Weekly Recommendation, Target Price, Earnings Forecast Changes

This story features AURIZON HOLDINGS LIMITED, and other companies. For more info SHARE ANALYSIS: AZJ

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 June 20 to Friday June 24, 2016
Total Upgrades: 5
Total Downgrades: 6
Net Ratings Breakdown: Buy 41.86%; Hold 43.99%; Sell 14.15%

With the world's attention firmly focused on Great Britain's "should I stay or should I go" referendum, stockbroking analysts were not in a mood to issue many downgrades or upgrades during the week ending Friday, 24th July 2016.

FNArena registered five upgrades and six downgrades and Morgan Stanley was responsible for three in each basket. The in-house view has changed more favourably for crude oil prices going forward and this led to three upgrades out of the grand total of five for the week.

Morgan Stanley's weight underneath a higher oil price also dominates the table for positive revisions to price targets, but insurance broker Steadfast nevertheless commands pole position with an eye-catching gain of 13.89% following a successful Investor Day. Morgan Stanley's update on disruption for financial companies made Platinum Asset Management the number one loser for the week with its consensus price target declining by seven percent. Other moves remained relatively subdued.

APN News & Media sits on top of the week's table for positive revisions to profit estimates but investors should ignore it. It's merely a statistical adjustment following the seven-for-one consolidation of outstanding shares. A more constructive view on crude oil prices dominates this table too.

On the negative side, FAR Ltd suffered a decline of -448%,  followed by Whitehaven Coal (-46.8%), AWE Ltd (-20.4%) and Mirvac (-19%). Not all oil and gas companies are enjoying the same support in the current environment.

Upgrade

AURIZON HOLDINGS LIMITED ((AZJ)) Upgrade to Buy from Hold by Deutsche Bank .B/H/S: 5/3/0

Deutsche Bank observes the operating environment is better than previously expected. The company has indicated it has reached 200mt of coal haulage a day earlier this year compared with last year and, therefore, appears on track to achieve guidance of 204-209mt.

Deutsche Bank also revises up FY17 forecasts to 204mt, given positive commentary from the company's largest customer about coal volumes.

Rating is upgraded to Buy from Hold. Target is raised to $5.20 from $4.30.

CSR LIMITED ((CSR)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 3/1/2

Credit Suisse believes the time has come to consider whether CSR is too cheap, with a 6.8% gross dividend yield and buy-back supporting the stock price.

Broader macro risks should not be dismissed but the broker suggests the market is pricing in a far worse outcome to FY19. Hedging aside, if an investor believes the aluminium price will be higher next year the broker is confident so, too, will be the share price.

The risk/reward balance now presents an opportunity and the broker upgrades to Outperform from Neutral. Target is raised to $3.85 from $3.50.

ORIGIN ENERGY LIMITED ((ORG)) Upgrade to Equal-weight from Underweight by Morgan Stanley .B/H/S: 6/2/0

Morgan Stanley's house view is now that crude oil, longer term, will rise to US$80/bbl. The way towards this price level will remain volatile, say the analysts.

Even if their projection proves too optimistic, the analysts remain convinced technology will decrease operating costs, improving the bottom line for producers.

Origin Energy has been upgraded to Equal-weight from Underweight. Industry view is In-Line. Target lifts to $5.38 from $3.69 prior.

SANTOS LIMITED ((STO)) Upgrade to Equal-weight from Underweight by Morgan Stanley .B/H/S: 4/3/0

Morgan Stanley's house view is now that crude oil, longer term, will rise to US$80/bbl. The way towards this price level will remain volatile, say the analysts.

Even if their projection proves too optimistic, the analysts remain convinced technology will decrease operating costs, improving the bottom line for producers.

Santos has been upgrade to Equal-weight from Underweight. In-Line industry view retained. New target is $4.59, up from $2.95 prior. Earnings estimates have received one gigantic boost.

WOODSIDE PETROLEUM LIMITED ((WPL)) Upgrade to Overweight from Equal-weight by Morgan Stanley .B/H/S: 2/5/1

Morgan Stanley's house view is now that crude oil, longer term, will rise to US$80/bbl. The way towards this price level will remain volatile, say the analysts.

Even if their projection proves too optimistic, the analysts remain convinced technology will decrease operating costs, improving the bottom line for producers.

Morgan Stanley thinks market consensus is too negative on Woodside Petroleum. Rating upgraded to Overweight from Equal-weight. In-Line sector view retained. New target is $32.56 versus $24.94 prior.

Downgrade

AGL ENERGY LIMITED ((AGL)) Downgrade to Underweight from Equal-weight by Morgan Stanley .B/H/S: 2/3/1

Morgan Stanley downgrades to Underweight from Equal-weight as the current valuation is seen as too rich. Target price declines to $17.88 from $18.66.

Equally important, the analysts believe the market is too sanguine about the headwinds that lay ahead for utilities in future years.

It is Morgan Stanley's view that all the drivers could be directionally more bullish for solar and battery take-up than the market currently thinks. Certainly, the analysts will be watching further developments closely.

BORAL LIMITED ((BLD)) Downgrade to Underweight from Equal-weight by Morgan Stanley .B/H/S: 4/2/1

On Morgan Stanley's analysis the uplift in materials demand from infrastructure is less than the market expects. Hence, the broker downgrades Boral to Underweight from Equal-weight on a 12-month view.

The company has suggested the uplift in infrastructure will broadly offset other declines but the broker is not so sure and believes there are risks to this outlook. Target is $5.77. Industry view: In-Line.

CHARTER HALL GROUP ((CHC)) Downgrade to Neutral from Buy by UBS .B/H/S: 3/1/2

UBS downgrades to Neutral from Buy largely on valuation but remains positive about several aspects of the business, including earnings revisions post the deployment of equity, increasing assets under management and strong capital flows for well managed, long-lease duration assets.

The broker forecasts FY16 earnings growth of 9.8%, at the top end of the guidance range of 8-10%. Earnings growth is expected to moderate in FY17 to 4%. UBS raises the target to $5.00 from $4.85.

DEXUS PROPERTY GROUP ((DXS)) Downgrade to Lighten from Hold by Ord Minnett .B/H/S: 2/1/2

Ord Minnett believes the recent share price rally has priced in the Sydney CBD recovery story and factored in further capitalisation rate compression. Hence the broker downgrades to Lighten from Hold.

Ord Minnett does not believe the market has balanced the recovery story against the medium-term lease expiries facing Dexus, which it suspects will create downward pressure on cash flow over the next three to five years. Target is lifted to $7.94 from $7.74.

METCASH LIMITED ((MTS)) Downgrade to Lighten from Hold by Ord Minnett .B/H/S: 4/1/1

The FY16 results missed Ord Minnett's forecasts as convenience store operations weighed on the result. The broker observes the core supermarkets performed well.

The broker expects concerns over the competitive environment to weigh on the food business and this will be a drag on the share price. Ord Minnett also believes the Woolworths ((WOW)) Home Timber & Hardware is an attractive acquisition target and would support the Mitre 10 division.

The broker downgrades to Lighten from Hold and reduces the target to $2.00 from $2.40.

PLATINUM ASSET MANAGEMENT LIMITED ((PTM)) Downgrade to Underweight from Equal-weight by Morgan Stanley .B/H/S: 0/2/2

Morgan Stanley observes wealth managers are likely to gain an edge over asset managers as business models face disruption from managed accounts.

The broker downgrades Platinum Asset to Underweight from an Equal-weight rating as the risks of disappointing on flows are rising, compounded by a more mature retail business mix and below-peer gross sales. Target is reduced to $5.10 from $6.90. In-Line sector view retained.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

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