Daily Edition
Mar 12, 2004
Your summary of the latest recommendation, valuation, forecasts and opinion changes. 
WHAT STOCKBROKERS ARE SAYING...
Last updated: 10:06am

OIL JP Morgan – The analysts have lifted their 2004 WTI price forecasts by US$2 to US$31/barrel. This implies that prices will fall in 2Q04, and will then stabilise at around US$30 for the rest of the year. As a result, WPL’s FY04 profit forecast rises 11.5% to $498m, STO's by 18.5% to $170m, OSH 11% to US$94m and BHP up 2% to US$3.02bn.

RESOURCES

Merrill Lynch has conducted a major proprietary China aluminium study, including a survey of in excess of 100 Chinese smelters. This has caused a change in outlook for the industry, with the analysts lifting their price forecasts. Merrill Lynch now thinks that despite dramatic smelter capacity expansions in China, production is much lower than stated capacity and will be constrained by future power and alumina availability. Forecast 2004 price up 9.3% from US73.5 to 80.4c/lb, 2005 price up 20% from US75 to 90c/lb and 2006 price up 5.9% from US72 to 76.3c/lb. Report states these forecasts are above market consensus, which Merrill Lynch believes to be 72c/lb in 2004 and 74c/lb in 2005.

"This Report includes concise but limited reviews of research recently published by Stockbrokers, which should be considered as information concerning likely market behaviour rather than advice on the securities mentioned. Do not act on the contents of this Report without first reading the important information included at the end." www.fnarena.com
Companies discussed in this issue
ALN ANZ AWB AWC BLD CML COH FOA OST PBL PPT RIO SFE SGN TLS                               

ALN ALINTA
$7.66
GS JB Were
 Outperform/LT Buy		 Valuation $7.40. GSJBW notes its profit model already assumes a mid-year sale of Uecomm, so the analysts don't expect any material earnings revision resulting from the announced transaction. Analysts continue to see a favourable environment for domestic defensive stocks. Target price is N/A
ANZ ANZ BANKING GRP
$19.15
ABN Amro
 Buy		 The ANZ/NBNZ integration briefing regarded as a reassuring event, especially on the lack of revenue attrition. Broker retains ANZ as its top pick in the sector. Target price is N/A
GS JB Were
 Marketperform/LT Hold		 Valuation $18.45. In broker's view, presentations confirmed that NBNZ is a quality, relatively low risk franchise. No changes with analysts noting ANZ is trading at a 7% discount to Westpac and a 4% premium to their DCF valuation. Target price is N/A
Merrill Lynch
 Neutral		 Analysts comment that their concerns were exacerbated by customer attrition and earnings trends in the latest update on NZ. Broker's neutral call reflects, amongst other things, the perceived merger integration risks. However, dynamics for the bank sector collectively look strong and ANZ like others will benefit, the report concludes. Target price is N/A
AWB AWB
$4.87
JP Morgan
 Neutral		 The analysts would look to take profits above $5.00. EPS forecasts cut on lower expected grain receivals. Target price is N/A
AWC ALUMINA
$5.34
Merrill Lynch
 Buy		 Increased aluminium price forecasts result in higher forecasts: FY04 EPS from $0.23 to $0.27; FY05 EPS from $0.37 to $0.52 and FY06 EPS from $0.38 to $0.48. NPV $5.27. Analysts would be aggressively buying in $5-5.50 range. Target price is N/A
BLD BORAL LIMITED
$6.47
CSFB
 Downgrade to Neutral		 The analysts have downgraded their recommendation due to recent share price movements which now leave the stock with an excess rate of return relative to the market of 5%. The do however remain positive on Boral, primarily due to what is seen as management’s strong post merger track record, above market dividends and better industry discipline. Only part of expected upside from ABC acquisition is seen as currently factored in to share price. Target price is N/A
CML COLES MYER
$8.21
ABN Amro
 Hold		 H1 above expectations. However, additional costs in 2H04 appears to limit earnings upside, broker notes. Whilst it is difficult to fault the result, trading on 20x forecast FY04 earnings leaves little margin for error going forward, the report points out. Target price is N/A
CSFB
 Neutral		 Target rises $1.00 to $9.00. Result exceeded forecasts, and if company aspirations for FY06 can be achieved the stock is expected to perform well. However, the analysts feel that a more aggressive group restructuring is necessary and non-food group structural flaws need to be overcome for FY06 targets to be met. Target price is N/A
GS JB Were
 Marketperform/LT Hold		 Valuation $8.30. GSJBW pleased with H1. Increased EPS forecasts by 3% to 41.9c in FY04, 8% to 48.4c in FY05 and 9% to 54.6c in FY06, reflecting the impact of management's turnaround strategies. Report notes that FY06E PER of 15x is at a significant premium to both the non-bank industrials PER in FY06 of 13.6x and other major retailers. The high PER leaves no room for earnings disappointment in the medium term, according to GSJBW. Target price is N/A
JP Morgan
 Overweight		 Positive sentiment seen heralding possible share price upside following positive result surprise and guidance increase. Target price is N/A
Merrill Lynch
 Neutral		 Merrill Lynch saw an excellent result. Increased forecasts: FY04 NPAT (pre recaps, including $40m supply chain costs) from $526.6m to $549.8m and FY05 NPAT from $589.5m to $622m. Analysts believe the exchange rate benefit to CML's current earnings is somewhat overstated and though the stock is seen as fully valued - Merrill Lynch prefers CML as an equity investment to Woolworths. Target price is N/A
UBS
 Buy		 Target raised by 27c to $9.27 following a strong 1H04 result 9% above expectations. Company believed to be in a strong position to carry out capital management initiatives. FY04 earnings forecasts rise by 2% and FY05-06 by 3.5%. Target price is N/A
COH COCHLEAR
$19.15
GS JB Were
 Downgrade to Underperform/LT Hold from Marketperform/LT Buy		 Valuation $33.44. 'Request for information' from the US Department of Justice relating to its US subsidiary Cochlear Americas is expected to weigh heavily on the stock with analysts now commenting Cochlear's underlying value may be realised in a shorter time frame by a corporate buyer. Using their assessment of a worst case scenario, they see a downside floor to the share price of around $16 (approx 30% below the current share price). Target price is N/A
FOA FOODLAND
$19.62
ABN Amro
 Buy		 Excluding extra gains, FOA's H1 was below expectations with ABN Amro commenting the surprise was the A$2.1m loss from Farmers, now divested. Target price is N/A
GS JB Were
 Outperform/LT Buy		 Valuation $21.50. Reduced EPS forecasts by 3% to 142c in FY04, 4% to 154c in FY05 and 4% to 164c in FY06. Following H1. Analysts believe FOA's FY04 PER of 13.9x largely reflects near term earnings risks. Target price is N/A
JP Morgan
 Neutral		 Stock expected to fall below $19.00, which would be seen as a preferred entry point following the disappointing result. FY04 and FY05 earnings cut by 5% each. Progressive’s growth disappointing but capital management initiative potential remains. Target price is N/A
Merrill Lynch
 Neutral		 Valuation $18.70. Interim result did not meet expectations, largely caused by lower EBIT growth in the key NZ supermarket business. Analyst comment it appears their previously stated concern of FOA re-investing the synergies in discounted prices and thus not getting the full benefit have materialised. Cut FY04 forecast NPAT by 9.6%. Stock still perceived as overvalued. Target price is N/A
UBS
 Downgrade to Neutral from Buy		 Target falls 18c to $22.62. Downgrade comes based on share price performance. The analysts are concerned about the slightly weaker result and its implications. FY04 forecasts cut by 6%. Target price is N/A
OST ONESTEEL
$2.22
GS JB Were
 Outperform/LT Hold		 Valuation 2.65. GSJBW believes that the prospect of additional price rises sticking has improved substantially over recent months. Increased FY05 and FY06 EPS forecasts by 3.2% and 2.4%. Also, Magnetite feasibility study in June/July could add $0.30-0.40/share to DCF valuation. Target price is N/A
PBL PUBLISH BROADCST
$11.72
GS JB Were
 Marketperform/LT Hold		 DCF Valuation $11.35 (was $11.10) due to increase of investments value by $170m to $1.26bn. GSJBW notes that despite recent share price weakness, PBL is still trading on an FY05 PER of almost 17x. However, looking at the cash flow metrics, the stock is currently the cheapest since a long time. The broker believes that the recent price weakness does represent a rare opportunity to buy into what GSJBW regards as Australia's best placed domestic media stock at attractive valuation metrics. Target price is N/A
PPT PERP TR AUST
$43.90
ABN Amro
 Add		 In ABN Amro's view, Adelaide Bank's $800m RMBS issue, with PPT acting as the trustee, highlights that the securitisation market is still performing well. The analysts estimate a deal of this nature would be worth around 5-8bp for PPT. Target price is N/A
RIO RIO TINTO
$34.52
GS JB Were
 Outperform/LT Buy		 Valuation US$21.66 (A$33.03). Sale of Neves Corvo below valuation, but on broker's commodity price forecasts, the profit participation clause is likely to be triggered in each of the 4yrs, which would partly make up for this difference. Despite recent share price retracement the analysts remain comfortable with their long-term view of the sector and would use current weakness as a Buying opportunity. Target price is N/A
Merrill Lynch
 Neutral		 NPV $33.42 (was $32.48). Increased price forecasts for aluminium, energy and iron ore lead to lift in forecast earnings; 2005 up 7% to US$2961m, 2006 up 4% to US$2627m. Broker would seek exposure to aluminium through other vehicles. Target price is N/A
SFE SFE CORPORATION
$5.51
UBS
 Neutral		 The analysts believe the company will be in a position to release capital from its balance sheet, but are unable to quantify this at the moment. Target price is N/A
SGN STW COMM GROUP
$3.15
CSFB
 Neutral		 Target rises 30c to $3.30. Sale of SCTV seen as positive with most if not all of the 30c/share proceeds likely to be returned to shareholders. This is expected to please the market, despite yesterday’s below expectation result. Target price is N/A
TLS TELSTRA CORP FPO
$4.80
GS JB Were
 Marketperform/LT Hold		 Valuation $5.05. GSJBW now believes Telstra will be forced to deploy an advanced 3G mobile network sooner than it would prefer as the rumoured sale of Optus's satellite operations is regarded as a possible accelerated push into 3G by Optus. Target price is N/A

Summary
ALN ALINTA: Outperform/LT Buy - GS JB Were - Last Quote $7.66
AWC ALUMINA: Buy - Merrill Lynch - Last Quote $5.34
ANZ ANZ BANKING GRP: Marketperform/LT Hold - GS JB Were - Last Quote $19.15
ANZ ANZ BANKING GRP: Buy - ABN Amro - Last Quote $19.15
ANZ ANZ BANKING GRP: Neutral - Merrill Lynch - Last Quote $19.15
AWB AWB: Neutral - JP Morgan - Last Quote $4.87
BLD BORAL LIMITED: Downgrade to Neutral - CSFB - Last Quote $6.47
COH COCHLEAR: Downgrade to Underperform/LT Hold from Marketperform/LT Buy - GS JB Were - Last Quote $19.15
CML COLES MYER: Hold - ABN Amro - Last Quote $8.21
CML COLES MYER: Overweight - JP Morgan - Last Quote $8.21
CML COLES MYER: Buy - UBS - Last Quote $8.21
CML COLES MYER: Marketperform/LT Hold - GS JB Were - Last Quote $8.21
CML COLES MYER: Neutral - CSFB - Last Quote $8.21
CML COLES MYER: Neutral - Merrill Lynch - Last Quote $8.21
FOA FOODLAND: Downgrade to Neutral from Buy - UBS - Last Quote $19.62
FOA FOODLAND: Neutral - JP Morgan - Last Quote $19.62
FOA FOODLAND: Buy - ABN Amro - Last Quote $19.62
FOA FOODLAND: Neutral - Merrill Lynch - Last Quote $19.62
FOA FOODLAND: Outperform/LT Buy - GS JB Were - Last Quote $19.62
OST ONESTEEL: Outperform/LT Hold - GS JB Were - Last Quote $2.22
PPT PERP TR AUST: Add - ABN Amro - Last Quote $43.90
PBL PUBLISH BROADCST: Marketperform/LT Hold - GS JB Were - Last Quote $11.72
RIO RIO TINTO: Outperform/LT Buy - GS JB Were - Last Quote $34.52
RIO RIO TINTO: Neutral - Merrill Lynch - Last Quote $34.52
SFE SFE CORPORATION: Neutral - UBS - Last Quote $5.51
SGN STW COMM GROUP: Neutral - CSFB - Last Quote $3.15
TLS TELSTRA CORP FPO: Marketperform/LT Hold - GS JB Were - Last Quote $4.80
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