Tag Archives: Telecom/Technology

article 3 months old

No Consensus On Telstra

- Telstra interim broadly as expected
- Mobiles a driver, Sensis still struggling
- Minor changes to broker estimates post the result
- Broker opinion remains divided on the stock

By Chris Shaw

Interim earnings from Telstra ((TLS)) were broadly as the market had expected, the company delivering solid mobile revenue growth and subscribers but continuing to struggle with the Sensis division.

The result was accompanied by management maintaining full year guidance, which implies low single digit growth in EBITDA (earnings before interest, tax, depreciation and amortisation). Driving the growth will be solid underlying demand for mobile services, while RBS Australia also sees a more stable pricing environment and benefits from Telstra's continued network advantage.

Given full year guidance has been maintained and the interim result contained no major surprises, stockbrokers have made relatively modest changes to earnings estimates. For RBS this meant a minor increase to its earnings per share (EPS) forecast for FY12 and no change to FY13 numbers, while Citi lifted numbers this year by about 4% but cut FY13 estimates by 3%.

Consensus EPS forecasts for Telstra according to the FNArena database now stand at 28.1c for FY12 and 29.6c for FY13.

Despite Telstra's result coming in largely as expected there continue to be a range of views on the outlook for the company. The FNArena database reflects this, showing Telstra is rated as Buy four times, Hold three times and Sell once.

In the Buy camp sits UBS, who argues valuation remains compelling at current levels. On UBS's numbers Telstra is trading on an earnings multiple of 8.5 times in FY13 and a yield of 8.2% fully franked, with potential capital management a further positive. 

As well, UBS suggests upgrades to consensus earnings estimates are likely as NBN details are digested by the market and the mobile market returns to a more rational pricing environment. This is likely to occur ahead of the implementation of 4G spectrum.

RBS agrees Telstra offers value, with upside potential coming from Project New and the scope for cost savings to be better than currently anticipated. RBS also expects some capital management initiatives once the ACCC agrees to Telstra's structural separation undertaking, an announcement RBS regards as imminent.

Capital management is likely to take the form of share buybacks in the view of RBS, the broker suggesting a program of $500 million to $1.0 billion per annum is possible depending on the timing of payments from the NBN.

But Citi argues the return outlook is factored into expectations at current share price levels, particularly given the broker's view capital management is likely to be delayed relative to previous expectations. This reflects a pushing back of expected NBN cash receipts by 12 months, meaning the first significant payments will now arrive in FY15.

Free cash flows should cover dividend payments in coming years, but according to Citi additional capital management measures are unlikely prior to these payments being received. This means Telstra is unlikely to outperform in the shorter to medium-term, particularly as on Citi's numbers the stock is trading in line with the peer multiples of incumbent telcos in developed markets.

To reflect this, Citi has downgraded to a Neutral rating on Telstra, from Buy previously. But even a Neutral rating is excessive according to BA Merrill Lynch, who remains the only broker in the database with a negative view on the stock.

For BA-ML, Telstra simply lacks visible upside catalysts and the market appears to be discounting any potential downside risks. These include a lack of scope for cutting fixed costs, the fact more than 35% of group revenue is susceptible to digital substitution and the potential for any wholesale DSL declaration and price reset to impact on competitive dynamics in Telstra's markets.

These concerns are more than enough to overshadow what remains a compelling yield, especially as BA-ML doesn't see scope for any capital management initiatives prior to FY14 at the earliest. Reflecting its view, BA-ML's price target for Telstra is $3.00, well below the consensus target according to the FNArena database of $3.39. This is up from $3.37 prior to the interim result.

Shares in Telstra today are stronger and as at 11.10am the stock was up 3.5% at $3.405. This compares to a trading range over the past year of $2.57 to $3.45 and sees the stock trading in line with the consensus price target in the database.


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article 3 months old

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

Brokers have displayed some caution leading into the profit reporting season this month, the FNArena database showing the eight brokers providing coverage on Australian stocks have upgraded only eight ratings over the past week compared to 13 downgrades. This brings total Buy recommendations to 55.45%.

A solid quarterly update from Aston Resources ((AZT)) was enough for UBS to upgrade to a Buy rating, the broker noting progress at the Maules Creek project continues to be solid. Valuation has also improved in UBS's view given recent share price weakness.

For Automotive Holdings ((AHE) it was an acquisition that expands the group's presence in the Victorian market that was enough to spark an upgrade to a Buy rating from RBS Australia. An attractive valuation adds weight to the broker's rating.

Fletcher Building ((FBU)) was also upgraded to a Buy by RBS, this reflecting the view the outlook for a gradual improvement in conditions in the construction market should favour the value plays into the second half of this year. 

Opinions on GWA ((GWA)) remain divided, as while Deutsche Bank suggests the current tough market conditions are priced in and so the stock offers value at current levels sufficient to justify an upgrade to a Buy, Credit Suisse disagrees. The latter has downgraded to Neutral from Outperform, this reflecting the view the current downturn will probably be deeper and last longer than has been expected up until now.

Deutsche also upgraded Mesoblast ((MSB)) to Buy from Hold as the company has received approval to advance to Phase II trials of its diabetes treatment. Further good news is expected in coming weeks from approval for Phase II trials of a congestive heart failure treatment.

Solid mask sales and stronger margins in the second quarter were enough for Deutsche to upgrade ResMed ((RMD)) to Buy from Hold, while both Roc Oil ((ROC)) and Tabcorp ((TAH)) scored upgrades primarily on valuation grounds. The former saw JP Morgan move to Overweight from Underweight, while the latter had Macquarie upgrade to a Neutral recommendation.

Among the downgrades the most common was Energy Resources of Australia ((ERA)), which is fast becoming an exploration company with potential projects threatened by bad weather. Concern over the future at Ranger Deeps and the lack of any potential catalysts for outperformance were behind downgrades to Sell ratings by both UBS and Credit Suisse.

A weak quarterly production report from Aquarius ((AQP)) and the expectation of at least one more quarter of the same level was enough for Citi to downgrade to a Neutral rating. The change reflects the lack of potential share price upside medium-term and valuation issues at current levels.

The lack of shorter-term catalysts were also enough for BA-Merrill Lynch to downgrade Asciano ((AIO)) to Neutral from Buy, especially given rival QR National ((QRN)) appears to have more shorter-term growth options.

Earnings headwinds across the IT sector have seen RBS cut its earnings estimates for ASG Group ((ASZ)), the prevailing headwinds enough to see the broker move to a Hold rating. It is a similar story over at Bank of Queensland ((BOQ)), where Deutsche has downgraded to a Hold rating to reflect the current lack of asset growth being achieved.

Reduced expectations for the Melbourne and Sydney office markets are behind Macquarie downgrading to an Underperform rating on Commonwealth Property Office ((CPA)), the broker also downgrading to a Neutral rating on Dexus for similar reasons.

A weak result and a resultant lowering in forecasts and confidence in coming years is enough for RBS to downgrade to sell from Buy on CSG ((CSV)). Upcoming commissioning risks at the Boseto project are enough for Deutsche to move to a Neutral rating on Discovery Metals ((DML)), while valuation issues and tough market conditions have prompted downgrades for James Hardie ((JHX)) and Regis Resources ((RRL)).

Outside of ERA the most significant change in price targets was in Alesco ((ALS)), as tough market conditions continue to outweigh any operational improvements the group is achieving. Mirabela ((MBN)) saw both its target and earnings estimates reduced after a disappointing quarterly report, while post somewhat disappointing quarterly reports from Gloucester Coal ((GCL)), Alacer Gold ((AQG)), Panoramic Resources ((PAN)) and Atlas Iron ((AGO)) brokers responded by lowering earnings estimates. 

Total Recommendations
 Recommendation Changes

 

Broker Recommendation Breakup
Suisse,Deutsche<*br*>Bank,JP<*br*>Morgan,Macquarie,RBS<*br*>Australia,UBS&b0=119,110,123,108,92,150,187,158&h0=79,104,84,116,87,90,113,86&s0=41,18,18,8,30,23,9,16" 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 ASTON RESOURCES LIMITED Neutral Buy UBS
2 AUTOMOTIVE HOLDINGS GROUP LIMITED Neutral Buy RBS Australia
3 FLETCHER BUILDING LIMITED Neutral Buy RBS Australia
4 GWA GROUP LIMITED Neutral Buy Deutsche Bank
5 MESOBLAST LIMITED Neutral Buy Deutsche Bank
6 RESMED INC Neutral Buy Deutsche Bank
7 ROC OIL COMPANY LIMITED Sell Buy JP Morgan
8 TABCORP HOLDINGS LIMITED Neutral Neutral Macquarie
Downgrade
9 AQUARIUS PLATINUM LIMITED Neutral Neutral Citi
10 ASCIANO GROUP Buy Neutral BA-Merrill Lynch
11 ASG GROUP LIMITED Buy Neutral RBS Australia
12 BANK OF QUEENSLAND LIMITED Buy Neutral Deutsche Bank
13 COMMONWEALTH PROPERTY OFFICE FUND Neutral Sell Macquarie
14 CSG LIMITED Buy Sell RBS Australia
15 DEXUS PROPERTY GROUP Buy Neutral Macquarie
16 DISCOVERY METALS LIMITED Neutral Neutral Deutsche Bank
17 ENERGY RESOURCES OF AUSTRALIA Buy Sell UBS
18 ENERGY RESOURCES OF AUSTRALIA Sell Sell Credit Suisse
19 GWA GROUP LIMITED Buy Neutral Credit Suisse
20 JAMES HARDIE INDUSTRIES N.V. Buy Neutral RBS Australia
21 REGIS RESOURCES LIMITED Buy Neutral Deutsche Bank
 

Recommendation

Positive Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 ROC 25.0% 75.0% 50.0% 4
2 AHE 50.0% 75.0% 25.0% 4
3 KCN 40.0% 60.0% 20.0% 5
4 AZT 60.0% 80.0% 20.0% 5
5 GNC 33.0% 50.0% 17.0% 6
6 MRM 67.0% 83.0% 16.0% 6
7 ORG 75.0% 88.0% 13.0% 8
8 FBU 63.0% 75.0% 12.0% 8
9 RMD 38.0% 50.0% 12.0% 8
10 CPB 14.0% 17.0% 3.0% 6

Negative Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 ERA - 38.0% - 63.0% - 25.0% 8
2 RRL 75.0% 50.0% - 25.0% 4
3 ALS 60.0% 40.0% - 20.0% 5
4 CRZ 83.0% 67.0% - 16.0% 6
5 WHC 83.0% 67.0% - 16.0% 6
6 DXS 29.0% 14.0% - 15.0% 7
7 CPA - 29.0% - 43.0% - 14.0% 7
8 REA 71.0% 57.0% - 14.0% 7
9 QAN 88.0% 75.0% - 13.0% 8
10 MGX 25.0% 13.0% - 12.0% 8
 

Target Price

Positive Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 AIO 3.371 3.790 12.43% 8
2 RRL 3.618 3.975 9.87% 4
3 ROC 0.498 0.538 8.03% 4
4 KCN 8.664 8.966 3.49% 5
5 MGX 1.609 1.623 0.87% 8
6 CPA 1.007 1.013 0.60% 7
7 RMD 3.163 3.180 0.54% 8
8 AHE 2.408 2.415 0.29% 4
9 MRM 3.493 3.502 0.26% 6

Negative Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 ERA 2.403 1.444 - 39.91% 8
2 ALS 2.366 1.560 - 34.07% 5
3 FBU 7.350 6.350 - 13.61% 8
4 QAN 2.088 2.030 - 2.78% 8
5 BOQ 9.576 9.345 - 2.41% 8
6 WHC 6.980 6.840 - 2.01% 6
7 ORG 17.574 17.380 - 1.10% 8
8 AZT 11.888 11.763 - 1.05% 5
9 WBC 23.026 22.965 - 0.26% 8
 

Earning Forecast

Positive Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 ROC 3.109 6.011 93.34% 4
2 TAP 1.625 2.125 30.77% 4
3 BPT 4.820 5.560 15.35% 5
4 SXL 14.263 16.188 13.50% 8
5 AIO 16.438 18.625 13.30% 8
6 AWE 7.286 8.200 12.54% 7
7 BRG 29.333 32.000 9.09% 3
8 IGO 5.720 6.020 5.24% 5
9 RMD 15.139 15.740 3.97% 8
10 PPT 133.257 135.443 1.64% 7

Negative Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 MBN 0.477 - 0.199 - 141.72% 5
2 GCL 21.240 5.480 - 74.20% 5
3 AQP 16.709 7.135 - 57.30% 5
4 AQG 113.627 73.746 - 35.10% 6
5 PAN 9.925 6.800 - 31.49% 4
6 AGO 28.475 20.726 - 27.21% 8
7 MML 64.677 48.496 - 25.02% 3
8 CHC 23.467 17.800 - 24.15% 6
9 MGX 37.413 28.425 - 24.02% 8
10 ALS 22.435 17.833 - 20.51% 5
 

Technical limitations

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article 3 months old

The Short Report

By Chris Shaw

Increases in short positions outweighed decreases in the week from December 7th, with three companies seeing shorts increase by more than 1.0% against just one fall by a similar amount.

The largest increase was in BlueScope Steel ((BSL)), shorts increasing by 2.1% to nearly 4.4% as the market continues to adjust to both tough trading conditions and the recently announced capital raising by the company.

Shorts also jumped higher for Whitehaven Coal ((WHC)) from a negligible level to 1.63%, this following the proposal for a merger of equals between Whitehaven and Aston Resources ((AZT)). Brokers in general are positive on the proposal, though the price being paid for the Boardwalk Resources assets has been identified as a possible point of concern.

Media market conditions remain tough and as a reflection of this shorts in Fairfax ((FXJ)) remain at an elevated level, rising a further 1.4% to nearly 13%. The other dominant sector in terms of high short positions is retail, where the likes of Myer ((MYR)), David Jones ((DJS)), Billabong ((BBG)) and JB Hi-Fi ((JBH)) continue to have short positions among the highest in the market.

Investors have been proven correct with respect to both Billabong and JB Hi-Fi given both have delivered profit warnings to the market in recent sessions.

The most significant fall in short positions for the week from December 7th was in Singtel ((SGT)), where a decline of 1.1% has total shorts now at 2.45%. There has been little from the company since a quarterly update early in November.

Monthly changes in short positions suggest concerns over companies exposed to the discretionary retail sector remain, as Flight Centre ((FLT)) and Myer both saw shorts rise by more than 1.3% for the period.

Shorts in Iluka ((ILU)) also rose over the past month by 1.6% to nearly 3.2%, this despite the company announcing strong price increases for titanium oxide that has seen brokers lift earnings estimates for the coming year.

Resource companies in general have been among the more prominent in terms of short position increases over the past month, this as the European debt crisis continues to weigh on the global growth outlook and on the prospects for commodity demand.

Alkane Exploration ((ALK)), Ramelius Resources ((RMS)), Arafura Resources ((ARU)) and Kingsgate Consolidated ((KCN)) all experienced increases in shorts of more than 1.0% over the past month. Wesfarmers ((WES)), which also has a discretionary retail exposure through the Coles group, was the closest of the industrials as its shorts rose by 0.9% during the period.

Falls in shorts for the month from November 14th were also dominated by resource stocks, with Santos ((STO)), Murchison Metals ((MMX)) and Paladin ((PDN)) all enjoying falls of more than 1.0%. Aristocrat Leisure ((ALL)) was the only industrial stock to enjoy a more than 1.0% fall in shorts for the month from November 14th.

Elsewhere, RBS notes Macquarie Group ((MQG)) has seen an increase in shorts of just over 0.5% in the past month. In the view of RBS this reflects ongoing tough conditions in capital markets given the Eurozone crisis continues to drag, something expected to weigh on earnings for Macquarie.

One stock where short position moves indicate the market is uncertain is Cochlear ((COH)), as RBS notes while shorts have risen by almost 1.0% over the past month they have fallen slightly in the last week. The changes have mirrored the news flow from the company, as ongoing concerns about issues with the Nucleus 5 implant may be tempered in coming sessions given the company has indicated it has found out why the device was failing.
 

Top Ten Largest Short Positions

Rank Symbol Short Position Total Product %Short
1 JBH 21613182 98833643 21.87
2 ISO 935644 5401916 17.32
3 FXJ 306805187 2351955725 13.05
4 MYR 71813085 583384551 12.30
5 BBG 29113634 255102103 11.43
6 DJS 51019454 524940325 9.70
7 FLT 9514262 99997851 9.49
8 LYC 117271559 1713846913 6.83
9 WTF 13734586 211736244 6.48
10 PPT 2714307 41980678 6.45

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

IMPORTANT INFORMATION ABOUT THIS REPORT

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

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

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

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

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

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

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

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

Technical limitations

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article 3 months old

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

Christmas is edging ever so closer but the share market is not displaying its usual tendencies to put a positive twist onto the calendar year's finish, but that doesn't stop the major stockbrokerages in Australia to continue to downgrade more stocks than to issue upgrades. The week past saw the eight brokers in the FNArena database downgrading recommendations on 16 stocks while lifting only four. Total Buy ratings now stand at 56.6%, down from 57.1% last week.

Among the upgrades was ANZ Banking Group ((ANZ)), BA Merrill Lynch upgrading to a Buy rating from Neutral on both valuation grounds and expectations Asia will provide solid growth opportunities for the bank going forward. ANZ is now the broker's top pick in the sector.

A full review of Cochlear's ((COH)) prospects sees Macquarie upgrade to an Outperform rating from Neutral, this despite cuts to earnings estimates and price target to reflect manufacturing issues, supply constraints and product recalls. The upgrade is a valuation call, Macquarie seeing the stock as attractive at current levels given recent share price weakness.

Investa Office ((IOF)) was the only play to receive two upgrades, both JP Morgan and Deutsche Bank lifting ratings to Buy from Hold previously. For JP Morgan the call is valuation inspired after recent relative underperformance, while Deutsche sees reduced execution risk and some growth prospects following offshore asset sales and a share buyback. 

Deutsche has also adjusted its target for Investa slightly higher. The upgrades follow a similar move the previous week by UBS, who also identified improved value in the stock on the back of overseas asset sales.

On the downgrade side, Amcor ((AMC)) saw a cut to a Neutral rating by Citi given the current share price represents a premium on the broker's numbers. Earnings estimates were also adjusted slightly to reflect changes to forex assumptions.

Citi made a similar change with respect to Ansell ((ANN)), again on the basis the current share price is a stretch relative to valuation even allowing for the possibility current earnings guidance might turn out to be conservative. Target has been trimmed slightly.

APA ((APA)) has made an offer for Hastings Diversified ((HDF)) and this has prompted both Citi and BA-ML to downgrade ratings, the former to Neutral and the latter to Underperform. While the associated sale of AllGas is viewed positively, the possibility a higher offer may be needed and some valuation concerns post recent share price gains is enough to see both brokers adopt more conservative views. Citi has also trimmed its price target.

Commonwealth Property Office ((CPA)) has enjoyed some gains of late and this has created some valuation issues for both Credit Suisse and JP Morgan. The former has moved to an Underperform rating and the latter to a Neutral recommendation as both now see better value elsewhere in the sector.

A review by Deutsche Bank left the broker with the view competition is increasing in some of CSL's ((CSL)) markets, a concern that was enough for the broker to downgrade to a Hold rating. The downgrade also reflects recent share price outperformance, while the review generated an increase in price target.

JB Hi-Fi ((JBH)) surprised the market on Thursday by cutting earnings guidance for 1H12, citing ongoing price deflation and tough competition. Brokers have responded by cutting earnings estimates and price targets, with Citi, JP Morgan and UBS all downgrading ratings as well. JP Morgan moves to Underweight, the other two brokers to Neutral recommendations. 

Valuation has been the driver of Credit Suisse's downgrade on Mirvac ((MGR)) to a Neutral rating, the broker similarly cutting its rating on Stockland ((SGP)) to Underperform following recent share price movements.

As brokers continue to adjust numbers for Telecom New Zealand ((TEL)) to account for the recent de-merger, RBS has gone a step further and downgraded to a Sell rating, this reflecting recent relative outperformance post the de-merger. The broker's target comes down to account for the split in the business.

An asset tour saw UBS adjust numbers for Wesfarmers ((WES)), the trimming of forecasts enough for a minor cut in target. Such a reaction was also seen elsewhere in the market, though UBS was the only broker to also downgrade its rating, moving to Neutral on valuation grounds.

A similar review of prospects for Ten network ((TEN)) saw Deutsche downgrade to a Sell rating, the broker now factoring in increased overall risk and volatility for earnings in the shorter-term.

Elsewhere, BA-ML has reviewed prospects for the IT sector and the result is changes to earnings estimates and price target for Oakton ((OKN)), the move following similar cuts to expectations for SMS Management and Technology ((SMX)) made by Macquarie last week.

Changes to sales assumptions for Whitehaven ((WHC)) have seen RBS Australia lower expectations and price target for the coal play, while a capital raising by Qube Logistics ((QUB)) sees brokers adjust earnings per share expectations.

Changes to expectations for Echo Entertainment ((EGP)) resulted in BA-ML lifting earnings estimates and price target for the group, while Citi has lifted earnings forecasts for Australian Worldwide Exploration ((AWE)) post a review of the Sugarloaf project.

A change in analyst at JP Morgan has resulted in some changes to price target and earnings forecasts for Charter Hall ((CHC)), while AMP's ((AMP)) strategic distribution agreement with Mitsubishi UFJ in Japan has caused some estimate and target changes across the market. Citi has further lowered earnings estimates and its price target for Ridley ((RIC)) to reflect poor weather conditions and associated operating delays.

 

Total Recommendations
 Recommendation Changes

 

Broker Recommendation Breakup

 

Broker Rating

Order Company Old Rating New Rating Broker
Upgrade
1 AUSTRALIA & NEW ZEALAND BANKING GROUP Neutral Buy BA-Merrill Lynch
2 COCHLEAR LIMITED Neutral Buy Macquarie
3 INVESTA OFFICE FUND Neutral Buy JP Morgan
4 INVESTA OFFICE FUND Neutral Buy Deutsche Bank
Downgrade
5 AMCOR LIMITED Buy Neutral Citi
6 ANSELL LIMITED Buy Neutral Citi
7 AUSTRALIAN PIPELINE TRUST Buy Neutral RBS Australia
8 AUSTRALIAN PIPELINE TRUST Buy Neutral Citi
9 AUSTRALIAN PIPELINE TRUST Neutral Sell BA-Merrill Lynch
10 COMMONWEALTH PROPERTY OFFICE FUND Buy Neutral JP Morgan
11 COMMONWEALTH PROPERTY OFFICE FUND Neutral Sell Credit Suisse
12 CSL LIMITED Buy Neutral Deutsche Bank
13 JB HI-FI LIMITED Buy Neutral Citi
14 JB HI-FI LIMITED Neutral Sell JP Morgan
15 JB HI-FI LIMITED Buy Neutral UBS
16 MIRVAC GROUP Buy Neutral Credit Suisse
17 STOCKLAND Neutral Sell Credit Suisse
18 TELECOM CORPORATION OF NEW ZEALAND LIMITED Neutral Sell RBS Australia
19 TEN NETWORK HOLDINGS LIMITED Neutral Sell Deutsche Bank
20 WESFARMERS LIMITED Buy Neutral UBS
 

Recommendation

Positive Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 IOF 50.0% 67.0% 17.0% 6
2 COH - 38.0% - 25.0% 13.0% 8
3 ILU 75.0% 88.0% 13.0% 8
4 EGP 63.0% 75.0% 12.0% 8
5 ANZ 38.0% 50.0% 12.0% 8
6 SGT 57.0% 67.0% 10.0% 6

Negative Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 JBH 75.0% 38.0% - 37.0% 8
2 OKN 60.0% 40.0% - 20.0% 5
3 MAH 67.0% 50.0% - 17.0% 4
4 WHC 100.0% 83.0% - 17.0% 6
5 SGP 71.0% 57.0% - 14.0% 7
6 MGR 71.0% 57.0% - 14.0% 7
7 TCL 100.0% 86.0% - 14.0% 7
8 CFX 71.0% 57.0% - 14.0% 7
9 ANN 43.0% 29.0% - 14.0% 7
10 CSL 63.0% 50.0% - 13.0% 8
 

Target Price

Positive Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 ILU 20.219 20.786 2.80% 8
2 CSL 33.600 33.891 0.87% 8
3 IOF 0.678 0.683 0.74% 6
4 EGP 4.440 4.468 0.63% 8

Negative Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 OKN 1.970 1.770 - 10.15% 5
2 JBH 17.996 16.925 - 5.95% 8
3 MAH 0.713 0.685 - 3.93% 4
4 WHC 7.090 6.980 - 1.55% 6
5 COH 54.840 54.084 - 1.38% 8
6 QUB 1.593 1.580 - 0.82% 4
7 ANZ 22.869 22.688 - 0.79% 8
8 WES 32.941 32.716 - 0.68% 8
9 TEN 1.036 1.029 - 0.68% 8
10 ANN 14.391 14.357 - 0.24% 7
 

Earning Forecast

Positive Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 HST 3.237 20.300 527.12% 5
2 QUB 7.800 14.075 80.45% 4
3 BPT 4.140 4.920 18.84% 5
4 AWE 6.871 7.300 6.24% 7
5 QAN 12.988 13.688 5.39% 8
6 CHC 22.800 23.467 2.93% 6
7 AMP 32.103 32.678 1.79% 8
8 HGG 15.964 16.172 1.30% 6
9 STO 59.000 59.538 0.91% 8
10 OSH 14.833 14.959 0.85% 8

Negative Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 AZT 17.980 - 3.600 - 120.02% 5
2 WHC 37.600 31.650 - 15.82% 6
3 TEL 14.691 12.553 - 14.55% 8
4 PAN 11.475 9.925 - 13.51% 4
5 RIC 10.033 9.333 - 6.98% 3
6 TAH 47.375 44.438 - 6.20% 8
7 JBH 138.325 130.500 - 5.66% 8
8 OKN 18.620 17.640 - 5.26% 5
9 COH 220.275 210.400 - 4.48% 8
10 SMX 48.420 46.460 - 4.05% 5
 

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article 3 months old

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

The past week has seen downgrades by brokers in the FNArena database double the number of upgrades, 10 ratings being lowered to just five increases. Total Buy recommendations now stand at 57.1%, down from 57.4% last week.

Among the upgrades were Bathurst Resources ((BTU)), where Credit Suisse moved to an Outperform rating from Neutral given a view the smaller cap plays are now the more attractive in the Australian coal sector. Bathurst's overall rating also benefited from Citi initiating coverage with a Buy rating.

A recent profit warning saw the Fletcher Building ((FBU)) share price suffer but in JP Morgan's view the sell-off was overdone. On valuation grounds the broker upgraded to an Overweight rating from Neutral previously despite a cut in price target. Macquarie also lowered its target for the stock.

Iluka ((ILU)) has announced better than expected titanium oxide price increases, which has forced brokers across the market to lift earnings estimates and price targets. The changes suggest some upside remains for the stock, enough for RBS Australia to upgrade to a Buy rating from Hold previously.

A US asset sale by Investa Office ((IOF)) was well received by the market given a price in excess of book value. The sale saw UBS lift its price target slightly, the broker also upgrading to a Buy rating given the potential valuation upside from further asset sales.

Management at Peet ((PPC)) offered cautious commentary at the group's AGM this week and the market reacted by pushing down the stock. The falls have been overdone according to Citi, who has upgraded to a Buy rating on valuation grounds.

Among the downgrades was Adelaide Brighton ((ABC)), JP Morgan cutting its rating to Neutral from Overweight following relative outperformance. This is a valuation call as the stock is now trading close to the broker's price target.

Clough ((CLO)) has reported some cost overruns and margin pressure on two contracts, enough for RBS Australia to lower its earnings estimates and price target. The changes are enough for a downgrade to a Hold rating, again a valuation call on the part of the broker.

Valuation is also behind Credit Suisse's downgrade of Gloucester Coal ((GCL)) to a Neutral rating, this following recent share price outperformance. Minor adjustments to earnings forecasts have accompanied the downgrade.

With earnings to be impacted by some one-offs UBS has cut forecasts for HFA Holdings ((HFA)). The changes have also seen its price target cut, while a lack of positive momentum sees the broker downgrade to a Neutral rating.

A lack of positive catalysts is also behind Citi's downgrade of Hills Industries ((HIL)), as earnings are still being impacted by the strong Australian dollar and ongoing challenges in the building industry. Target has been trimmed on minor cuts to estimates.

Deutsche Bank has lowered forecasts for Newcrest ((NCM)) given changes to production expectations, the changes seeing a reduction in price target. On valuation grounds the broker has moved to a Hold rating from Buy previously, the only non-Buy recommendation on Newcrest in the FNArena database.

Demand for IT services is expected to remain subdued given weak domestic economic growth and to reflect this Macquarie sees scope for some contract cancellations. This is likely to impact on earnings for Oakton ((OKN)), so the broker has adjusted its model to the point its rating has been downgraded to Neutral.

A solid run in Programmed Maintenance ((PRG)) shares has seen Citi downgrade to a Neutral rating on valuation grounds. The downgrade comes despite a modest increase in price target. Citi has also downgraded Transurban ((TCL)) to a Neutral rating on the same basis.

United Group ((UGL)) has acquired the DTZ trading assets and this offers the company a European property footprint. Despite this RBS Australia sees a slower rate of margin improvement going forward, enough to downgrade to a Hold rating. Targets for the stock have risen overall to reflect the impact of the acquisition.

Price targets for Charter Hall Office ((CQO)) have risen slightly following news the bidding consortium has lifted its offer slightly, while targets for APN News and Media ((APN)) have fallen on the back of cuts to earnings estimates post the company's investor day.

Broker models for Australian Worldwide Exploration ((AWE)) have been adjusted on news the company has sold part of its stake in the BassGas project, the changes having minor impact on price targets across the market.

Weak global markets have Computershare's ((CPU)) earnings under pressure, enough for JP Morgan to adjust its forecasts. Models have also been adjusted to reflect the recently completed Specialised Loan Services acquisition.

New guidance from Independence Group ((IGO)) has seen brokers lower estimates and price targets, while changes to aluminium price expectations mean BA Merrill Lynch has trimmed its earnings estimates for Alumina Ltd ((AWC)). 


 

Total Recommendations
 Recommendation Changes

 

Broker Recommendation Breakup
Suisse,Deutsche<*br*>Bank,JP<*br*>Morgan,Macquarie,RBS<*br*>Australia,UBS&b0=123,118,128,107,94,149,189,158&h0=74,96,80,118,87,91,112,81&s0=41,18,14,6,25,20,6,13" 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 BATHURST RESOURCES LIMITED Neutral Buy Credit Suisse
2 FLETCHER BUILDING LIMITED Neutral Buy JP Morgan
3 ILUKA RESOURCES LIMITED Neutral Buy RBS Australia
4 INVESTA OFFICE FUND Neutral Buy UBS
5 PEET & COMPANY LIMITED Buy Buy Citi
Downgrade
6 ADELAIDE BRIGHTON LIMITED Buy Neutral JP Morgan
7 CLOUGH LIMITED Buy Neutral RBS Australia
8 GLOUCESTER COAL LTD Buy Neutral Credit Suisse
9 HFA HOLDINGS LIMITED Buy Neutral UBS
10 HILLS HOLDINGS LIMITED Buy Neutral Citi
11 NEWCREST MINING LIMITED Buy Neutral Deutsche Bank
12 OAKTON LIMITED Buy Neutral Macquarie
13 PROGRAMMED MAINTENANCE SERVICES LIMITED Buy Neutral Citi
14 TRANSURBAN GROUP Buy Neutral Citi
15 UNITED GROUP LIMITED Buy Neutral RBS Australia
 

Recommendation

Positive Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 BTU 50.0% 100.0% 50.0% 3
2 IOF 33.0% 50.0% 17.0% 6
3 TPI 50.0% 67.0% 17.0% 6
4 ILU 75.0% 88.0% 13.0% 8
5 FBU 38.0% 50.0% 12.0% 8
6 SWM 63.0% 75.0% 12.0% 8

Negative Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 CLO 100.0% 67.0% - 33.0% 3
2 GCL 100.0% 80.0% - 20.0% 5
3 OKN 60.0% 40.0% - 20.0% 5
4 TCL 100.0% 86.0% - 14.0% 7
5 UGL 71.0% 57.0% - 14.0% 7
6 PRG 100.0% 86.0% - 14.0% 7
7 CQO 43.0% 29.0% - 14.0% 7
8 FKP 80.0% 67.0% - 13.0% 6
9 ABC 88.0% 75.0% - 13.0% 8
10 NUF 38.0% 25.0% - 13.0% 8
 

Target Price

Positive Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 UGL 14.137 14.509 2.63% 7
2 SWM 4.045 4.151 2.62% 8
3 ILU 20.219 20.661 2.19% 8
4 PRG 2.437 2.456 0.78% 7
5 IOF 0.673 0.678 0.74% 6
6 TCL 5.859 5.899 0.68% 7
7 TPI 0.872 0.877 0.57% 6
8 CQO 3.568 3.586 0.50% 7
9 NUF 4.843 4.866 0.47% 8

Negative Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 APN 1.140 1.004 - 11.93% 8
2 OKN 1.970 1.832 - 7.01% 5
3 CLO 0.927 0.870 - 6.15% 3
4 FKP 0.844 0.793 - 6.04% 6
5 AAX 3.016 2.873 - 4.74% 4
6 BTU 1.000 0.967 - 3.30% 3
7 NCM 45.195 43.939 - 2.78% 8
8 GCL 9.454 9.304 - 1.59% 5
 

Earning Forecast

Positive Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 AWE 6.871 7.086 3.13% 7
2 CPU 51.447 52.513 2.07% 7
3 SWM 41.313 42.075 1.84% 8
4 SUN 78.325 79.400 1.37% 8
5 IMD 22.040 22.207 0.76% 3
6 CPB 305.329 307.043 0.56% 7
7 NHC 29.775 29.900 0.42% 3
8 MGX 38.088 38.163 0.20% 8
9 ABC 23.550 23.575 0.11% 8
10 BTU - 0.600 - 0.667 11.17% 3

Negative Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 AZT 17.980 - 3.600 - 120.02% 5
2 GBG 0.671 0.243 - 63.79% 6
3 IGO 12.820 7.560 - 41.03% 5
4 TCL 12.314 8.929 - 27.49% 7
5 PPC 7.108 5.792 - 18.51% 6
6 PAN 11.475 10.175 - 11.33% 4
7 AWC 5.893 5.387 - 8.59% 8
8 APN 13.438 12.350 - 8.10% 8
9 CLO 7.433 6.833 - 8.07% 3
10 TNE 7.767 7.200 - 7.30% 3
 

Technical limitations

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article 3 months old

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

The past week has seen downgrades again outnumber upgrades, as the eight brokers in the FNArena database have cut ratings on 10 stocks while lifting recommendations on just three. Total Buy ratings remain at 57.4%, little changed from last week.

Among those upgraded were Metcash ((MTS)) post the group's interim profit result. While the result was slightly weaker than the market had expected the medium-term earnings outlook is improved by the fact the legal uncertainty of the proposed Franklins acquisition has now mostly passed. 

This was enough for JP Morgan to upgrade to a Neutral rating, while Credit Suisse went one better and upgraded Metcash to Outperform from Neutral to reflect both the Franklins purchase and improved valuation post recent share price weakness. Targets and earnings estimates were adjusted across the market.

Seven West Media ((SWM)) was the other upgrade for the week, Citi lifting its rating to Buy from Neutral. While ad market conditions remain difficult, the broker suggests lead indicators are turning a little more positive. 

The still tough conditions mean stock selection will be important in the sector and here Citi also sees reasons to like Seven West relative to peers. Citi's upgrade was accompanied by changes to earnings estimates and price target. On the same basis Citi has downgraded APN News and Media ((APN)) to Neutral from Buy, while also cutting its price target for the stock. 

An in-line interim result from Campbell Brothers ((CPB)) wasn't enough to stop Deutsche Bank downgrading the stock to Hold from Buy, though the change is a valuation call rather than one indicating any concerns over the growth outlook for the company. Forecasts and price targets for Campbell Brothers across the market rose on the back of the result.

Weak end markets continue to impact on earnings for GUD ((GUD)) and RBS Australia has lowered its estimates and price target accordingly. The changes have caused the broker to downgrade to a Hold rating on the stock.

Recent share price outperformance and the fact the company will be cycling tough comparable numbers in coming months has prompted RBS to downgrade Nufarm ((NUF)) to a Hold rating. There are only minor associated changes in forecasts and price target from brokers covering the stock post a trading update from management.

Primary Health Care ((PRY)) has offered fresh earnings guidance to the market in the past week but the issue for BA Merrill Lynch is the guidance doesn't appear to be conservative. This suggests limited scope for outperformance, which is enough for the broker to downgrade to a Neutral rating. The update from management has seen only minor changes to estimates and targets across the market.

A more disappointing trading update from management at Symex ((SYM)) has seen RBS take the axe to its numbers, the broker more than halving its price target. Given a debt/cost restructuring now looks more critical, the broker has downgraded to a Neutral rating.

RBS has also downgraded TPG Telecom ((TPM)) to a Hold rating, as while the company has lifted its stake in iiNet ((IIN)) the broker sees any deal between the two as difficult given cultural differences. The change in shareholding in iiNet also sees the broker adjust its price target and earnings assumptions.

Disappointing production guidance was enough for both BA-ML and UBS to downgrade ratings for Woodside, the former to Underperform and the latter to Neutral. Brokers across the market have cut earnings forecasts and price targets post the update, with a couple of mentions for Santos (STO)) as a preferred play in the sector at present.

Concerns over the growth profile for Wotif.com ((WTF)) have seen Citi downgrade to a Sell rating, this given concerns over too much leverage to domestic tourism. A cut in price target follows from changes to earnings estimates.

With UBS initiating coverage of Regis Resources ((RRL)) with a price target above others in the market there has been a lift in the consensus target for the stock, while the broker also sees some upside potential in Cardno ((CDD)) and has lifted its target there as well. The consensus target for Bathurst Resources ((BTU)) has also come down slightly on the back of Citi initiating coverage.

In terms of changes to earnings estimates, forecasts for Air New Zealand ((AIZ)) have come down to reflect high fuel costs, while weak guidance from management at Qantas ((QAN)) has also resulted in some cuts to expectations.

The potential for spending cuts in the IT sector have impacted on BA-ML's model for Technology One ((TNE)), while some adjustments to commodity price forecasts saw earnings estimates trimmed for Rio Tinto ((RIO)).

Higher costs have seen minor changes to models for Santos ((STO)), while the potential for Alacer Gold ((AQG)) to lose part of its stake in the Copler project proved enough for UBS to cut its numbers and price target.

On the positive revision side, higher than expected guidance from Miclyn Offshore ((MIO)) saw Macquarie lift its estimates and price target, while the broker also made some changes to its model for Macquarie Atlas ((MQA)).

 

Total Recommendations
 Recommendation Changes

 

Broker Recommendation Breakup

 

Broker Rating

Order Company Old Rating New Rating Broker
Upgrade
1 Metcash Limited Sell Neutral JP Morgan
2 Metcash Limited Neutral Buy Credit Suisse
3 SEVEN WEST MEDIA LIMITED Neutral Buy Citi
Downgrade
4 APN NEWS & MEDIA LIMITED Buy Neutral Citi
5 Campbell Brothers Limited Buy Neutral Deutsche Bank
6 G.U.D. HOLDINGS LIMITED Buy Neutral RBS Australia
7 NUFARM LIMITED Buy Neutral RBS Australia
8 PRIMARY HEALTH CARE LIMITED Buy Neutral BA-Merrill Lynch
9 SYMEX HOLDINGS LIMITED Buy Neutral RBS Australia
10 TPG TELECOM LIMITED Buy Neutral RBS Australia
11 WOODSIDE PETROLEUM LIMITED Neutral Sell BA-Merrill Lynch
12 WOODSIDE PETROLEUM LIMITED Buy Neutral UBS
13 WOTIF.COM HOLDINGS LIMITED Neutral Sell Citi
 

Recommendation

Positive Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 MMX - 67.0% - 33.0% 34.0% 3
2 MTS - 13.0% 13.0% 26.0% 8
3 BTU 50.0% 67.0% 17.0% 3
4 GNC 50.0% 67.0% 17.0% 6
5 SUL 33.0% 50.0% 17.0% 6
6 RFG 50.0% 67.0% 17.0% 3
7 SWM 63.0% 75.0% 12.0% 8
8 AQG 40.0% 50.0% 10.0% 6
9 RRL 67.0% 75.0% 8.0% 4
10 CDD 67.0% 75.0% 8.0% 4

Negative Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 WPL 63.0% 38.0% - 25.0% 8
2 TPM 100.0% 75.0% - 25.0% 4
3 ORL 100.0% 80.0% - 20.0% 5
4 CHC 100.0% 83.0% - 17.0% 6
5 GUD 67.0% 50.0% - 17.0% 6
6 CPB 29.0% 14.0% - 15.0% 7
7 BSL 43.0% 29.0% - 14.0% 7
8 WTF 38.0% 25.0% - 13.0% 8
9 NUF 38.0% 25.0% - 13.0% 8
10 DJS - 25.0% - 38.0% - 13.0% 8
 

Target Price

Positive Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 MMX 0.203 0.390 92.12% 3
2 RRL 3.257 3.618 11.08% 4
3 CPB 49.327 50.830 3.05% 7
4 SWM 4.045 4.151 2.62% 8
5 CDD 6.213 6.333 1.93% 4
6 CHC 2.482 2.500 0.73% 6
7 NUF 4.843 4.866 0.47% 8

Negative Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 BSL 0.851 0.627 - 26.32% 7
2 WPL 44.009 40.099 - 8.88% 8
3 RFG 3.085 2.913 - 5.58% 3
4 APN 1.140 1.081 - 5.18% 8
5 BTU 1.000 0.967 - 3.30% 3
6 WTF 4.348 4.216 - 3.04% 8
7 TPM 1.860 1.820 - 2.15% 4
8 DJS 2.796 2.745 - 1.82% 8
9 GUD 9.048 8.898 - 1.66% 6
10 GNC 8.675 8.533 - 1.64% 6
 

Earning Forecast

Positive Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 COF 8.733 9.733 11.45% 3
2 RRL 15.867 17.150 8.09% 4
3 RFG 26.150 28.033 7.20% 3
4 CPB 286.857 305.329 6.44% 7
5 CDD 55.220 57.570 4.26% 4
6 GNC 79.377 82.617 4.08% 6
7 MIO 21.365 21.934 2.66% 4
8 MQA 8.267 8.433 2.01% 6
9 SWM 41.313 42.075 1.84% 8
10 SUL 51.117 51.717 1.17% 6

Negative Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 AIZ 10.322 7.791 - 24.52% 4
2 QAN 14.863 12.988 - 12.62% 8
3 TNE 7.767 7.200 - 7.30% 3
4 RIO 836.708 787.603 - 5.87% 8
5 STO 62.413 59.000 - 5.47% 8
6 AQG 59.396 56.725 - 4.50% 6
7 MML 67.870 64.922 - 4.34% 3
8 SLM 31.033 29.700 - 4.30% 6
9 IFL 43.900 42.700 - 2.73% 7
10 TEL 15.065 14.695 - 2.46% 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.

article 3 months old

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

The past week has been a relatively balanced one in terms of changes to ratings on stocks covered by the eight brokers in the FNArena database. A total of seven upgrades and eight ratings downgrades brought total Buy recommendations to 57.4%, down a little from nearly 57.7% last week.

Centro Retail ((CER)) was one to enjoy an upgrade, Deutche Bank moving to a Buy rating from Hold previously in response to revised aggregation terms. For Deutsche, the new terms significantly reduce the risk profile going forward, while offering additional incentives for unitholders to approve the proposal.

Following a review Deutsche also made minor changes to earnings estimates and lifted its price target for the stock. Elsewhere in the property sector, plans for a buyback of shares by Commonwealth Property Office ((CPA)) were enough for JP Morgan to upgrade to Overweight from Underweight. The buyback should act as a catalyst for the share price, while the broker is also attracted to low gearing levels and a conservative balance sheet as this offers scope for expansion opportunities.

In the resources sector, RBS Australia upgraded to Buy from Hold on Discovery Metals ((DML)), reflecting both upside from ongoing exploration success and to reflect improved valuation following recent share price weakness.

RBS also upgraded Kingsgate ((KCN)) to Buy from Hold on the expectation the ending of the wet season in northern Thailand will deliver improved quarterly production results from the Chatree project. The upgrade in rating comes despite a lowering of the broker's price target.

Murchison Metals ((MMX)) was upgraded to Neutral from Underweight by JP Morgan on news the company has entered an agreement to sell its interests in Crosslands and OPR. The funds to be received imply a value of $0.47 per share and improve both the valuation and financial position of Murchison. JP Morgan's price target has been adjusted to reflect the valuation impact.

While Northern Iron ((NFE)) remains on track to meet production targets for the full year, the move by the company to raise a further $9 million from its debt facility to alleviate a tight cash position has also been viewed favourably by Macquarie. This is enough for an upgrade to an Outperform rating from Neutral previously.

Among industrials, Programmed Maintenance ((PRG)) enjoyed an upgrade from RBS Australia, the broker moving to Buy from Hold post a solid interim result. The result increases confidence in the outlook for Programmed and should also help restore some credibility in the market according to RBS.

BlueScope ((BSL)) was downgraded to Hold from Buy this week by RBS, the broker arguing while an equity raising will improve the group's balance sheet there remains a significant amount of earnings uncertainty. This uncertainty means a Buy rating is no longer appropriate in the broker's view. 

Targets and earnings estimates for BlueScope have been adjusted across the market to account for the impact of the equity raising. OneSteel ((OST)) also saw cuts to earnings estimates and price targets post weak outlook commentary at its AGM during the week.

Cuts to iron ore prices by JP Morgan resulted in Gindalbie ((GBG)) being downgraded to Neutral from Overweight, while price target and earnings estimates were also reduced. It was a similar story for Mount Gibson ((MGX)), though in this case it was Citi lowering its numbers and downgrading to a Neutral rating from Buy previously.

In a tough week for IT stocks both Oakton ((OKN)) and SMS Management and Technology ((SMX)) were downgraded by RBS to Hold ratings from Buy. The changes reflect still difficult operating conditions in key markets. In both cases earnings estimates and price targets were also reduced.

Things are no easier for wealth managers as evidenced by weak guidance from IOOF ((IFL)), the update causing brokers to lower earnings forecasts and price targets. UBS also downgraded to a Neutral rating from Buy previously.

In contrast, Kathmandu ((KMD)) delivered a solid trading update but it only triggered minor changes to estimates. RBS has still downgraded to a Hold rating on valuation grounds post recent share price gains.

This week Telecom New Zealand ((TEL)) de-merged its network division and this has prompted brokers across the market to update their earnings models. Price targets have fallen across the board and Credit Suisse has downgraded to an Underperform rating from Neutral previously.

A solid second quarter result from James Hardie ((JHX)) has been enough to prompt some increases to earnings estimates and price targets, while brokers have gone the other way on David Jones ((DJS)) and trimmed forecasts and targets post yet another disappointing quarterly sales update from the department store owner.

NRW Holdings ((NWH)) delivered strong AGM earnings guidance and was being rewarded through increases to earnings estimates across the market, with all three brokers covering the stock also lifting price targets.

Forecasts for Virgin Blue ((VBA)) have also sneaked higher following solid AGM commentary, while a solid full year result from Graincorp ((GNC)) and expectations of another strong year to come have been enough for some minor revisions to estimates and price targets.

Following the acquisition of TransACT brokers have lifted forecasts for iiNet ((IIN)), the result being modest increases to price targets as well. Monadelphous ((MND)) has seen forecasts and price targets increase thanks again to positive outlook commentary at the group's AGM. Monadelphous is facing a different kind of problem than most other stocks in the Australian share market: ongoing popularity among buyers of equities. One recurring theme in stockbroker research on the company is thus, unsurprisingly, whether the shares are getting a bit expensive?

A slightly better than expected interim result has seen minor increases to forecasts for Thorn Group ((TGA)).

Shale gas developer and oil producer Beach ((BPT)) received some good news during the week with the Tantanna to Gidgealpa oil pipeline coming back on stream and this was enough for UBS to lift forecasts, while Credit Suisse revised some volume assumptions for Fortescue ((FMG)) that resulted in lower earnings estimates and a cut in price target. 

 

Total Recommendations
 Recommendation Changes

 

Broker Recommendation Breakup

 

Broker Rating

Order Company Old Rating New Rating Broker
Upgrade
1 Centro Retail Group Neutral Buy Deutsche Bank
2 COMMONWEALTH PROPERTY OFFICE FUND Neutral Buy JP Morgan
3 DISCOVERY METALS LIMITED Neutral Buy RBS Australia
4 KINGSGATE CONSOLIDATED LIMITED Neutral Buy RBS Australia
5 MURCHISON METALS LTD Sell Neutral JP Morgan
6 NORTHERN IRON LIMITED Neutral Buy Macquarie
7 PROGRAMMED MAINTENANCE SERVICES LIMITED Neutral Buy RBS Australia
Downgrade
8 BLUESCOPE STEEL LIMITED Buy Neutral RBS Australia
9 GINDALBIE METALS LTD Buy Neutral JP Morgan
10 IOOF HOLDINGS LIMITED Buy Neutral UBS
11 KATHMANDU HOLDINGS LIMITED Buy Neutral RBS Australia
12 Mount Gibson Iron Limited Buy Neutral Citi
13 OAKTON LIMITED Buy Neutral RBS Australia
14 SMS MANAGEMENT & TECHNOLOGY LIMITED Buy Neutral RBS Australia
15 TELECOM CORPORATION OF NEW ZEALAND LIMITED Buy Sell Credit Suisse
 

Recommendation

Positive Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 MMX - 67.0% - 33.0% 34.0% 3
2 DML 25.0% 50.0% 25.0% 4
3 KCN 20.0% 40.0% 20.0% 5
4 CER 33.0% 50.0% 17.0% 4
5 PRG 86.0% 100.0% 14.0% 7
6 STO 75.0% 88.0% 13.0% 8

Negative Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 MGX 75.0% 25.0% - 50.0% 8
2 KMD 80.0% 60.0% - 20.0% 5
3 AZT 80.0% 60.0% - 20.0% 5
4 OKN 80.0% 60.0% - 20.0% 5
5 SMX 100.0% 80.0% - 20.0% 5
6 CHC 100.0% 83.0% - 17.0% 6
7 GBG 100.0% 83.0% - 17.0% 6
8 BSL 57.0% 43.0% - 14.0% 7
9 IFL 71.0% 57.0% - 14.0% 7
10 ORG 88.0% 75.0% - 13.0% 8
 

Target Price

Positive Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 MMX 0.220 0.390 77.27% 3
2 JHX 6.391 6.706 4.93% 8
3 PRG 2.357 2.437 3.39% 7
4 DML 1.608 1.640 1.99% 4
5 CER 0.350 0.355 1.43% 4
6 ILU 19.938 20.219 1.41% 8
7 KMD 2.083 2.103 0.96% 5
8 CHC 2.482 2.500 0.73% 6
9 ORG 17.455 17.456 0.01% 8

Negative Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 BSL 1.356 0.851 - 37.24% 7
2 MGX 1.946 1.659 - 14.75% 8
3 AZT 12.870 11.540 - 10.33% 5
4 OKN 2.152 1.970 - 8.46% 5
5 GBG 1.078 0.995 - 7.70% 6
6 IFL 6.637 6.329 - 4.64% 7
7 SMX 6.790 6.478 - 4.59% 5
8 DJS 2.796 2.745 - 1.82% 8
9 KCN 8.744 8.664 - 0.91% 5
 

Earning Forecast

Positive Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 NWH 25.133 30.300 20.56% 3
2 VBA 2.871 3.014 4.98% 7
3 GNC 79.377 82.550 4.00% 6
4 JHX 29.699 30.791 3.68% 8
5 IIN 29.067 29.950 3.04% 5
6 PRU 22.517 23.183 2.96% 6
7 MND 119.183 122.583 2.85% 5
8 PRG 25.414 26.086 2.64% 7
9 TGA 19.467 19.967 2.57% 3
10 BPT 4.040 4.140 2.48% 5

Negative Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 AZT 39.460 17.980 - 54.43% 5
2 TEL 18.523 14.700 - 20.64% 8
3 GBG 0.771 0.671 - 12.97% 6
4 PPC 7.833 7.108 - 9.26% 6
5 OST 15.114 13.986 - 7.46% 7
6 MGX 40.863 38.088 - 6.79% 8
7 IFL 46.100 43.900 - 4.77% 7
8 CER 3.633 3.475 - 4.35% 4
9 FMG 66.072 63.294 - 4.20% 8
10 OKN 19.420 18.620 - 4.12% 5
 

Technical limitations

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article 3 months old

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
 

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article 3 months old

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.

article 3 months old

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

In a change from the recent pattern, the last week has seen broker downgrades outnumber upgrades by a score of seven to three based on recommendations by the eight brokers in the FNArena database. This brings total Buy ratings to 59.3%, down slightly from 59.5% last week.

Fund manager Henderson Group ((HGG)) enjoyed one of the upgrades courtesy of Macquarie, the broker moving to Neutral from Underperform to reflect improved value following recent share price weakness. This has offset ongoing weakness in fund flows thanks to still tough equity market conditions. Macquarie is also attracted to the yield of 6%.

Macquarie also upgraded Tabcorp ((TAH)) to Neutral from Underperform following a trading update that supports the view the stock offers value around current levels. A move to a more positive rating is not justified in the broker's view given overhanging uncertainty of compensation relating to claims in the Victorian market. Earnings estimates have been trimmed as part of the review.

Among resource stocks Credit Suisse has upgraded to an Outperform rating on Western Areas ((WSA)) from Neutral, this due to revisions to earnings and price target on the back of changes to nickel price expectations.

Credit Suisse has also upgraded CSL to Outperform from Neutral following changes to foreign exchange assumptions. Again, there have been related changes to earnings forecasts and price target. Charter Hall Office ((CQO)) has been upgraded by UBS to Buy from Neutral, as while a consortium bidding for the stock has lifted its offer there remains scope for a revised offer closer to net tangible asset backing.

On the downgrade side, Credit Suisse has lowered its rating on Navitas ((NVT)) to Neutral from Outperform to reflect a full valuation. While the Knight Review offered some positives the broker notes earnings are unlikely to be impacted prior to FY13. This suggests a full short-term valuation.

A rights issue announced by Energy Resources of Australia ((ERA)) has prompted Deutsche Bank to downgrade the stock to Hold from Buy. Not only was the issue a surprise but Deutsche notes even if the key Ranger 3 Deeps project goes ahead, it will be one of the world's most expensive uranium mines.

Deutsche has sliced its price target as well on the news, while other brokers in the market similarly lowered both targets and earnings forecasts to reflect the dilution to earnings per share from the capital raising.

A downgrade to earnings guidance by Fletcher Building ((FBU)) given ongoing difficult operating conditions has seen brokers lower earnings forecasts and price targets. Macquarie has gone a step further, downgrading to Neutral from Outperform on valuation grounds, as any recovery in earnings appears set to take some time.

James Hardie ((JHX)) is another building materials group to suffer a downgrade, JP Morgan moving to an Underweight rating from Neutral on the back of lower earnings forecasts. Price target also comes down as the broker sees little chance of strong performance relative to the sector in the current market.

Brokers ceasing coverage have also been a feature this week, with both Macquarie and JP Morgan stopping coverage on ConnectEast ((CEU)) given shareholder approval of a takeover offer. Macquarie has also dropped coverage on Minara ((MRE)).

With respect to earnings, an increase to long-term iron ore price assumptions by Credit Suisse has had a positive impact on expectations for Gindalbie ((GBG)). Forecasts for Paladin ((PDN)) have been adjusted to reflect an equity issue that has also meant changes in price targets, while changes to gold price assumptions have impacted on earnings estimates for Newcrest ((NCM)). 

BA Merrill Lynch rolled forward its model for Caltex ((CTX)) and this has prompted some increases in estimates, while higher margin assumptions saw Citi also lift its numbers for the stock. Virgin Blue ((VBA)) also saw an upgrade to forecasts from Macquarie as the company is seen as a beneficiary of the issues at Qantas ((QAN)).

Forecasts for Alumina ((AWC)) have come down slightly thanks to a lower than expected 3Q earnings result from Alcoa, while a slower project ramp up has contributed to Macquarie trimming its numbers for Beach ((BPT)). 

For Perpetual ((PPT)), a move to outsource some back office functions will impact on earnings in the medium-term, prompting JP Morgan to lower its forecasts and price target. Others have similarly adjusted estimates to reflect weak market conditions. 

Conditions also remain tough for Oakton ((OKN)) and brokers have reacted to AGM commentary by trimming earnings estimates, which has also brought about a trimming in price targets.  

Total Recommendations
 Recommendation Changes

 

Broker Recommendation Breakup

 

Broker Rating

Order Company Old Rating New Rating Broker
Upgrade
1 HENDERSON GROUP PLC. Sell Neutral Macquarie
2 TABCORP HOLDINGS LIMITED Neutral Neutral Macquarie
3 WESTERN AREAS NL Neutral Buy Credit Suisse
Downgrade
4 ENERGY RESOURCES OF AUSTRALIA Neutral Sell UBS
5 FLETCHER BUILDING LIMITED Buy Neutral Macquarie
6 JAMES HARDIE INDUSTRIES N.V. Neutral Sell JP Morgan
7 NAVITAS LIMITED Buy Neutral Credit Suisse
 

Recommendation

Positive Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 HGG 60.0% 80.0% 20.0% 5
2 WSA 33.0% 50.0% 17.0% 6
3 CQO 29.0% 43.0% 14.0% 7
4 PNA 75.0% 88.0% 13.0% 8
5 CSL 50.0% 63.0% 13.0% 8
6 TAH 13.0% 25.0% 12.0% 8
7 CPA - 17.0% - 14.0% 3.0% 7

Negative Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 GPT 67.0% 50.0% - 17.0% 6
2 CER 50.0% 33.0% - 17.0% 3
3 NVT 43.0% 29.0% - 14.0% 7
4 CQR 43.0% 29.0% - 14.0% 7
5 ERA - 25.0% - 38.0% - 13.0% 8
6 FBU 50.0% 38.0% - 12.0% 8
7 JHX 50.0% 38.0% - 12.0% 8
8 MRE - 25.0% - 33.0% - 8.0% 3
9 CAB 67.0% 60.0% - 7.0% 5
10 CEU - 17.0% - 20.0% - 3.0% 5
 

Target Price

Positive Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 CQO 3.426 3.568 4.14% 7
2 WSA 6.325 6.400 1.19% 6
3 CSL 33.249 33.499 0.75% 8
4 TAH 3.356 3.375 0.57% 8

Negative Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 ERA 4.650 3.795 - 18.39% 8
2 PNA 4.591 4.348 - 5.29% 8
3 CAB 5.627 5.426 - 3.57% 5
4 HGG 2.624 2.574 - 1.91% 5
 

Earning Forecast

Positive Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 GBG 0.614 1.014 65.15% 6
2 OGC 15.388 18.697 21.50% 3
3 PDN 1.672 1.753 4.84% 7
4 NCM 208.971 217.229 3.95% 8
5 PRU 24.600 25.433 3.39% 6
6 CTX 110.900 113.550 2.39% 6
7 WHC 37.950 38.750 2.11% 5
8 TCL 12.157 12.400 2.00% 7
9 AIZ 10.326 10.524 1.92% 4
10 VBA 2.571 2.614 1.67% 7

Negative Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 ROC 0.259 - 0.169 - 165.25% 4
2 MRE 5.400 3.500 - 35.19% 3
3 CER 4.250 3.633 - 14.52% 3
4 AWC 6.832 6.009 - 12.05% 8
5 BPT 5.280 4.780 - 9.47% 5
6 FBU 49.214 46.293 - 5.94% 8
7 PPT 169.614 160.486 - 5.38% 7
8 PAN 17.325 16.450 - 5.05% 4
9 OKN 20.300 19.420 - 4.33% 5
10 IGO 25.294 24.334 - 3.80% 5
 

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.