article 3 months old

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

FYI | Sep 17 2012

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            [0] => ((AGO))
            [1] => ((RRL))
            [2] => ((BRG))
            [3] => ((DXS))
            [4] => ((SIP))
            [5] => ((LEI))
            [6] => ((MYR))
            [7] => ((ANN))
            [8] => ((BXB))
            [9] => ((AQP))
            [10] => ((ENV))
            [11] => ((TRS))
            [12] => ((IAG))
            [13] => ((SXL))
            [14] => ((TOL))
            [15] => ((OTH))
            [16] => ((WPL))
            [17] => ((WEB))
            [18] => ((NWH))
            [19] => ((PAN))
            [20] => ((LYC))
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            [2] => BRG
            [3] => DXS
            [4] => SIP
            [5] => LEI
            [6] => MYR
            [7] => ANN
            [8] => BXB
            [9] => AQP
            [10] => ENV
            [11] => TRS
            [12] => IAG
            [13] => SXL
            [14] => TOL
            [15] => OTH
            [16] => WPL
            [17] => WEB
            [18] => NWH
            [19] => PAN
            [20] => LYC
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)

By Chris Shaw

The past week has been fairly evenly balanced in terms of ratings changes by the eight brokers in the FNArena database, with seven ratings upgraded and ten downgraded during the period. Total Buy ratings now stand at 44.64%.

Among the upgrades were two resource plays, Atlas Iron ((AGO)) and Regis Resources ((RRL)). Atlas was upgraded by UBS to Neutral from Sell, as despite the weaker iron ore price the broker suggests Atlas has enough liquidity to meet its capex, dividend and tax requirements in FY13. Recent share price weakness has improved the value on offer enough for UBS to upgrade.

For Regis Resources, full year earnings showed a strengthening of the group's balance sheet, while Deutsche continues to see value as production increases from the combination of the Moolart Well and Garden Well projects and dividends from the company come closer to reality. Deutsche has lifted its rating to Buy from Hold, while also lifting its price target on the stock.

Among the industrials, UBS upgraded Breville Group ((BRG)) to Buy from Neutral given the expectation the company can continue to grow its share of the US market. Breville's profit result prompted changes to earnings forecasts and the result was an increase in UBS's price target for the stock.

While forecasting lower average income growth in the office sector in FY13, JP Morgan continues to like the quality of Dexus's ((DXS)) portfolio, while the broker also sees scope for an increase in payout ratios in coming years. This is enough for an upgrade to a Neutral rating from Underweight previously.

Sigma Pharmaceuticals ((SIP)) delivered a better interim profit result than Macquarie had forecast, the result being increases to estimates in coming years. Macquarie's price target increased as well and on valuation grounds the broker has upgraded to a Neutral rating from Sell.

Deutsche Bank upgraded both Leighton Holdings ((LEI)) and Myer ((MYR)) to Buy ratings this week, in both cases from Hold previously. For Leighton, Deutsche suggests the market is pricing in too much risk, particularly given the company is primarily exposed to low cost mines and committed LNG projects within its resource sector activities. There are also some potential balance sheet positives such as a sale of NextGen, which is enough to justify a more positive view at current share price levels.

With respect to Myer, an improvement in gross margin was the highlight of the full year profit result in Deutsche's view. Top line growth continues to look difficult to achieve but the stock offers an attractive yield and some longer-term value at current levels in the broker's view, which supports the upgrade in rating.

On the downgrade side of the ledger UBS has cut its rating on Ansell ((ANN)) to Sell from Neutral, the change something of a relative valuation call given the company is seen to have less defensive earnings than others in the sector. The downgrade in rating comes despite an increase in price target.

UBS also downgraded Brambles ((BXB)) to a Hold rating from Buy, again on valuation grounds following an 8% rally in the share price since full year earnings were announced in August. As UBS notes, the stock is now trading broadly in line with valuation.

Aquarius Platinum ((AQP)) has been downgraded by BA Merrill Lynch to Sell from Hold as part of a reinstatement of coverage. With two mines on care and maintenance the broker sees a turnaround as reliant on improving operations at Kroondal, which is currently operating at a loss. When political risk is added to the equation BA-ML sees little upside for the stock in the shorter-term.

Credit Suisse has similarly downgraded Envestra ((ENV)) to Sell from Hold, this coming after changes to estimates to account for expectations of upcoming draft regulatory decisions. The cuts to forecasts impacted on the broker's price target, while the rating downgrade is a valuation call by Credit Suisse.

The Reject Shop ((TRS)) was also downgraded to Sell from Hold by Credit Suisse, this after recent share price outperformance suggests limited further upside from current levels. While group gearing should improve with Ipswich DC flooding claims being finalised, Credit Suisse expects tough operating conditions will continue for some time.

Recent share price strength has been enough for Citi to downgrade Insurance Australia Group ((IAG)) to Hold from Buy, as even allowing for an increase in price target the broker doesn't see enough upside from current levels to justify a more positive rating. 

JP Morgan has made two downgrades over the week, lowering ratings on both Southern Cross Media ((SXL)) and Toll Holdings ((TOL)) to Sell from Hold. For Southern Cross, still tough TV conditions lead the broker to suggest further cuts to consensus earnings estimates are unlikely, something that will act to limit potential share price upside.

In Toll's case, JP Morgan suggests a focus on market share is generating some domestic margin pressure and this suggests earnings headwinds are likely to remain in place for some time. Along with the downgrade in rating, the broker has trimmed earnings forecasts and price target.

OnTheHouse Holdings ((OTH)) delivered a result better than RBS Australia had forecast for FY12, but the broker expects FY13 will see earnings pumped back into the online business an in attempt to ensure longer-term growth. This is enough to prompt a downgrade to a Hold rating from Buy.

Macquarie has similarly downgrade Woodside ((WPL)) to Hold from Buy, this as a result of taking a less bullish view on the outlook for Australian LNG plays given the expectation of increasing competition in the global market. This view prompted cuts to earnings estimates and the broker's price target for the stock.

With respect to changes to price targets, the largest increases were seen in Webjet ((WEB)) and Sigma, while the largest decrease was in NRW Holdings ((NWH)). Only the latter saw a change of more than 10%.

Changes to earnings estimates were more significant, with Aquarius seeing the largest increase in forecasts and Panoramic Resources ((PAN)), Lynas ((LYC)) and Gindalbie ((GBG) experiencing the largest cuts to earnings expectations.  

Total Recommendations
Recommendation Changes

 

Broker Recommendation Breakup
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Broker Rating

Order Company Old Rating New Rating Broker
Upgrade
1 ATLAS IRON LIMITED Sell Neutral UBS
2 BREVILLE GROUP LIMITED Neutral Buy UBS
3 DEXUS PROPERTY GROUP Sell Neutral JP Morgan
4 LEIGHTON HOLDINGS LIMITED Neutral Buy Deutsche Bank
5 MYER HOLDINGS LIMITED Neutral Buy Deutsche Bank
6 REGIS RESOURCES LIMITED Neutral Buy Deutsche Bank
7 Sigma Pharmaceuticals Ltd Sell Neutral Macquarie
Downgrade
8 ANSELL LIMITED Neutral Sell UBS
9 AQUARIUS PLATINUM LIMITED Neutral Sell BA-Merrill Lynch
10 BRAMBLES LIMITED Buy Neutral UBS
11 ENVESTRA LIMITED Neutral Sell Credit Suisse
12 INSURANCE AUSTRALIA GROUP LIMITED Buy Neutral Citi
13 ONTHEHOUSEHOLDINGS LIMITED Buy Neutral RBS Australia
14 SOUTHERN CROSS MEDIA GROUP Neutral Sell JP Morgan
15 THE REJECT SHOP LIMITED Neutral Sell Credit Suisse
16 TOLL HOLDINGS LIMITED Neutral Sell JP Morgan
17 WOODSIDE PETROLEUM LIMITED Buy Neutral Macquarie
 

Recommendation

Positive Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 PAN 67.0% 100.0% 33.0% 3
2 BRG 67.0% 100.0% 33.0% 3
3 SIP – 14.0% 14.0% 28.0% 7
4 DXS – 29.0% – 14.0% 15.0% 7
5 BSL 43.0% 57.0% 14.0% 7
6 RRL 57.0% 71.0% 14.0% 7
7 AGO 50.0% 63.0% 13.0% 8
8 WEB 25.0% 33.0% 8.0% 3

Negative Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 AQP 40.0% 20.0% – 20.0% 5
2 CTX – 33.0% – 50.0% – 17.0% 6
3 ARI 83.0% 67.0% – 16.0% 6
4 GPT – 14.0% – 29.0% – 15.0% 7
5 NWH 86.0% 71.0% – 15.0% 7
6 BXB 86.0% 71.0% – 15.0% 7
7 ANN 29.0% 14.0% – 15.0% 7
8 IAG 38.0% 25.0% – 13.0% 8
9 NCM 38.0% 25.0% – 13.0% 8
10 SUN 88.0% 75.0% – 13.0% 8
 

Target Price

Positive Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 WEB 3.580 3.917 9.41% 3
2 SIP 0.627 0.681 8.61% 7
3 BRG 5.683 6.117 7.64% 3
4 RRL 4.686 4.844 3.37% 7
5 ANN 15.060 15.226 1.10% 7
6 GPT 3.500 3.534 0.97% 7
7 IAG 4.079 4.098 0.47% 8
8 CTX 14.060 14.110 0.36% 6
9 CHC 2.656 2.663 0.26% 6

Negative Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 NWH 3.924 3.516 – 10.40% 7
2 PAN 1.175 1.083 – 7.83% 3
3 ARI 1.238 1.172 – 5.33% 6
4 AGO 2.299 2.236 – 2.74% 8
5 SXL 1.501 1.471 – 2.00% 8
6 WPL 40.359 40.171 – 0.47% 8
 

Earning Forecast

Positive Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 AQP 2.608 3.387 29.87% 5
2 COH 274.738 281.325 2.40% 8
3 SIP 4.657 4.757 2.15% 7
4 GPT 23.957 24.129 0.72% 7
5 QRN 21.075 21.200 0.59% 7
6 RMD 19.962 20.004 0.21% 8
7 WPL 223.107 223.443 0.15% 8
8 WDC 63.775 63.813 0.06% 8
9 SGP 28.914 28.929 0.05% 7
10 HZN 2.081 2.082 0.05% 4

Negative Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 PAN 4.400 0.125 – 97.16% 3
2 LYC 1.800 0.600 – 66.67% 5
3 GBG 4.567 3.617 – 20.80% 6
4 AGO 12.763 11.513 – 9.79% 8
5 FMG 53.948 49.840 – 7.61% 8
6 RRL 60.529 56.286 – 7.01% 7
7 GRR 6.933 6.517 – 6.00% 6
8 MGX 24.363 22.963 – 5.75% 8
9 NWH 41.086 39.543 – 3.76% 7
10 BHP 280.180 271.866 – 2.97% 8
 

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CHARTS

AGO ANN BRG BXB DXS IAG LYC MYR NWH OTH PAN RRL SIP SXL TRS WEB WPL