid balance sheet suggests acquisitions are possible, as Deutsche estimates Ausdrill has a FY12 gearing level of 13%. Management has been relatively active in terms of acquisitions, having purchased Brandrill in 2009 and Connector Drilling in February of this year.

Key concerns in the view of Deutsche relate to the uncertainty stemming from the current global economic outlook. In the previous downturn, Deutsche notes Ausdrill experienced lower equipment utilisation rates as well as competitive pressures on contract pricing.

Having factored these risks in, Deutsche's valuation and price target on Ausdrill has been set at $3.70. This compares to a consensus price target according to the FNArena database of $3.88. Targets range from Deutsche at $3.70 to BA Merrill Lynch at $4.26.

The Buy arguments of others to cover Ausdrill are related to the fact the company has a strong order book and significant levels of contract revenues already locked in. The other attraction according to Macquarie is high levels of tender activity, as this supports the potential for earnings to receive a boost from new contract wins.

Shares in Ausdrill have moved inside a trading range over the past 12 months of $2.31 to $3.94. The current share price implies upside of almost 32% relative to the consensus price target in the FNArena database.

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Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Broker Rating

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

Recommendation

Positive Change Covered by > 2 Brokers

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

Negative Change Covered by > 2 Brokers

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

Target Price

Positive Change Covered by > 2 Brokers

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

Negative Change Covered by > 2 Brokers

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

Earning Forecast

Positive Change Covered by > 2 Brokers

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

Negative Change Covered by > 2 Brokers

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

Technical limitations

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Treasure Chest: Set For the Mining Services Surge

By Greg Peel

What?

RBS Australia recommends buying selected Australian listed mining services companies in FY12 when earnings result are unlikely to beat forecasts and thus will provide for attractive entry levels.

Why?

RBS Australia's equity strategists and energy and transport sector analysts have been researching expected energy demand out of Asia through to 2025. The conclusion is that there will be no lack of work contracts available for Australian listed service providers to the local mining and energy industries. Where there will be a problem, however, will be in availability of appropriate labour.

The team has thus assessed which of the many planned projects are most likely to succeed and looking at tier one expansion projects, RBS prefers those exposed to iron ore, coal and energy. It's a matter of both size and confidence in end-demand.

It is not unusual for delays to occur in the awarding of contracts to those companies servicing said industries, and when the global macroeconomic climate is uncertain delays are even more inevitable. On that basis, RBS is not expecting services companies to achieve FY12 earnings results that exceed current forecasts. However, the analysts do believe that by the second half of FY12, the services sector will begin to move towards peak activity. This suggests that earnings should really start lifting in FY13-14. On that basis the RBS “alpha” analysts recommend investors look to get set in selected names during FY12.

[The asset valuation model separates two forms of upside/downside risk for a stock, called “alpha” and “beta”. Beta risk is the risk any stock carries with respect to the market in general, and varies in degree. Cyclicals, for example are “high beta”, defensives “low beta”, and some stocks even show a negative beta (bankruptcy administrators might be an example). Alpha risk is that risk peculiar to a specific stock, and thus explains movements in stock price that bear no relationship to the market in general. In this case RBS is looking at alpha opportunity with respect to the mining services sector as a whole.]

In terms of which stocks to choose, RBS believes Downer-EDI ((DOW)) is materially undervalued and should see its own alpha risks ease off over the next six months. Lend Lease ((LLC)) is offering significant earnings growth via its Valemus acquisition and exposure to the construction environment. WorleyParsons ((WOR)) is a bit overvalued at present given optimistic earnings expectations, but RBS would buy under $24.

Monadelphous ((MND)) is the best single name exposure in terms of benefitting from resource sector capital expenditure, RBS believes. Now that Mona has been promoted to the ASX 100, the stock may suffer some price weakness which would provide a great buying opportunity.

[Seems counterintuitive, I know. However promotion to the Top 100 implies MND is now a “large cap” and no longer a “small cap”. This means all those small cap funds managers (who incidentally have been doing very nicely out of Mona, thank you) must now mandatorily exit the stock.]

Speaking of small caps, in this space RBS prefers Bradken ((BKN)) given its exposure to coal and capital goods manufacturing.

Note that RBS's alpha report follows several sector reports by other stockbrokerages in the past weeks, as reported in earlier FNArena stories. Investors interested in the theme can also have a look at the following (among others):

- Your Editor On Switzer (broadcast from Nov 3) with specific mentionings for Monadelphous ((MND)) and Campbell Bros ((CPB))

- Icarus Signal Daily Update, November 8

- Icarus Signal Daily Update, November 7

- Icarus Signal Daily Update, November 1

- Fleetwood Update Confirms Good News Story, October 12

- Top Picks In Engineering And Contracting, September 8

Subscribers have access to supportive data and services in the form of Stock Analysis, the R-Factor and The Australian Broker Call Report on the FNArena website to conduct further analysis.

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Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup Suisse,Deutsche<br>Bank,JP<br>Morgan,Macquarie,RBS<br>Australia,UBS&b0=125,119,129,104,88,144,193,159&h0=73,92,77,118,88,94,106,77&s0=39,15,14,6,26,22,7,13" style="border-bottom: #000000 1px solid; border-left: #000000 1px solid; border-top: #000000 1px solid; border-right: #000000 1px solid" />

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	MACQUARIE GROUP LIMITED	Neutral	Buy	BA-Merrill Lynch
2	QR NATIONAL	Neutral	Buy	Deutsche Bank
3	SANTOS LIMITED	Neutral	Buy	BA-Merrill Lynch
4	Transpacific Industries Group Ltd	Neutral	Buy	RBS Australia
Downgrade
5	AQUILA RESOURCES LIMITED	Neutral	Sell	RBS Australia
6	AUSTRALIAN PIPELINE TRUST	Buy	Neutral	Macquarie
7	AUSTRALIAN WORLDWIDE EXPLORATION LIMITED	Buy	Neutral	Credit Suisse
8	COCHLEAR LIMITED	Neutral	Sell	Credit Suisse
9	CONSOLIDATED MEDIA HOLDINGS LIMITED	Buy	Neutral	RBS Australia
10	CSR LIMITED	Buy	Neutral	Deutsche Bank
11	HARVEY NORMAN HOLDINGS LIMITED	Buy	Neutral	Citi
12	HARVEY NORMAN HOLDINGS LIMITED	Buy	Neutral	Credit Suisse
13	IRON ROAD LIMITED	Buy	Neutral	RBS Australia
14	JAMES HARDIE INDUSTRIES N.V.	Neutral	Sell	Credit Suisse
15	KINGSGATE CONSOLIDATED LIMITED	Buy	Neutral	Citi
16	KINGSGATE CONSOLIDATED LIMITED	Buy	Neutral	Deutsche Bank
17	MIRVAC GROUP	Buy	Neutral	UBS
18	ONESTEEL LIMITED	Buy	Neutral	RBS Australia
19	ONESTEEL LIMITED	Neutral	Sell	Deutsche Bank
20	PALADIN ENERGY LTD	Buy	Neutral	RBS Australia
21	SANTOS LIMITED	Buy	Neutral	Credit Suisse
22	SPOTLESS GROUP LIMITED	Buy	Neutral	Citi

Recommendation

Positive Change Covered by > 2 Brokers

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

Negative Change Covered by > 2 Brokers

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

Target Price

Positive Change Covered by > 2 Brokers

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

Negative Change Covered by > 2 Brokers

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

Earning Forecast

Positive Change Covered by > 2 Brokers

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

Negative Change Covered by > 2 Brokers

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

Technical limitations

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Transpacific Restructuring Attracts Stockbroker Upgrades

- Transpacific refinancing removes a headwind
- Company should benefit from improved management focus
- Goldman Sachs upgrades to a Buy rating

By Chris Shaw

Transpacific Industries ((TPI)) has undergone significant changes since 2009, with a new chairman and senior management team and new governance functions in place. The final step needed was a debt restructuring and capital raising, which is now underway.

A debt refinancing for $1.5 billion has been achieved on improved terms and a total of $300 million is to be raised from institutional and general shareholders.

For Goldman Sachs, the news of the recapitalisation has been enough to justify upgrading to a Buy rating from Hold previously. The move to raise funds should see Transpacific's balance sheet return to a more normal gearing level over the next three years, which implies a move to interest cover of more than three times. This should make the stock more attractive to a wider range of investors.

As well, the restructuring means no debt matures between now and November 2014, something Goldman Sachs suggests will allow management to run the business with a view to what is in the longer-term best interests of the group without the distraction of debt issues.

In terms of Transpacific's operations, market growth about equal to that of GDP growth is a reasonable expectation in the view of Goldman Sachs. This should translate into solid growth for Transpacific given strong market positions, the company enjoying about a 20% share of key operating markets in the industrial cleaning, recycling and waste management sectors.

Under such an assumption the stock appears to offer value at current levels, as Goldman Sachs estimates Transpacific is trading on an earnings multiple of around 9.8 times in FY13 and 8.4 times in FY14.

This is based on Goldman Sachs's earnings per share (EPS) forecasts of 5.2c for FY12, 7.6c for FY13 and 8.9c for FY14. These estimates compare to consensus EPS forecasts according to the FNArena database of 6.4c for FY12 and 8.1c for FY13.

Assuming the Transpacific balance sheet returns to more normal levels, Goldman Sachs sees scope for the current discount to the Small Industrials index of 1% for FY13 and 7% for FY14 to be unwound. This should also see the current 20% earnings multiple discount relative to global peers come in from what are seen as excessive levels at present.

Goldman Sachs has not been the only broker to turn more positive on Transpacific on the back of the debt restructuring. Both Credit Suisse and RBS Australia have similarly upgraded to Buy ratings from previous Hold recommendations.

RBS agrees with the Goldman Sachs view the debt restructuring and capital raising could act as a possible catalyst for the share price of Transpacific, as it removes what had been some headwinds for the company.

Credit Suisse sides more with the other element of the Goldman Sachs argument, in that with debt and balance sheet pressures no longer on the minds of management, Transpacific can focus on growing its operations. This offers some upside medium-term.

The changes to the ratings of RBS and Credit Suisse means Transpacific is now rated as Buy three times and Hold twice, while Macquarie is restricted from offering a rating. Goldman Sachs is not in the FNArena database.

With the capital raising increasing the number of shares on offer, the consensus price target for Transpacific now stands at $0.87, down from $0.90 prior to the refinancing announcement.

Shares in Transpacific have traded inside a range over the past year of $0.515 to $1.50. The current share price implies upside of around 23% to the consensus price target in the FNArena database.

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Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

As companies have updated outlook commentary at annual general meetings over the past week, stockbrokers have reacted by making double the number of ratings downgrades to upgrades. Among the eight brokers in the FNArena database eight ratings were upgraded this week against 16 downgrades, meaning total Buy recommendations have fallen to 58.2% from 58.7% previously.

One to enjoy an upgrade in rating was Wotif.com ((WTF)), with BA Merrill Lynch lifting its rating to Neutral from Underperform. The upgrade reflects both minor changes to estimates following updated guidance from management and underperformance by the stock over the past 12 months that has improved the value on offer. The show stopper during the week was biotech Pharmaxis ((PXS)) who finally received product approval from Europe which saw investors jumping back in the shares and stockbrokers (3) lifting their ratings and price targets.

SingTel ((SGT)) was also upgraded to Overweight by JP Morgan, this to account for the expectation Singapore's NBN project will solidify the company's dominant position in that market. Regional asset earnings growth should also be solid and this sees the broker ahead of consensus with its earnings forecasts. Alacer Gold was upgraded too, by two notches to Buy by Credit Suisse.

Southern Cross Media ((SXL)) saw an initiation of coverage with an Outperform rating by Credit Suisse and this has lifted the consensus recommendation for the company. In the view of the broker, while ratings are under pressure and advertising is weaker this appears priced into the stock at current levels.

On the downgrade side Oz Minerals ((OZL)) saw RBS Australia move to a Hold from Buy previously on the back of changes to commodity price assumptions and foreign exchange forecasts. Kingsgate Consolidated ((KCN)) was similarly downgraded to a Hold rating by RBS. Earnings estimates and price targets were also adjusted, the move on OZL by RBS following similar downgrades a week earlier by UBS and Credit Suisse.

Brokers have continued to react to Super Retail's ((SUL)) move to acquire Rebel Sport with Citi the latest to downgrade to Neutral from Buy previously, with associated changes to earnings estimates and price target.

ResMed ((RMD)) was similarly downgraded by Credit Suisse following a Q1 result that showed the group's markets were relatively challenging at present. Earnings estimates and price targets for ResMed across the market have also been revised on the back of the result.

Following an investor day JP Morgan suggests the market may have gotten a little ahead of itself with respect to the outlook for WorleyParsons ((WOR)), so the broker downgraded to Underweight from Neutral. The change in rating has been accompanied by adjustments to earnings estimates and price target.

Caltex ((CTX)) has also received a few changes to ratings in recent sessions, both BA Merrill Lynch and Citi downgrading to a Neutral rating on valuation grounds while Credit Suisse has upgraded to a Neutral rating on the back of an increase in price target on news of a rationalisation of operations at the Kurnell refinery.

Valuation has come into play for Computershare ((CPU)) as adjustments to RBS Australia's model and target have been enough to prompt a downgrade to a Hold rating, while Credit Suisse has done the same with Wesfarmers ((WES)). Relative pricing grounds have seen UBS cut its rating on Charter Hall Retail ((CQR)) to Hold.

Some minor changes to its model have caused RBS to lift earnings and price target for Adelaide Brighton ((ABC)), while BA-ML has gone the other way in cutting forecasts and target for Insurance Australia Group ((IAG)) given a tough market for insurance margins and some capital issues.

Leading into next week's result Macquarie has cut its target for CSR ((CSR)) on the back of some adjustments to estimates, which follows a similar move by UBS earlier this month.

Earnings forecasts have been lifted for Regis Resources ((RRL)) following a solid quarter of production, while estimates for Santos ((STO)) and Woodside ((WPL)) have similarly increased post respective production reports.

Still strong exploration activity levels have prompted RBS to lift forecasts for Imdex ((IMD)), which has also generated an increase in price target. The changes follow similar adjustments made by BA-ML and Deutsche Bank.

Further progress at Maules Creek has seen RBS lift earnings estimates for Aston ((AZT)), while a solid quarterly report from Webjet ((WEB)) has been enough for BA-ML and UBS to lift earnings estimates and price targets.

Changes to earnings estimates for Panoramic ((PAN)) are more a reflection of changes to expectations for commodity prices and foreign exchange rates than operational issues, but weaker production and sales have been behind cuts to expectations for Gloucester Coal ((GCL)).

Forecasts for Macquarie Atlas ((MQA)) have come down post a slightly weaker Q3 traffic result, while weaker nickel prices are impacting on earnings estimates for Western Areas ((WSA)). On the back of a reasonable quarterly production report there have been modest changes to estimates for Atlas Iron ((AGO)), while the announcement of a capital raising has resulted in adjustments to estimates for Transpacific Industries ((TPI)).

Tough operating conditions have seen forecasts lowered for GWA International ((GWA)), while changed commodity price and forex assumptions have prompted a lowering of earnings estimates for BHP Billiton ((BHP)).

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup Suisse,Deutsche<br>Bank,JP<br>Morgan,Macquarie,RBS<br>Australia,UBS&b0=123,122,130,105,88,146,196,160&h0=75,90,77,118,88,92,104,76&s0=39,15,12,5,26,21,6,13" style="border-bottom: #000000 1px solid; border-left: #000000 1px solid; border-top: #000000 1px solid; border-right: #000000 1px solid" />

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	ALACER GOLD CORP	Sell	Buy	Credit Suisse
2	Pharmaxis Ltd	Neutral	Buy	RBS Australia
3	Pharmaxis Ltd	Neutral	Buy	BA-Merrill Lynch
4	Pharmaxis Ltd	Neutral	Buy	Credit Suisse
5	SINGAPORE TELECOMMUNICATIONS LIMITED	Neutral	Buy	JP Morgan
6	WOTIF.COM HOLDINGS LIMITED	Sell	Neutral	BA-Merrill Lynch
Downgrade
7	ADELAIDE BRIGHTON LIMITED	Buy	Neutral	RBS Australia
8	CALTEX AUSTRALIA LIMITED	Buy	Neutral	BA-Merrill Lynch
9	CHARTER HALL RETAIL REIT	Buy	Neutral	UBS
10	CSG LIMITED	Buy	Neutral	RBS Australia
11	INSURANCE AUSTRALIA GROUP LIMITED	Buy	Neutral	BA-Merrill Lynch
12	KINGSGATE CONSOLIDATED LIMITED	Buy	Neutral	RBS Australia
13	OZ MINERALS LIMITED	Buy	Neutral	RBS Australia
14	PRIMARY HEALTH CARE LIMITED	Buy	Neutral	Credit Suisse
15	RESMED INC	Buy	Neutral	Credit Suisse
16	WESFARMERS LIMITED	Buy	Neutral	Credit Suisse
17	WESTERN AREAS NL	Buy	Neutral	UBS
18	WESTFIELD RETAIL TRUST	Buy	Neutral	Deutsche Bank
19	WORLEYPARSONS LIMITED	Neutral	Sell	JP Morgan

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	RRL	33.0%	67.0%	34.0%	3
2	WTF	25.0%	38.0%	13.0%	8
3	SGT	40.0%	50.0%	10.0%	6
4	SXL	71.0%	75.0%	4.0%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	OZL	88.0%	50.0%	- 38.0%	8
2	SUL	67.0%	33.0%	- 34.0%	6
3	RMD	63.0%	38.0%	- 25.0%	8
4	KCN	80.0%	60.0%	- 20.0%	5
5	WOR	33.0%	14.0%	- 19.0%	7
6	CTX	33.0%	17.0%	- 16.0%	6
7	CPU	29.0%	14.0%	- 15.0%	7
8	CQR	29.0%	14.0%	- 15.0%	7
9	WRT	100.0%	86.0%	- 14.0%	7
10	WES	63.0%	50.0%	- 13.0%	8

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	ABC	3.343	3.348	0.15%	8
2	CQR	3.317	3.321	0.12%	7
3	SVW	9.314	9.318	0.04%	4

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	RMD	3.527	3.193	- 9.47%	8
2	OZL	13.729	12.919	- 5.90%	8
3	SUL	7.155	6.756	- 5.58%	6
4	KCN	9.658	9.444	- 2.22%	5
5	IAG	3.508	3.435	- 2.08%	8
6	WTF	4.425	4.348	- 1.74%	8
7	RRL	3.287	3.257	- 0.91%	3
8	WES	33.108	32.941	- 0.50%	8
9	CSR	2.818	2.805	- 0.46%	8
10	WOR	28.862	28.769	- 0.32%	7

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	MAP	6.187	7.259	17.33%	6
2	RRL	13.607	15.867	16.61%	3
3	STO	56.425	61.125	8.33%	8
4	WPL	205.928	216.457	5.11%	8
5	OSH	14.479	14.902	2.92%	8
6	MQG	261.386	268.214	2.61%	7
7	IMD	20.133	20.467	1.66%	3
8	AZT	24.900	25.275	1.51%	4
9	WEB	16.900	17.125	1.33%	4
10	MMS	72.567	73.333	1.06%	3

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	PAN	16.450	11.475	- 30.24%	4
2	GCL	50.200	41.220	- 17.89%	5
3	OZL	113.513	94.029	- 17.16%	8
4	MQA	9.683	8.433	- 12.91%	6
5	WSA	53.667	48.700	- 9.26%	6
6	AGO	34.850	31.638	- 9.22%	8
7	TPI	7.233	6.567	- 9.21%	6
8	GWA	19.583	18.117	- 7.49%	6
9	GRR	10.900	10.250	- 5.96%	4
10	BHP	447.715	421.154	- 5.93%	8

Technical limitations

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

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Broker Rating

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

Recommendation

Positive Change Covered by > 2 Brokers

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

Negative Change Covered by > 2 Brokers

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

Target Price

Positive Change Covered by > 2 Brokers

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

Negative Change Covered by > 2 Brokers

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

Earning Forecast

Positive Change Covered by > 2 Brokers

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

Negative Change Covered by > 2 Brokers

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

Technical limitations

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