For a more comprehensive preview of next week's events, please refer to "The Monday Report", published each Monday morning. For all economic data release dates, ex-div dates and times and other relevant information, please refer to the FNArena Calendar.

By Greg Peel

At 19,852, the Dow remains tantalisingly close to the 20,000 milestone. Not quite as close as it was pre-Fed nonetheless. Can we see a final push next week as Wall Street’s Christmas present?

First we need to get through tonight’s quadruple witching expiry, and then there’s a rush of US data releases to consider next week. It must be said, however, in the context of the Fed’s rate hike and updated forecasts, they don’t really mean all that much. We can probably now wait until into the new year before Wall Street starts responding to new data releases vis a vis the next rate hike.

But for the record, next week sees a flash read of the US services PMI, existing home sales, and then all on the Thursday before Christmas, the Chicago Fed national activity index, Conference Board leading indicators, durable goods, house prices, personal income and spending and another revision of September quarter GDP.

On the Friday before Christmas, the NYSE closes at 1pm.

The Bank of Japan holds a policy meeting on Tuesday.

The only local release of any note next week is the minutes of the December RBA meeting. That meeting was pre-Fed and is already largely redundant. There is very little in the way of corporate activity next week.

FNArena will cease regular service for 2016 on Thursday, Dec 22, returning on Monday, January 16. The website will remain accessible over that period.

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MYEFO numbers; mortgage re-pricing; La Nina; opportunities for small telcos; increased Oz tourism; and Citi's update on small cap stocks.

-Mortgage market dynamics may be hurting smaller banks
-Lower likelihood of cyclonic activity will benefit insurers
-Addressable markets for smaller telcos increasing with NBN roll-out
-Increased Oz tourism positive for small leisure sector
 

By Eva Brocklehurst

MYEFO (Mid Year Economic and Fiscal Outlook)

Should a preview attempt to forecast numbers that Treasury is expected to publish in the document or should it contain those numbers that the broker ultimately expects a few years down the track? This is the question Deutsche Bank asks. The broker does both. On account of higher commodity prices, Treasury's nominal GDP growth forecast for 2016-17 is likely to be revised higher. The broker expects a forecast of 4.75% this year, up from 4.25% expected at the time of the May budget.

Yet, even a mild pullback in commodity prices combined with weakness in wages growth means that the GDP growth forecast for 2017-18 is likely to be well below the May budget forecast of 5%. Deutsche Bank forecasts nominal growth in that year at 3.25% and suspects Treasury will settle for 3.75%. The report is expected to show a weaker fiscal position compared with the May budget.

Specifically, the broker expects a forecast for a budget deficit of $36bn into 2016-17 and $26.3m in 2017-18. Deutsche Bank suspects Treasury may just manage to estimate that the budget will be in balance in 2020-21. Yet, further out, getting beyond a budget balance into even a very modest surplus is expected to be difficult.

Deutsche Bank forecasts a long-run, nominal growth rate of 4.75% instead of Treasury's 5% and this assumption suggests it is unlikely, on current policy settings, the budget will ever return to surplus.

Banks and Mortgages

Banks have announced another round of mortgage re-pricing, most of this being centred on the investor, line-of-credit categories. Deutsche Bank believes the motivation was to repair the profitability of mortgage books and to widen the gap between investor and owner-occupied pricing.

The broker estimates the full benefits for the majors to be 1-2 basis points to net interest margins and 0.7%-1.5% to net profit. The broker does not believe the impact on credit quality will be material, given the small scale of the re-pricing.

While the major banks focused their efforts on investor, interest-only and equity line-of-credit mortgages, the smaller banks such as Bendigo and Adelaide Bank ((BEN)) and ING Direct increased both investor and owner-occupier mortgage rates.

Bank of Queensland ((BOQ)) is yet to follow suit, but Deutsche Bank suggests market dynamics may be hurting smaller banks compared with the majors, which may reflect the relatively high spread in RMBS markets at present.

Morgan Stanley does not change forecasts based on the latest re-pricing, as it already assumes some further moves will be made in FY17. The broker believes an ongoing reduction in home loan and deposit competition is necessary to limit the downside risks to margins. The broker believes Bank of Queensland should also re-price its residential home loans to help alleviate downside risk on margins.

Commonwealth Bank ((CBA)), the remaining one of the big four yet to make a move, has recently increased fixed-rate home loan pricing. The broker also observes, separately, this bank has made it more difficult for its customers to switch an existing home loan to interest only.

General Insurers

The likelihood of La Nina conditions in the upcoming cyclone season is considered low and Morgan Stanley observes this reduces the chance of above-average storm damage and flooding. This bodes well for insurers, with catastrophe losses around 60% lower in neutral versus La Nina years.

The outlook from the Bureau of Meteorology has been downgraded to Inactive from Watch, although some weak La Nina patterns continue. Morgan Stanley notes, Insurance Australia Group ((IAG)) has greater leveraged to a more benign cyclone season versus Suncorp ((SUN)).

Telecommunications

As the NBN roll-out accelerates in FY17, infrastructure-owning telcos are facing increasing headwinds to their margins because of higher access costs. Yet, Goldman Sachs observes the roll-out is also benefitting overall subscriber growth and increasing the addressable markets of the smaller telcos.

The broker believes there are several market opportunities for TPG Telecom ((TPM)) and Vocus Communications ((VOC)).

The roll-out in up to 1.8m households categorised as "undeserved” is just 20% complete and the broker envisages a strong tailwind for market growth the next 3-4 years. As the two companies charge materially higher prices in regional Australia because of the lack of infrastructure, the roll-out of the NBN is considered to be a significant opportunity.

The broker estimates 2.3m regional ADSL subscribers will migrate to the NBN over the next five years. Thirdly, as the hybrid fibre coaxial (HFC) network is transferred to the NBN, the competitive advantage for both Optus and Telstra ((TLS)) across these 1m subscribers will be removed.

Hence, while acknowledging significant margin headwinds, the broker believes TPG Telecom can continue to grow its consumer earnings through subscriber growth and FTTB (Fibre To The Basement) network. The broker retains a Buy rating on the stock.

Goldman Sachs remains constructive on Vocus Communications' consumer earnings, given it does not face NBN margin headwinds and should benefit from an increased addressable market including regional Australia. The broker has a Neutral rating on the stock.

Tourism

Citi notes outbound travel continues to slow while arrivals are strong. Australian resident short-term departures grew 3.4% in October, representing the third consecutive month of slowing growth. Meanwhile, arrivals increased 11.1%, representing the 11th consecutive month of double-digit growth.

The broker notes a lower Australian dollar will lead to outbound travel becoming more expensive, which should translate to more Australians taking domestic holidays and Australia becoming more attractive to foreign tourists.

The broker envisages increased Australian tourism will be positive for the small leisure sector such as Ardent Leisure ((AAD)) and Village Roadshow ((VRL)). Mantra Group ((MTR)) should benefit through its hotel operations.

Small Caps

Citi believes Sino Gas & Energy ((SEH)) offers material upside potential. The key steps to de-risking the stock include commencement of the payments from Sanjiaobei and a re-start of the project, both imminent. As well, reserve upgrades are expected in the first quarter 2017 and approval of the overall development plan in the second half or into 2018.

The broker initiated coverage on seven small cap stocks in the December quarter, including two Buys, these being MYOB ((MYO)) and Sino Gas. There are three Sell initiations including a2 Milk ((A2M)), Bellamy's Australia ((BAL)) and Smartgroup ((SIQ)) and two Neutral including News Corp ((NWS)) and Trade Me ((TME)).

The broker has upgraded OceanaGold ((OGC)) to Buy from Neutral and four - Charter Hall Retail ((CQR)), Premier Investments ((PMV)), Regis Resources ((RRL)) and Shopping Centres Australasia ((SCP)) - to Neutral from Sell. Ardent Leisure, Beach Energy ((BPT)), GUD Holdings ((GUD)) and Resolute Mining ((RSG)) are downgraded to Neutral from Buy and Sigma Pharmaceuticals ((SIP)) to Sell from Neutral.
 

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Guide:

The Short Report draws upon data provided by the Australian Securities & Investment Commission (ASIC) to highlight significant weekly moves in short positions registered on stocks listed on the Australian Securities Exchange (ASX). Short positions in exchange-traded funds (ETF) and non-ordinary shares are not included. Short positions below 5% are not included in the table below but may be noted in the accompanying text if deemed significant.

Please take note of the Important Information provided at the end of this report. Percentage amounts in this report refer to percentage of ordinary shares on issue.

Stock codes highlighted in green have seen their short positions reduce in the week by an amount sufficient to move them into a lower percentage bracket. Stocks highlighted in red have seen their short positions increase in the week by an amount sufficient to move them into a higher percentage bracket. Moves in excess of one percentage point or more are discussed in the Movers & Shakers report below.

Summary:

Week ending December 8, 2016

Last week saw the ASX200 drop to 5400 before bouncing back up to 5500.

One of the features of last week’s trade was the jump in the oil price, as both OPEC and then a group of non-OPEC producers announced oil production cut plans. Energy sector services provider WorleyParsons has been incumbent in the 10% plus shorted club for about as long as this Report has been published. Someone has capitulated – Worley shorts fell 2 percentage points last week to 9.8% from 11.8%.

Two stocks that have been in the news this week have been Bellamy’s Australia and Syrah Resources ((SYR)). The former has gone into suspension and there are rumours of a takeover bid for the latter from South32 ((S32)).

Ahead of both pieces of news, Bellamy’s shorts dropped to 9.0% from 11.4% last week and Syrah shorts ticked up slightly to put the stock back in the 10% plus shorted club. Both those moves now appear unfortunate from the shorters’ perspective.

It’s been a rough year for foreign exchange services company Ozforex. The past month has seen a bit of a share price recovery but the shorters are moving in. Last week saw Ozforex shorts increase to 7.8% from 6.7%.

It’s also been a difficult year for SaaS company iSentia ((ISD)). Despite a relatively stable stock price last week, iSentia has reappeared in the table below at 6.1% shorted from under 5%.

Heading the other way last week, out of the 5% plus table, was Boral ((BLD)). Boral briefly found itself 6% shorted the week before as hedge funds played the rights issue arbitrage game.

Weekly short positions as a percentage of market cap:

10%+

MYR   16.7
ACX   14.3
WSA   13.5
NEC    11.6
TFC     11.1
SYR    10.4
MTS    11.5
MND   10.1

In: SYR           Out: WOR, BAL

9.0-9.9%

WOR, VOC, ORE, BAL, JHC, HSO
 
In: WOR, BAL, JHC, HSO               Out: SYR       

8.0-8.9%

AWC, NWS, MTR, IGO, GEM, FLT, DOW

In: IGO, FLT, DOW              Out: HSO, JHC, GEM                                  

7.0-7.9%

OFX, EHE, NXT, MYO, BEN, IVC, GEM, GTY, CVO

In: GEM, OFX           Out: FLT, IGO, DOW

6.0-6.9%

SGH, SEK, IFL, BKL, ILU, MSB, RWC, PRY, RIO, ISD, OSH, MLX

In: ISD, MLX             Out: OFX, AWE, BLD

5.0-5.9%

BGA, AWE, WOW, ORI, CAB, SUL, CSV, GXL, CSR, DMP, SPO

In: AWE, GXL                       Out: MLX, GOR, PDN

Movers and Shakers

How strange it is to no longer see energy sector services provider WorleyParsons ((WOR)) in the 10% plus shorted club. Since the oil price started heading south from above US$100/bbl, Worley has been a permanent member.

But not anymore. As the oil price has recovered over the course of 2016, Worley’s share price has recovered to $10 from a low of $3. Last week saw Worley shorts drop to 9.8% from 11.8%, suggesting one or more shorters may have bitten the bullet. They probably don’t have much to be upset about – back in 2012 Worley was trading at $30.

I noted last week that Bellamy’s Australia ((BAL)) shorts had dropped a little prior to the company issuing a profit warning that saw its stock fall 40%. Last week saw some shorters taking profits, sending Bellamy’s to 9.0% from 11.4%. Those profit-takers will likely be ruing their impetuousness. Now in suspension due to be unable to satisfy ASX disclosure requirements, Bellamy’s is not likely to rally when it comes back on.

Ozforex ((OFX)) shares started the year at $2.20 and hit a low of $1.30 last month on a weak first half earnings report. Brokers were nonetheless not concerned with the report, believing that while the company still had issues to work through, there was longer term upside to be had at such a valuation. Macquarie upgraded to Outperform.

Ozforex is now back up at $1.80 but short positions have been quietly building over past weeks. They rose to 7.8% last week from 6.7%.

 

ASX20 Short Positions (%)

 

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

IMPORTANT INFORMATION ABOUT THIS REPORT

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

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

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

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

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

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

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

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

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International research suggests shares in companies that buy in their own equities are more likely to respond positively through share price appreciation. Investors should note, however, buying back own stock is not a guarantee for significant share price gains ahead.

For local research about investor benefits from capital management, including companies buying in their own shares, FNArena subscribers can read "Buy Capital Management"

Below is an incomplete overview of companies buying in their own shares this year. We very much appreciate all feedback, contributions and suggestions at info@fnarena.com

See attached excel file for more details (paying subscribers only)

8IH	8I Holdings	21/09/2016
ACQ	Acorn Capital Inv Fund	10/10/2016
AFA	ASF Group	26/04/2016
AGL	AGL Energy	13/10/2016
AHY	Asaleo Care	01/10/2015
AIB	Aurora Global Income	14/12/2015
AIV	ActivEX Ltd	01/11/2016
ALR	Aberdeen Leaders Ltd	27/02/2015
APW	AIMS Property Securities Fund	07/09/2016
AQF	Australian Governance Masters	29/11/2016
ARA	Ariadne Australia	21/08/2014
ARG	Argo Investments	01/01/2016
AUF	Asian Masters Fund	23/11/2016
AUI	Australian United Investments	14/05/2015
AUP	Aurora Property Buy-Write Trust	14/12/2015
BWF	Blackwall Property Fund	15/03/2016
BWR	Blackwall Property Trust	07/07/715
CAM	Clime Capital.	21/12/2015
CAMPA	Clime Capital Preference	15/08/2016
CGO	CPT Global	27/08/2015
CHN	Chalice Gold Mines	30/06/2016
CIM	Cimic Group	29/12/2015
CIM	Cimic Group	29/12/2016
CIN	Carlton Investments	29/11/2015
CIW	Clime Investment Management	16/12/2015
CIW	Clime Investment Management	28/12/2016
CLT	Cellnet Group	09/09/2015
CMC	China Magnesium Corp	28/10/2014
CMI	CMI Ltd	25/11/2016
CNI	Centuria Capital	24/12/2015
CSL	CSL Ltd	27/10/2016
CSR	CSR Ltd	21/03/2016
CSV	CSG Ltd	12/03/2016
CVC	CVC Ltd	07/12/2015
CVW	ClearView Wealth	19/12/2013
CYG	Coventry Group	23/11/2015
DUI	Diversified United Investments	01/06/2016
EAI	Ellerston Asia Investments	27/09/2016
EMF	Emerging Markets Masters Fund	21/12/2015
EMF	Emerging Markets Masters Fund	21/12/2016
EZL	Euroz Ltd	14/01/2016
FID	Fiducian Group	03/03/2015
FRI	Finbar Group	08/12/2014
GOW	Gowing Bros	20/06/2012
GPT	General Property Group	06/05/2016
HHY	HHY Fund	24/08/2016
HML	Henry Morgan Ltd	27/12/2016
HOT	HotCopper Holdings	02/11/2016
IAG	Insurance Australia Group	21/11/2016
ICN	Icon Energy	26/02/2015
IFT	Infratil	24/08/2016
IPE	IPE Ltd	12/11/2016
ISU	iSelect	30/03/2016
ITD	ITL Ltd	28/11/2016
JBH	JB Hi-Fi	12/09/2016
KAT	Katana Capital	30/12/2014
KBC	Keybridge Capital	07/12/2015
KKT	Konekt	15/11/2016
LGD	Legend Corp	24/12/2015
LLC	Lend Lease Corp	28/08/2015
MEL	Metgasco	04/02/2016
MFF	Magellan Flagship Fund	13/08/2015
MGP	Managed Accounts Holdings	14/08/2015
MHM	MHM Metals	17/02/16
NVT	Navitas	16/02/2016
OCL	Objective Corp	26/02/2016
OPG	OPUS Group	09/12/2016
ORL	Oroton Group	26/04/2016
OZG	Ozgrowth Ltd	30/12/2015
OZL	OZ Minerals	14/03/2016
PME	Pro Medicus	01/04/2016
PTM	Platinum Asset Management	04/10/2016
QAN	Qantas	08/09/2016
REY	Rey Resources	24/05/2016
RND	Rand Mining	12/12/2015
SDG	Sunland Group	27/12/2016
SIP	Sigma Pharmaceuticals	13/10/2014
SMX	SMS Management & Tech	15/06/2015
SVW	Seven Group Holdings	12/03/2016
SVW	Seven Group Holdings	17/08/2016
SWK	Swick Mining Services	14/12/2015
TBR	Tribune Resources	28/09/2015
TGG	Templeton Global Growth Fund	26/02/2016
TLS	Telstra	Announced 11/8/16
TOF	360 Capital Office Fund	02/05/2016
TOT	360 Capital Total Return	28/03/2016
VSC	Vita Life Sciences	13/05/2016
WAT	Waterco	07/04/2016
WIC	Westoz Investment Co	30/12/2015
XPD	XPD Soccer Gear Group	20/09/2016

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By Rudi Filapek-Vandyck, Editor FNArena

Guide:

The FNArena database tabulates the views of eight major Australian and international stock brokers: Citi, Credit Suisse, Deutsche Bank, Macquarie, Morgan Stanley, Morgans, Ord Minnett and UBS.

For the purpose of broker rating correlation, Outperform and Overweight ratings are grouped as Buy, Neutral is grouped with Hold and Underperform and Underweight are grouped as Sell to provide a Buy/Hold/Sell (B/H/S) ratio.

Ratings, consensus target price and forecast earnings tables are published at the bottom of this report.

Summary

Period: Monday December 5 to Friday December 9, 2016
Total Upgrades: 29
Total Downgrades: 13
Net Ratings Breakdown: Buy 43.73%; Hold 42.14%; Sell 14.13%

This doesn't happen often. The share market continues to ignore technical overbought signals, by going up, up, and further up, and stockbroking analysts are issuing ever more upgrades for recommendations on individual stocks.

The world upside down? Probably more a sign that not every stock and sector is fully participating in this year's end-of-year buoyancy.

For the week ending December 9, 2017, FNArena registered 29 upgrades versus 13 downgrades.

The composition of the group receiving upgrades shows the underlying theme is not black and white, with the inclusion of mining companies Alumina Ltd, BHP Billiton, Rio Tinto (2x) and a whole bunch of gold miners. One clear theme is former market darling industrials whose share price has not followed the broader market trend recently; Bapcor, Carsales, CSL, REA Group, etc - they're all included.

On the downgrade side of the ledger, the focus is more with corporate disappointments. Think Bellamy's, and Origin Energy (4x downgrades), OrotonGroup and Platinum Asset Management, alongside a few mining companies.

In terms of total Buy and Hold ratings for all eight stockbrokers monitored daily by FNArena, the Buys are holding a clear lead commanding 43.73% of all recommendations versus 42.14% for the Neutral/Holds. Traditionally this signals a tough time for the share market, which could be a warning signal about red hot running blind sentiment, but it is likely a mirror for how narrow the group of real winners is in this rally.

With commodities analysts updating their estimates and outlooks for the year ahead, it should be no surprise the table for positive revisions to price targets has become a near exclusive domain for resources stocks. REA Group is the sole exception on spot ten this week. Fortescue Metals (+16.30%) leads the pack, followed by Rio Tinto, Whitehaven Coal and more brethren from the resources segment.

Bellamy's "shines" on the negative side with a fall of -57% in consensus price target, followed by Bapcor (-6.77%), St Barbara (-3.16%) and Platinum Asset Management (-2.35%).

The table for positive revisions offers the same ingredients as the one for price targets: miners, more miners, and one agri-stock (Graincorp). On the flipside, Bellamy's (-46%) was beaten by gold miner Perseus (-118%) for the wooden spoon. Other companies suffering notable reductions to estimates include Virgin Australia, Virtus Health and Insurance Australia Group, amidst a handful of gold miners.

Upgrade

ALUMINA LIMITED ((AWC)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 1/3/3

Ord Minnett has increased its forecasts for coal, iron ore and copper, while downgrading near-term gold price forecasts. The broker also raises forecasts for alumina. Spot alumina continues to look strong at US$325/t and presents upside potential to the broker's earnings estimates.

The broker upgrades AWC to Accumulate from Hold and raises the target to $1.80 from $1.60. The upgrade is driven by a higher valuation and strong forecasts for free cash flow.

BAPCOR LIMITED ((BAP)) Upgrade to Buy from Neutral by UBS and Upgrade to Add from Hold by Morgans .B/H/S: 3/1/0

The company has lifted its offer for Hellaby Holdings, to NZ $3.60, which is at the lower end of the independent expert's valuation range.

The board has stated it will not recommend the offer unless a dividend is paid, making use of its imputation credits.

Regardless of whether the board endorses the offer, UBS believes it highly likely that Bapcor will attain at least a majority ownership. Given this likelihood the broker incorporates the business into forecasts.

UBS notes the company is long on growth options and pricing is attractive and upgrades to Buy from Neutral. Target is raised to $6.85 from $6.30.

The company has increased its takeover bid for Hellaby to NZ$3.60 and received irrevocable shareholder acceptances representing 40% of issued capital.

Morgans now factors in the acquisition, but notes there is some risk to Bapcor gaining full control.The broker acknowledges the company has been particularly accretive in recent years, which brings higher integration risk.

Nonetheless, the broker believes the deal stacks up from an accretion perspective. Morgans upgrades to Add from Hold and reduces the target to $5.75 from $6.36.

BEADELL RESOURCES LIMITED ((BDR)) Upgrade to Buy from Neutral by Citi .B/H/S: 2/0/1

Citi commodities analysts have changed their view on commodities, now expecting 2016's momentum is likely to remain the dominant theme for 2017 and 2018. The analysts remain bearish on bulk commodities whose rallies are labeled "a fluke" on the back of China changing its policies.

Price estimates have all gone up. For gold producers in particular, the combination of flat prices in AUD and a pull back in share prices has inspired to upgrades. Rating moved to Buy/High Risk from Neutral.

BHP BILLITON LIMITED ((BHP)) Upgrade to Neutral from Sell by Citi .B/H/S: 2/6/0

Citi commodities analysts have changed their view on commodities, now expecting 2016's momentum is likely to remain the dominant theme for 2017 and 2018. The analysts remain bearish on bulk commodities whose rallies are labeled "a fluke" on the back of China changing its policies.

Price estimates have all gone up. BHP has been upgraded to Neutral from Sell.

See also BHP downgrade.

CARSALES.COM LIMITED ((CAR)) Upgrade to Neutral from Sell by UBS .B/H/S: 6/2/0

UBS upgrades to Neutral from Sell without accompanying commentary. Target is $10.50.

DUET GROUP ((DUE)) Upgrade to Hold from Reduce by Morgans and Upgrade to Neutral from Underperform by Credit Suisse .B/H/S: 2/5/0

The company has confirmed that it is considering a takeover bid from Cheung Kong Infrastructure. Given the corporate activity, Morgans lifts its rating to Hold from Reduce.

The broker does not factor corporate activity into the target, including the takeover premium that the company may be willing to pay to gain control of the stock.The broker sets the target at the indicative bid price of $3.00.

Cheung Kong may be attracted to the yield but also could merge its Victorian distribution networks with DUET networks, the broker observes. Morgans expects cash flow supporting the distribution to materially fall away early next decade.

The company has confirmed a non-binding offer of $3.00 from Cheung Kong infrastructure. Credit Suisse observes the bid price is in line with the upper end of recent transactions in NSW for Transgrid and Ausgrid.

The high initial offer reduces the likelihood of a counter bid. The broker acknowledges some uncertainty regarding approval by the Foreign Investment Review Board.

Credit Suisse upgrades to Neutral from Underperform and raises the target to $2.80 from $2.30.

EVOLUTION MINING LIMITED ((EVN)) Upgrade to Buy from Neutral by Citi .B/H/S: 7/0/0

Citi commodities analysts have changed their view on commodities, now expecting 2016's momentum is likely to remain the dominant theme for 2017 and 2018. The analysts remain bearish on bulk commodities whose rallies are labeled "a fluke" on the back of China changing its policies.

Price estimates have all gone up. For gold producers in particular, the combination of flat prices in AUD and a pull back in share prices has inspired to upgrades. Rating moved to Buy/High Risk from Neutral.

FORTESCUE METALS GROUP LTD ((FMG)) Upgrade to Neutral from Sell by Citi .B/H/S: 2/4/1

Citi commodities analysts have changed their view on commodities, now expecting 2016's momentum is likely to remain the dominant theme for 2017 and 2018. The analysts remain bearish on bulk commodities whose rallies are labeled "a fluke" on the back of China changing its policies.

Price estimates have all gone up. Fortescue has been upgraded to Neutral from Sell.

GRAINCORP LIMITED ((GNC)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 3/3/0

A strong crop season and the latest receivables data suggest that the company is catching up after a delayed start to harvest and Macquarie lifts its forecast for FY17 receivables to 11.2mt and also raises export expectations to 5mt.

The broker also removes the overhang from ADM's sell down of its stake and transfers coverage to another analyst. FY17 and FY18 earnings per share estimates are raised by 14% and 4% respectively.

Rating is upgraded to Outperform from Neutral. The target is raised to $9.75 from $9.00..

INDEPENDENCE GROUP NL ((IGO)) Upgrade to Neutral from Sell by Citi .B/H/S: 1/4/1

Citi commodities analysts have changed their view on commodities, now expecting 2016's momentum is likely to remain the dominant theme for 2017 and 2018. The analysts remain bearish on bulk commodities whose rallies are labeled "a fluke" on the back of China changing its policies.

Price estimates have all gone up. For gold producers in particular, the combination of flat prices in AUD and a pull back in share prices has inspired to upgrades. Rating moved to Neutral from Sell.

JB HI-FI LIMITED ((JBH)) Upgrade to Neutral from Sell by Citi .B/H/S: 3/4/0

Citi analysts ask the question: Is JB Hi-Fi's sales growth sustainable? The combination of anticipated slowing in sales growth and the incorporation of The Good Guys only results in minor increases to estimates.

Luckily the shares are trading at a discount vis-a-vis the broader market ex-resources, and below the price target (unchanged at $27.20), so Citi analysts still upgrade to Neutral from Sell.

Bottom line: JB Hi-Fi is expected to outperform a market (consumer electronics) that is facing headwinds, in the analysts' view.

JAPARA HEALTHCARE LIMITED ((JHC)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 2/1/1

After reviewing the aged care sector Macquarie upgrades Japara to Outperform from Neutral. Target is $2.50.

The broker believes the company is well placed for the uncertainty inherent in all the regulatory environment, with more conservative gearing levels and more generous staff costs per place.

The broker expects the tight funding environment will restrict earnings growth from places, which increases the importance of portfolio growth.

See also JHC downgrade.

NEW HOPE CORPORATION LIMITED ((NHC)) Upgrade to Neutral from Underperform by Credit Suisse .B/H/S: 1/2/0

Credit Suisse updates its commodity price forecasts for 2017, upgrading iron ore, thermal coal and copper prices by 22%, 25% and 23% respectively.

While China has pushed up the price of thermal coal recently, a policy reversal is expected to lift local supply and cool prices into 2017.

Given recent developments with the new Queensland water legislation, the broker again defers the inclusion of the expansion of New  Acland mine and assumes a 12-month hiatus between depletion of stage 2 and the commencement of stage 3.

Rating is upgraded to Neutral  from Underperform. Target is steady at $1.75.

NORTHERN STAR RESOURCES LTD ((NST)) Upgrade to Outperform from Underperform by Credit Suisse .B/H/S: 3/2/0

Credit Suisse observes the company's exceptional returns have been extracted from low-cost operating practice, an elevated Australian dollar gold price, and disciplined acquisitions.

The broker upgrades to Outperform from Underperform, a valuation-based call given recent share price declines. Target is reduced to $4.10 from $4.20.

REA GROUP LIMITED ((REA)) Upgrade to Buy from Neutral by UBS .B/H/S: 6/1/0

UBS suspects investors may not fully appreciate the potential for Australian residential revenue to re-accelerate in FY18, even without a rebound in volumes.

If the companies in Australia's media sector could replicate their domestic models overseas, the broker believes the upside would be material. However, market structures are also less favourable and competition is fiercer.

The broker upgrades to Buy from Neutral and raises the target to $56 from $52..

RIO TINTO LIMITED ((RIO)) Upgrade to Outperform from Neutral by Credit Suisse and Upgrade to Neutral from Sell by Citi .B/H/S: 6/2/0

Credit Suisse updates its commodity price forecasts for 2017, upgrading iron ore, thermal coal and copper prices by 22%, 25% and 23% respectively.

Rio Tinto has recently revised the capital expenditure guidance and committed to a further US$5bn of free cash flow in productivity improvements over five years. The company has promised a minimum 2016 dividend of US$1.10 and the broker assumes US$1.50.

Credit Suisse upgrades to Outperform from Neutral and raises its target to $70 from $50.

Citi commodities analysts have changed their view on commodities, now expecting 2016's momentum is likely to remain the dominant theme for 2017 and 2018. The analysts remain bearish on bulk commodities whose rallies are labeled "a fluke" on the back of China changing its policies.

Price estimates have all gone up. Rio Tinto has been upgraded to Neutral from Sell.

REGIS RESOURCES LIMITED ((RRL)) Upgrade to Neutral from Underperform by Credit Suisse and Upgrade to Buy from Sell by UBS and Upgrade to Buy from Neutral by Citi .B/H/S: 4/3/1

Credit Suisse observes management understands well its prospective ground at Duketon, and the operation has become a robust, cash generating project.

Reliable commercial outcomes that are readily developed and quickly converted to cash flow are being delivered, the broker notes.

The broker upgrades to Neutral from Underperform on the back of share price declines. Target is reduced to $2.80 from $2.95.

UBS trims 2017 gold price forecasts to US$1350//oz and remains bullish on gold. The broker notes it was a volatile year for the company and remains drawn to the stock, although a premium valuation versus peers was always difficult to appreciate.

Nevertheless, with the share price pulling back and organic growth options turning into production growth, as well as a strong balance sheet, the broker expects investor interest  to remain high.  Rating is upgraded to Buy from Sell. Target is reduced to $3.08 from $3.10.

Citi commodities analysts have changed their view on commodities, now expecting 2016's momentum is likely to remain the dominant theme for 2017 and 2018. The analysts remain bearish on bulk commodities whose rallies are labeled "a fluke" on the back of China changing its policies.

Price estimates have all gone up. For gold producers in particular, the combination of flat prices in AUD and a pull back in share prices has inspired to upgrades. Rating moved to Buy from Neutral.

RESOLUTE MINING LIMITED ((RSG)) Upgrade to Buy from Neutral by Citi .B/H/S: 1/1/0

Citi commodities analysts have changed their view on commodities, now expecting 2016's momentum is likely to remain the dominant theme for 2017 and 2018. The analysts remain bearish on bulk commodities whose rallies are labeled "a fluke" on the back of China changing its policies.

Price estimates have all gone up. For gold producers in particular, the combination of flat prices in AUD and a pull back in share prices has inspired to upgrades. Rating moved to Buy/High Risk from Neutral.

SOUTH32 LIMITED ((S32)) Upgrade to Buy from Sell by Citi .B/H/S: 3/4/0

Citi commodities analysts have changed their view on commodities, now expecting 2016's momentum is likely to remain the dominant theme for 2017 and 2018. The analysts remain bearish on bulk commodities whose rallies are labeled "a fluke" on the back of China changing its policies.

Price estimates have all gone up. South32 has received a double-whammy upgrade to Buy from Sell.

SARACEN MINERAL HOLDINGS LIMITED ((SAR)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 1/0/0

Drilling at Thunderbox and Carosue Dam continue to return positive results, Macquarie notes. Confirmation of thick mineralisation at Thunderbox is particularly encouraging as it supports the broker's assumption of an underground operation down the track.

This confirmation, and Saracen's recent share price fall, leads Macquarie to upgrade to Outperform. Target unchanged at $1.30.

ST BARBARA LIMITED ((SBM)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 3/0/0

Credit Suisse considers the company's operational and financial turnaround has been stunning. Free cash generation from the maturing Gwalia asset has been maximised and the life of the operation has been extended.

The challenge is now to replace the short life Simberi asset with a value-adding acquisition. Credit Suisse removes the Simberi sulphide contribution from forecasts, with the recent strategic review indicating there are no plans to develop the project and no willing buyers in the current climate.

Rating is upgraded to Outperform from Neutral on the share price decline. Target is reduced to $2.60 from $2.90.

SANDFIRE RESOURCES NL ((SFR)) Upgrade to Buy from Neutral by Citi .B/H/S: 5/2/1

Citi commodities analysts have changed their view on commodities, now expecting 2016's momentum is likely to remain the dominant theme for 2017 and 2018. The analysts remain bearish on bulk commodities whose rallies are labeled "a fluke" on the back of China changing its policies.

Price estimates have all gone up. For gold producers in particular, the combination of flat prices in AUD and a pull back in share prices has inspired to upgrades. Rating moved to Buy/High Risk from Neutral.

WHITEHAVEN COAL LIMITED ((WHC)) Upgrade to Buy from Sell by Citi and Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 4/3/1

Citi commodities analysts have changed their view on commodities, now expecting 2016's momentum is likely to remain the dominant theme for 2017 and 2018. The analysts remain bearish on bulk commodities whose rallies are labeled "a fluke" on the back of China changing its policies.

Price estimates have all gone up. Whitehaven Coal has received a double-whammy upgrade to Buy from Sell.

Ord Minnett has increased its forecasts for coal, iron ore and copper, while downgrading near-term gold price forecasts. The broker upgrades Whitehaven Coal to Accumulate from Hold and the target to $3.30 from $3.00.

The upgrade is driven by a higher valuation and a strong free cash flow forecast.  Ord Minnett recognises it is late in its call but estimates the stock will be net cash within a year.

Downgrade

BELLAMY'S AUSTRALIA LIMITED ((BAL)) Downgrade to Hold from Add by Morgans and Downgrade to Hold from Buy by Ord Minnett .B/H/S: 0/2/1

The company's trading update and FY17 guidance were well below estimates. Morgans downgrades FY17 and FY18 net profit forecasts by 45% and 55% respectively.

The company's second quarter has not been as strong as expected. The company is also being affected by regulatory changes in China which is causing brands which won't meet the December 31 2017 CFDA approval deadline to heavily discount their excess stock.

Morgans downgrades to Hold from Add and reduces the target to $7.55 from $16.65.

Revenue for the year to November 20 2016 is up 24% which compares with Ord Minnett's FY17 estimate of up 59.3%. FY17 EBIT margins are now expected to be below 20%, depending on the sales channel mix.

With momentum materially slowing, market dislocation from regulatory changes, and the stock trading on FY17 price/earnings ratio of 20x post the downgrade, the broker lowers its recommendation to Hold from Buy. Target is reduced to $7.26 from $20.00.

BHP BILLITON LIMITED ((BHP)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 2/6/0

Credit Suisse updates its commodity price forecasts for 2017, upgrading iron ore, thermal coal and copper prices by 22%, 25% and 23% respectively.

Underlying EBITDA is revised up 33% and 35% in FY17 and FY18 respectively. The broker notes BHP has been widely criticised for under investing in its conventional oil business but has now sanctioned the Mad Dog 2 expansion and first oil is expected in 2023. The company is also the winning bidder for 60% of the block containing the Trion discovery in the Gulf of Mexico.

The stock has outperformed the Australian market by 37% in the past year and is now at around fair value, in the broker's opinion. Rating is downgraded to Neutral from Outperform. Target is raised to $26.50 from $24.00.

See also BHP upgrade.

DOWNER EDI LIMITED ((DOW)) Downgrade to Underperform from Neutral by Credit Suisse .B/H/S: 2/3/1

The company has been awarded the Sydney growth trains contract. The $1.7bn contract follows the contractual close on the Victorian government's $2bn high-capacity metro trains project.

Credit Suisse takes the opportunity to review its assumptions, noting  the company has positioned itself to diversify away from the challenged mining and engineering construction sectors. Over 55% of revenue is now generated from servicing public infrastructure customers in Australasia.

Despite raising the target to $5.30 from $4.70, the broker downgrades to Underperform from Neutral, as the business needs to prove its earnings now that it is trading almost on a market multiple where earnings estimates for FY19 will be roughly flat versus FY16.

JAPARA HEALTHCARE LIMITED ((JHC)) Downgrade to Hold from Add by Morgans .B/H/S: 2/1/1

Given the rally in the company's share price, Morgans downgrades to Hold from Add.

After a period of uncertainty, the broker notes the industry and the government have reached a broad agreement with some of the measures outlined in the FY16 budget regarding funding cuts being moderated.

The broker remains comfortable that current forecasts reflect the new arrangements. The target is unchanged at $2.47.

See also JHC upgrade.

ORIGIN ENERGY LIMITED ((ORG)) Downgrade to Hold from Add by Morgans and Downgrade to Hold from Accumulate by Ord Minnett and Downgrade to Underperform from Neutral by Credit Suisse and Downgrade to Neutral from Buy by Citi .B/H/S: 1/5/1

With the intention of fast tracking the de-gearing of its balance sheet, the company is preparing to spin off its conventional upstream oil & gas assets via an IPO.

Morgans values the combined assets at  $1.5-1.7bn,  Although recognises that the debt load, corporate costs and offtake contracts will have an impact.

After recent share price strength, the broker downgrades to Hold from Add. Target is steady at $6.40.

The company's intention to spin out its conventional petroleum business via an IPO partially addresses Ord Minnett's immediate concerns regarding the balance sheet.

While the sale proceeds could net as much as $3bn, the downside, the broker envisages, is that it removes the natural hedge for the gas retailing business. It also remains to be seen what contractual or other arrangements the company can make.

The recent run-up in the share price has led the broker to reduce its rating to Hold from Accumulate. Target is steady at $6.60.

The company has announced plans for an IPO of its conventional upstream assets. Credit Suisse believes this is strategically, and financially, the right thing to do. That said, the broker is baffled by a decision to sell to the equity market versus a trade sale.

The broker carries a value of $1.4bn for the assets noting that this is inclusive of the $350m in hedging cost. This does not include remediation or corporate costs, which are either not disclosed or unknown, and both will reduce the net present value.

Credit Suisse downgrades to Underperform from Neutral, reluctantly, but notes the valuation is hard to measure and an IPO is unlikely to be materially accretive to value. While the company will be a more investable business after this IPO, the broker believes the starting point share price is wrong. Target is steady at $5.40.

Citi has lifted its price target to $6.95 from $6.61 on the news Origin is looking to spin off its conventional oil assets through an IPO, while pulling back the rating to Neutral from Buy.

The analysts think the initiative is "OK", but not game changing. Debt will be reduced and the spin-off requires board approval without shareholders having their say, note the analysts.

Also, the analysts observe AGL Energy ((AGL)) is currently trading at a comparable premium, but this seems justified, in their opinion, because AGL has a stronger growth outlook and a stronger balance sheet, even after the planned divestment. Citi thinks a meaningful multiple re-rating for Origin may take several years.

OROTONGROUP LIMITED ((ORL)) Downgrade to Sell from Neutral by Citi .B/H/S: 0/0/1

Citi has downgraded to Sell from Neutral, while reducing forecasts and pulling back the price target to $2.05 from $2.40. Clearly, Oroton's trading update did not meet expectations.

Citi analysts observe the majority of weakness in sales was driven by the core handbag category and the exit of categories such as apparel, footwear and lingerie. Factory stores are under pressure from international competitors, they add.

PLATINUM ASSET MANAGEMENT LIMITED ((PTM)) Downgrade to Sell from Hold by Ord Minnett .B/H/S: 0/1/3

Ord Minnett has double-downgraded Platinum Asset Management to Sell from Hold. Apart from recent net funds outflows, the analysts are referring to increased competition for retail funds from the likes of Hyperion, Magellan ((MFG)) and ex-Platinum PM run, Antipodes.

As a result, Ord Minnett thinks the outlook remains challenging. The analysts have reduced estimates. The 10% buyback should provide some downward protection, the analysts acknowledge, but at what share price level exactly? Target drops to $4.69 from $5.09.

REGIS HEALTHCARE LIMITED ((REG)) Downgrade to Hold from Add by Morgans .B/H/S: 1/2/0

The government and the aged care industry have found some compromises to ensure that funding is better targeted to residents with the highest care needs. The company has re-confirmed FY17 EBITDA guidance of 15% growth.

Morgans makes no changes to forecasts but adjusts its target down to $5.02 from $5.13. Rating is downgraded to Hold from Add given the rally in the share price.

WESTERN AREAS NL ((WSA)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 2/1/3

Nickel prices have risen strongly on the back of supply restrictions. Nickel in stainless steel had also been stronger than expected. Credit Suisse maintains its price forecasts at US$5/lb in the first half of 2017 and at US$5.50/lb in the second half, increasing to US$6/lb in 2018.

The broker notes Western Areas has now completed a favourable offtake tender process, which will result in a greater return from nickel produced in concentrate versus the contracts that are due to expire in January 31, 2017.

As the shares have rallied 60% since the beginning of the year, the stock has become less attractive and the broker downgrades to Neutral from Outperform. Target rises to $3.25 from $3.00.

 

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

 

Broker Rating

Order Company New Rating Old Rating Broker Upgrade 1 ALUMINA LIMITED Buy Neutral Ord Minnett 2 BAPCOR LIMITED Buy Buy Morgans 3 BAPCOR LIMITED Buy Neutral UBS 4 BEADELL RESOURCES LIMITED Buy Neutral Citi 5 BHP BILLITON LIMITED Neutral Sell Citi 6 CARSALES.COM LIMITED Neutral Sell UBS 7 DUET GROUP Neutral Sell Morgans 8 DUET GROUP Neutral Sell Credit Suisse 9 EVOLUTION MINING LIMITED Buy Neutral Citi 10 FORTESCUE METALS GROUP LTD Neutral Sell Citi 11 GRAINCORP LIMITED Buy Neutral Macquarie 12 INDEPENDENCE GROUP NL Neutral Sell Citi 13 JAPARA HEALTHCARE LIMITED Buy Neutral Macquarie 14 JB HI-FI LIMITED Neutral Sell Citi 15 NEW HOPE CORPORATION LIMITED Neutral Sell Credit Suisse 16 NORTHERN STAR RESOURCES LTD Buy Sell Credit Suisse 17 REA GROUP LIMITED Buy Neutral UBS 18 REGIS RESOURCES LIMITED Buy Neutral Citi 19 REGIS RESOURCES LIMITED Buy Sell UBS 20 REGIS RESOURCES LIMITED Neutral Sell Credit Suisse 21 RESOLUTE MINING LIMITED Buy Neutral Citi 22 RIO TINTO LIMITED Neutral Sell Citi 23 RIO TINTO LIMITED Buy Neutral Credit Suisse 24 SANDFIRE RESOURCES NL Buy Neutral Citi 25 SARACEN MINERAL HOLDINGS LIMITED Buy Neutral Macquarie 26 SOUTH32 LIMITED Buy Sell Citi 27 ST BARBARA LIMITED Buy Neutral Credit Suisse 28 WHITEHAVEN COAL LIMITED Buy Sell Citi 29 WHITEHAVEN COAL LIMITED Buy Neutral Ord Minnett Downgrade 30 BELLAMY'S AUSTRALIA LIMITED Neutral Buy Morgans 31 BELLAMY'S AUSTRALIA LIMITED Neutral Buy Ord Minnett 32 BHP BILLITON LIMITED Neutral Buy Credit Suisse 33 DOWNER EDI LIMITED Sell Neutral Credit Suisse 34 JAPARA HEALTHCARE LIMITED Neutral Buy Morgans 35 ORIGIN ENERGY LIMITED Neutral Buy Morgans 36 ORIGIN ENERGY LIMITED Neutral Buy Citi 37 ORIGIN ENERGY LIMITED Sell Neutral Credit Suisse 38 ORIGIN ENERGY LIMITED Neutral Buy Ord Minnett 39 OROTONGROUP LIMITED Sell Neutral Citi 40 PLATINUM ASSET MANAGEMENT LIMITED Sell Neutral Ord Minnett 41 REGIS HEALTHCARE LIMITED Neutral Buy Morgans 42 WESTERN AREAS NL Neutral Buy Credit Suisse

Recommendation

Positive Change Covered by > 2 Brokers Order Symbol Company New Rating Previous Rating Change Recs 1 RRL REGIS RESOURCES LIMITED 31.0% -19.0% 50.0% 8 2 WHC WHITEHAVEN COAL LIMITED 31.0% -13.0% 44.0% 8 3 NST NORTHERN STAR RESOURCES LTD 60.0% 20.0% 40.0% 5 4 SBM ST BARBARA LIMITED 100.0% 67.0% 33.0% 3 5 S32 SOUTH32 LIMITED 43.0% 14.0% 29.0% 7 6 RIO RIO TINTO LIMITED 69.0% 44.0% 25.0% 8 7 BAP BAPCOR LIMITED 75.0% 50.0% 25.0% 4 8 REA REA GROUP LIMITED 86.0% 63.0% 23.0% 7 9 TGR TASSAL GROUP LIMITED 50.0% 33.0% 17.0% 4 10 GNC GRAINCORP LIMITED 50.0% 33.0% 17.0% 6

Negative Change Covered by > 2 Brokers Order Symbol Company New Rating Previous Rating Change Recs 1 BAL BELLAMY'S AUSTRALIA LIMITED -33.0% 33.0% -66.0% 3 2 REG REGIS HEALTHCARE LIMITED 33.0% 67.0% -34.0% 3 3 PTM PLATINUM ASSET MANAGEMENT LIMITED -75.0% -50.0% -25.0% 4 4 DOW DOWNER EDI LIMITED 17.0% 33.0% -16.0% 6 5 TCL TRANSURBAN GROUP 57.0% 71.0% -14.0% 7 6 WSA WESTERN AREAS NL -21.0% -7.0% -14.0% 7 7 AWC ALUMINA LIMITED -36.0% -29.0% -7.0% 7 8 FXJ FAIRFAX MEDIA LIMITED 33.0% 36.0% -3.0% 6

Target Price

Positive Change Covered by > 2 Brokers Order Symbol Company New Target Previous Target Change Recs 1 FMG FORTESCUE METALS GROUP LTD 5.857 5.036 16.30% 7 2 RIO RIO TINTO LIMITED 64.689 58.728 10.15% 8 3 WHC WHITEHAVEN COAL LIMITED 3.155 2.911 8.38% 8 4 AWC ALUMINA LIMITED 1.536 1.436 6.96% 7 5 DOW DOWNER EDI LIMITED 5.422 5.088 6.56% 6 6 SFR SANDFIRE RESOURCES NL 6.176 5.820 6.12% 8 7 S32 SOUTH32 LIMITED 2.848 2.691 5.83% 7 8 GNC GRAINCORP LIMITED 9.605 9.123 5.28% 6 9 WSA WESTERN AREAS NL 2.643 2.551 3.61% 7 10 REA REA GROUP LIMITED 58.870 57.536 2.32% 7

Negative Change Covered by > 2 Brokers Order Symbol Company New Target Previous Target Change Recs 1 BAL BELLAMY'S AUSTRALIA LIMITED 6.937 16.250 -57.31% 3 2 BAP BAPCOR LIMITED 6.060 6.500 -6.77% 4 3 SBM ST BARBARA LIMITED 3.067 3.167 -3.16% 3 4 PTM PLATINUM ASSET MANAGEMENT LIMITED 4.773 4.888 -2.35% 4 5 EVN EVOLUTION MINING LIMITED 2.571 2.603 -1.23% 7 6 TCL TRANSURBAN GROUP 11.689 11.794 -0.89% 7 7 REG REGIS HEALTHCARE LIMITED 4.657 4.693 -0.77% 3 8 RRL REGIS RESOURCES LIMITED 3.193 3.215 -0.68% 8 9 TGR TASSAL GROUP LIMITED 4.405 4.423 -0.41% 4

Earning Forecast

Positive Change Covered by > 2 Brokers Order Symbol Company New EF Previous EF Change Recs 1 WSA WESTERN AREAS NL 0.987 -0.856 215.30% 7 2 MGX MOUNT GIBSON IRON LIMITED 1.133 0.800 41.63% 3 3 S32 SOUTH32 LIMITED 24.518 17.726 38.32% 7 4 SFR SANDFIRE RESOURCES NL 39.438 32.535 21.22% 8 5 BHP BHP BILLITON LIMITED 138.458 114.516 20.91% 8 6 FMG FORTESCUE METALS GROUP LTD 61.027 51.551 18.38% 7 7 WHC WHITEHAVEN COAL LIMITED 33.683 28.876 16.65% 8 8 GNC GRAINCORP LIMITED 54.985 48.567 13.21% 6 9 AWC ALUMINA LIMITED 4.954 4.394 12.74% 7 10 OZL OZ MINERALS LIMITED 38.438 36.645 4.89% 8

Negative Change Covered by > 2 Brokers Order Symbol Company New EF Previous EF Change Recs 1 PRU PERSEUS MINING LIMITED -1.550 -0.710 -118.31% 5 2 BAL BELLAMY'S AUSTRALIA LIMITED 32.367 60.967 -46.91% 3 3 VAH VIRGIN AUSTRALIA HOLDINGS LIMITED 0.551 0.714 -22.83% 7 4 AQG ALACER GOLD CORP 10.903 12.643 -13.76% 5 5 NCM NEWCREST MINING LIMITED 86.324 91.658 -5.82% 8 6 SBM ST BARBARA LIMITED 30.480 32.247 -5.48% 3 7 VRT VIRTUS HEALTH LIMITED 42.150 44.450 -5.17% 4 8 RRL REGIS RESOURCES LIMITED 26.696 27.618 -3.34% 8 9 IAG INSURANCE AUSTRALIA GROUP LIMITED 33.175 34.300 -3.28% 8 10 NST NORTHERN STAR RESOURCES LTD 38.504 39.758 -3.15% 5

Our top ten news from 01 December 2016 to 08 December 2016 (ranked according to popularity).