Weekly Recommendation, Target Price, Earnings Forecast Changes

This story features AMCOR PLC, and other companies. For more info SHARE ANALYSIS: AMC

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: Tuesday February 16 to Saturday February 20, 2016
Total Upgrades: 29
Total Downgrades: 27
Net Ratings Breakdown: Buy 43.98%; Hold 43.79%; Sell 12.22%

The combination of weak share prices and overall not-as-bad-as-feared company results is proving an explosive cocktail with stockbroking analysts issuing no less than 29 recommendation upgrades for ASX-listed stocks during the week ending on Friday, 19th February 2016. But it wasn't one-way traffic as 27 downgrades were also issued. Needless to say, it was an unusually busy week.

Many of the upgrades are directly linked to company reports. Amcor, Aurizon, GWA Group, Monadelphous and Primary Healthcare all received multiple upgrades. CSL, Reckon and gold miners Evolution Mining and Independence Group received multiple downgrades during the week.

Stocks becoming less attractive, at least according to stockbroker downgrades, still include energy producers, yield providers and wealth managers. Though the latter may switch quickly if equity markets decide to build a base for a rebound.

Recorded adjustments to valuations and price targets remain large, in particular since resources stocks are absent from the week's tally, with Pacific Brands (+32%) leading the pack, followed by Cochlear (+17%) and Aveo Group (+14%). Alas, adjustments to the negative are matching. Bendigo and Adelaide Bank sits on top with a fall of -17%, followed by -15% for Henderson Group and -14% for Beach Petroleum.

Changes to earnings estimates can be extremely large when small caps and non-profitable companies are involved. Vitaco enjoyed an increase of no less than 216% during the week. On second spot we find NextDC enjoying an increase of 142%. As with price targets, reporting season can do some serious damage to prior expectations, in particular when resources stocks become the target.

Market forecasts for troubled Arrium dived by -131% during the week. Paladin saw consensus forecasts deteriorate by -85% and for Senex Energy the adjustment was -59%. Excluding resources, it appears the underlying trend remains slightly positive, but we'll know for certain by the end of this week as there's literally a mountain of corporate reports awaiting investors in the five days ahead.

P.S. Due to a technical glitch, Ord Minnett's upgrade for RCR Tomlinson wasn't captured in the table for upgrades, but it's included in the general tally.

Upgrade

AMCOR LIMITED ((AMC)) Upgrade to Buy from Neutral by Citi and Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 4/3/1

Citi analysts had been reducing their estimates on the belief FX headwinds and Emerging Markets turmoil would impact negatively, but they were proved wrong with Amcor releasing better-than-expected financial numbers in its interim report.

The analysts have been forced to reverse their earlier actions. They now believe the shares look attractive, hence the upgrade to Buy. Target lifts to $14.85 from $13.50.

First half results positively surprised Credit Suisse. The broker upgrades forecasts by 2-3%, on the back of a better FY16 base and more favourable EUR/USD exchange rate forecasts.

Regardless of the rally in response to the results, the broker believes the stock is still inexpensive and its attractiveness reinforced by a solid result. Upgrade to Outperform from Neutral. Target rises to $15.30 from $14.50.

AMP LIMITED ((AMP)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 6/2/0

2015 profit was slightly better than Credit Suisse expected. The broker observes while life business remains a drag the downside risk has reduced.

While there are obvious headwinds in the near term because of volatile investment markets, the broker believes this is more than compensated for in the current share price. Rating is upgraded to Outperform from Neutral. Target is reduced to $6.05 from $6.35.

AWE LIMITED ((AWE)) Upgrade to Overweight from Equal-weight by Morgan Stanley .B/H/S: 4/2/0

Oil markets may take longer to recover than many market participants believe, in Morgan Stanley's view. The broker lowers long-term oil price forecasts and believes reserves reporting may emerge as the new debate in 2016.

Updated oil price forecasts assume US$41/bbl in 2016, US$48/bbl in 2017, US$52/bbl in 2018 and US$60/bbl long-term. The broker upgrades AWE to Overweight from Equal-weight, given its strengthened balance sheet and growth options around gas.

In-Line sector view retained. Target is lowered to 59c from 67c.

AURIZON HOLDINGS LIMITED ((AZJ)) Upgrade to Outperform from Neutral by Macquarie and Upgrade to Buy from Neutral by Citi .B/H/S: 4/4/0

Aurizon's result beat Macquarie, as did an 11.3c dividend versus the broker's 10.1c. Another $186m of asset write-downs was nevertheless announced.

Aurizon's coal haulage revenues are currently immune to coal miner troubles given contractual obligations. But the profitability of said miners is shrinking fast, Macquarie notes, and the iron ore picture is bleak. However a downside scenario of 20% lower coal haulage prices and a collapse of iron ore could still leave Aurizon with 16% total return, the broker calculates, and capex can be reduced to prop up cash flow.

On a yield of 7% (9.6% after franking) and an undemanding valuation, Macquarie upgrades to Outperform. Target rises to $4.73 from $4.56.

Interim financials (underlying in-line) were playing second fiddle with investors focused on what can and is likely going to go wrong given severe pressures among Aurizon's customers in the bulk commodities sector. Management is not going to achieve its targets, that much Citi analysts agree upon.

Where they differ from general market sentiment is in the attractiveness of the yield on offer. Expecting the board to cut the pay-out ration, Citi suggests investors are currently ignoring the yield and hence passing on an attractive opportunity.

Target drops to $3.95 (was $4.71). Upgrade to Buy from Neutral though the analysts acknowledge investors might have to be patient.

BENDIGO AND ADELAIDE BANK LIMITED ((BEN)) Upgrade to Buy from Neutral by Citi .B/H/S: 1/4/2

Interim financials proved a significant beat but the market chose to zoom in on the underlying lack of operational momentum, point out the analysts. A big chunk of the upside surprise came from property revaluation profits.

Citi analysts see positives in the lack of asset quality concerns and the fact the Net Interest Margin (NIM) is likely to lift in H2 supported by mortgage re-pricing. Upgrade to Buy from Neutral. Target drops to $12.75 from $13.50. Earnings estimates have fallen.

CHALLENGER LIMITED ((CGF)) Upgrade to Buy from Neutral by Citi .B/H/S: 5/2/1

Citi has upgraded to Buy from Neutral as, post interim report and share price weakness, they are now even more confident on the growth profile, and at more attractive step-in level.

Small changes made to forecasts. Target remains $8.50.

DOMINO'S PIZZA ENTERPRISES LIMITED ((DMP)) Upgrade to Add from Hold by Morgans .B/H/S: 2/4/0

First half results were materially ahead of Morgans. The broker upgrades earnings estimates by 7.2% and 8.0% for FY16 and FY17 respectively.

The level of growth at Domino's is unrivalled in the broader retail sector, Morgans maintains, which supports the stock's premium. The broker envisages 40% growth is achievable.

Rating is upgraded to Add from Hold. Target rises to $63.20 from $61.58.

ESTIA HEALTH LIMITED ((EHE)) Upgrade to Buy from Hold by Deutsche Bank .B/H/S: 2/2/0

Despite a weaker than expected first half Deutsche Bank believes the company is on track. The aggressive acquisition strategy is risky but so far the broker notes there have been no serious mis-steps.

Deutsche Bank expects the company's strategy is likely to be vindicated at the full year result and, as the operating environment is supportive, upgrades to Buy from Hold. Target is reduced to $6.60 from $7.40.

FLEXIGROUP LIMITED ((FXL)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 5/1/0

First half results were in line with Credit Suisse estimates. The broker considers the stock not without challenges, as Australian leasing is a mixed bag and impairments and funding costs are providing headwinds.

Still, rating is upgraded to Outperform from Neutral as the valuation has become compelling in the broker's view. Credit Suisse reduces profit forecasts by 3.0%. Target is reduced to $2.60 from $2.68..

GWA GROUP LIMITED ((GWA)) Upgrade to Neutral from Underperform by Credit Suisse and Upgrade to Neutral from Underperform by Macquarie and Upgrade to Buy from Hold by Deutsche Bank .B/H/S: 1/5/0

Credit Suisse has upgraded GWA Group to Neutral from Underperform following the first-half result, having spied an opportunity for a tactical trade in the stock, which is supported by 7.3% dividend yield and an on-market buyback.

Credit Suisse remains concerned that cost cutting and diversification is not progressing as fast as foreign exchange and equities losses in key businesses. Target price falls to $2.05 from $2.30.

Back at its AGM, GWA warned currency issues will impact earnings in FY16 and make them second half-weighted. But the company has turned around and well beaten expectations through cost reductions, price increases and mix improvements, thus allaying Macquarie's fears.

Asset sales have bolstered the balance sheet, making a second capital return to shareholders possible. With cost savings offsetting the impact of the lower A$, Macquarie upgrades to Neutral. Target falls to $2.13 from $2.42 due to a lower PE multiple.

First half profit was ahead of Deutsche Bank's expectations, largely because of a better result in the bathrooms & kitchens segment. Second half cash flow is expected to improve as first half was negatively affected by higher inventory.

The broker envisages potential for further cost reductions and continued robust demand. Rating is upgraded to Buy from Hold. Target is raised to $2.47 from $2.28.

MAGELLAN FINANCIAL GROUP LIMITED ((MFG)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 3/0/1

Macquarie has upgraded Magellan to Outperform. The numbers speak for themselves: 41% increase in profit, 38% increase in dividend, exceptional net inflows and a reduction in employee expense to income.

The broker has significantly lifted earnings forecasts and its target to $24.34 from $21.91.

MONADELPHOUS GROUP LIMITED ((MND)) Upgrade to Buy from Hold by Deutsche Bank and Upgrade to Neutral from Sell by UBS .B/H/S: 1/2/4

First half results were largely in line with Deutsche Bank. The broker believes the company is performing well by preserving margins and diversifying into infrastructure & maintenance markets.

While the outlook remains tough the broker believes this is already factored in. With the stock offering a FY16 dividend yield of 10%, rating is upgraded to Buy from Hold. Target is reduced to $7.31 from $7.34.

UBS expects the future revenue profile will drive the share price over the next 6-12 months. Both revenue and earnings fell significantly in the first half but were ahead of the broker's forecasts. While the downside appears limited the broker observes few positive catalysts on the horizon.

Based on a better margin performance in the half, and the consistency in maintenance and industrial services revenues, UBS increases valuation and lifts the price target to $5.63 from $5.15 and upgrades to Neutral from Sell.

MYOB LIMITED ((MYO)) Upgrade to Buy from Neutral by UBS .B/H/S: 2/2/0

UBS upgrades to Buy from Neutral, citing an inexpensive share price relative to an 11% FY16-18 compound earnings growth rate. Recent disclosures suggest to the broker there is little risk to prospectus forecasts although visibility on costs is limited.

The broker also believes there are a number of short-term catalysts in the wings such as SuperStream, BankLink Cloud and online  practice ledgers. The $3.60 target is maintained.

MYER HOLDINGS LIMITED ((MYR)) Upgrade to Neutral from Underperform by Macquarie .B/H/S: 4/2/1

Macquarie notes David Jones has grown sales above market rates as suggested by the Woolworths SA results. Given the favourable consumer backdrop the broker expects Myer will also perform.

Given the operational leverage in the business model and the low expectations factored into the share price, the broker believes the risk is to the upside in the short term. Rating is upgraded to Neutral from Underperform. Target is raised to $1.06 from $1.03.

NATIONAL AUSTRALIA BANK LIMITED ((NAB)) Upgrade to Add from Hold by Morgans .B/H/S: 3/4/0

National Australia Bank's quarterly earnings update outpaced the broker but failed to impress given surprisingly low impairments concealed soft underlying earnings. 

Target price remains unchanged. 

Morgans upgrades to Add from Hold to reflect the recent share price retreat.

NEWCREST MINING LIMITED ((NCM)) Upgrade to Hold from Lighten by Ord Minnett .B/H/S: 0/4/4

First half earnings were marginally ahead of Ord Minnett. The Lihir pit optimisation plans are better than the broker expected in terms of production and capex outlook, while higher material movements imply the long-run costs will rise.

The broker believes gold equities will be supported over the near term, suggesting the balance of risks for Newcrest is now more evenly weighted.

The broker upgrades to Hold from Lighten and lifts the target to $15.00 from $10.20.

PACIFIC BRANDS LIMITED ((PBG)) Upgrade to Buy from Hold by Deutsche Bank .B/H/S: 2/3/0

First half profit was ahead of Deutsche Bank's estimates. The broker believes management has been successful in turning the business around to date.

The structurally challenged wholesale business appears to be reaching a stable position while the push into retail highlights the potential of the company's flagship brands.

Deutsche Bank increases earnings estimates for FY16 by 16% and FY17 by 26%. Rating is upgraded to Buy from Hold. Target is raised to $1.05 from 52c.

PRIMARY HEALTH CARE LIMITED ((PRY)) Upgrade to Neutral from Underperform by Credit Suisse and Upgrade to Neutral from Underperform by Macquarie .B/H/S: 1/7/0

First half earnings were in line with forecast. Credit Suisse envisages several catalysts to improve the company's capital position, including a potential tax refund and lower dividend pay-out. This is dependent on a recovery in operating cash flow, the broker acknowledges.

Credit Suisse upgrades to Neutral from Underperform and raises the target to $2.80 from $2.60.

Primary's result fell short of Macquarie. Pathology showed improvement as did doctor recruitment and retention but the company is still facing a number of regulatory and operational challenges which will place pressure on growth, the broker notes.

Improved cash flow and the dividend cut reduces the risk for a capital raising and Macquarie believes the current share price sufficiently captures regulatory and operational risks. Upgrade to Neutral. Target rises to $2.75 from $2.50.

RCR TOMLINSON ((RCR)) Upgrade to Buy from Accumulate by Ord Minnett. B/H/S 3/0/0

Interim result missed expectations but the stockbroker is of the view that most of the fall in profits should not have come as a big surprise. It certainly doesn't warrant the significant sell-off that occurred post the release given the share price already had fallen significantly in the months prior.

The analysts are of the view the current share price implies profits will only decline further in the years ahead but on its own assessment FY17 is likely to see a rebound. Hence why the rating has been upgraded to Buy from Accumulate. Target price falls to $1.70 from $2.00.

SMARTGROUP CORPORATION LTD ((SIQ)) Upgrade to Buy from Accumulate by Ord Minnett .B/H/S: 4/0/0

Ord Minnett observes stocks that have significantly outperformed in the past 12 months appear to be hardest hit by the recent sell off. The broker believes the share price decline equates to an opportunity and upgrades to Buy from Accumulate.

The broker believes the regulatory risk also remains low and at the current price the stock is compelling. 2016 forecasts are upgraded by 2.9%. Should margins continue to increase this is expected to drive organic growth. Target is reduced to $4.95 from $4.97.

SEVEN WEST MEDIA LIMITED ((SWM)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 3/3/1

First half results were ahead of Credit Suisse estimates, driven by cost control. The broker expects TV to benefit form strong growth in newer revenue streams.

Earnings estimates are upgraded by 7.0% on the back of lower TV costs and a reduced tax rate. The broker expects the stock will continue to trade below valuation because of pressures on market share and structural headwinds.

That said, the stock is considered cheap and the broker upgrades to Outperform from Neutral. Target is raised to $1.00 from 85c.

TELSTRA CORPORATION LIMITED ((TLS)) Upgrade to Neutral from Sell by UBS .B/H/S: 1/6/1

Telstra's top-line first-half result beat the broker, thanks to a $153m foreign exchange windfall and 33% growth in its network application services, triggering contract milestones. But higher costs (up 14% year-on-year) meant underlying earnings per share fell short of the broker's estimate. A slowing in mobile momentum and margins also dragged on the result.

Telstra maintains FY16 guidance, expecting network application services growth to slow in the second half and the foreign-exchange contribution to ease.

UBS trims earnings per share forecasts 1%-2% and increases dividend forecasts 1c per year out to FY19.

Telstra's share price is now more closely aligned with the broker's target price (steady at $5.30) and is offering a 6% fully franked dividend, so UBS upgrades to Neutral from Sell on a valuation basis, despite spying headwinds in several divisions and expecting a loss from high-margin copper revenue.

THE REJECT SHOP LIMITED ((TRS)) Upgrade to Buy from Neutral by UBS .B/H/S: 2/0/1

The Reject Shop seriously impressed the broker, posting a 45.7% jump in first-half normalised profits before interest and tax. Solid top-line growth of 4.4% was struck on good gross margins, operating cost cuts and respectable cash generation.

UBS notes the company managed a 10% fall in its hedged buying rate, a difficult task given its cost-conscious customers and has shifted to a sustainable strategy optimising the store network.

UBS estimates margins will improve to 4.6% from 3.3% in FY16 and pegs a 28% upside risk to its earnings forecasts. On the downside, it has another FX fall to manage, and stores in major centres (15%) are under structural pressure from falling foot traffic. 

UBS's earnings estimates jump 27% to 50%. Share price valuation rises 59% and the target price jumps to $15.70 from $9.80. Rating upgraded to Buy from Neutral to reflect expected shareholder returns.

Downgrade

BEACH ENERGY LIMITED ((BPT)) Downgrade to Equal-weight from Overweight by Morgan Stanley .B/H/S: 2/3/0

Oil markets may take longer to recover than many market participants believe, in Morgan Stanley's view. The broker lowers long-term oil price forecasts to US$60/bbl and believes reserves reporting may emerge as the new debate in 2016.

The broker believes parts of the Cooper Basin are more challenged in the lower commodity environment and downgrades Beach Energy to Equal-weight from Overweight. In-Line sector view maintained. Target is reduced to 57c from $1.03.

CHARTER HALL RETAIL REIT ((CQR)) Downgrade to Underperform from Neutral by Macquarie .B/H/S: 0/3/3

Charter Hall Retail's result was in line with Macquarie and FY16 guidance has been maintained. Strong tenants in Woolworths and Coles offer defensiveness, the broker notes, but only modest growth. Meanwhile, the ratio of turnover rent has reduced, placing a drag on income growth.

A 6.5% free cash flow yield is attractive, Macquarie acknowledges, but on recent share price strength the value proposition has diminished. Downgrade to Underperform. Target rises to $3.95 from $3.88.

CSL LIMITED ((CSL)) Downgrade to Neutral from Outperform by Credit Suisse and Downgrade to Hold from Buy by Deutsche Bank .B/H/S: 4/3/1

CSL's first-half profit met the broker's forecast, outpacing it on some earnings metrics.

But Credit Suisse notes an underlying schizophrenia, strong earnings on the base business being offset by a higher than anticipated ex-Novartis operation loss thanks to weaker sales in the northern hemisphere relating to its QIV vaccine, a problem that could resurface in FY17.

The broker cuts earnings per share by an average 5% in the near years but upgrades in later years. The target price increases to $108.00 from $105.00 but the stock is downgraded to Neutral from Outperform to reflect recent share price strength.

First half operating results were weaker than Deutsche Bank expected, largely due to the inclusion of the flu vaccination business, which reported a larger operating loss and smaller gain on acquisition compared with guidance.

Profit guidance in the flu business has dropped to a $100m loss from break even in a matter of months. To the broker this highlights the unpredictable nature of flu vaccine sales and a high fixed cost structure.

Deutsche Bank downgrades to Hold from Buy, given the limited upside to the target, which is revised to $106 from $113.

CSG LIMITED ((CSV)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 2/1/0

CSG's result missed Macquarie due to a procurement delay. The broker had already forecast a second half skew in earnings so this will be more pronounced as a result, which thus suggests heightened risk.

Business Solutions was otherwise the key driver, Enterprise continues to win contracts and CSG is well-placed to grow "share of wallet", Macquarie suggests, with existing and new customers. But the stock is fairly priced at present hence the broker pulls back to Neutral. Target falls to $1.52 from $1.65.

EVOLUTION MINING LIMITED ((EVN)) Downgrade to Underperform from Neutral by Credit Suisse and Downgrade to Neutral from Outperform by Macquarie .B/H/S: 1/4/1

First half losses were greater than Credit Suisse expected, the miss being amortisation debt establishment costs. FY16 guidance is unchanged.

The broker downgrades to Underperform from Neutral given recent share price strength. Target is raised to $1.65 from $1.45.

Evolution's underlying result was in line but Macquarie was not expecting write-downs which took the bottom line to a net loss. Cash flow was nevertheless strong and in line with expectation and while the dividend was also as forecast, an upgrade is likely ahead, the broker notes.

A potential dividend increase is encouraging and there is room for further cost cuts but on a 70% share price rally in 2016, Macquarie pulls back to Neutral. Target rises to $1.70 from $1.67.

GPT ((GPT)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 1/5/0

GPT's result was bang in line with Macquarie. The broker notes the earnings outlook is slightly softer than expected but renewed focus on internal development is a positive.

GPT offers a high quality, defensive proposition diversified across retail, office and industrial, the broker notes. But recent strength has taken the yield to under 5% and the stock is trading above Macquarie's revised target of $4.95, up from $4.76. Hence a downgrade to Neutral.

HENDERSON GROUP PLC. ((HGG)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 2/2/0

Henderson Group's FY15 result beat the broker by 3% thanks largely to a lower tax rate and performance fees.

But Credit Suisse downgrades earnings 22% predicting a sharp fall in funds under management following the recent share market spit, lower performance fee margins, negative operational leverage, a higher tax rate and minimal room to cut costs.

Target price falls to $5.25 from $6.50 and the stock is downgraded to Neutral from Outperform.

INDEPENDENCE GROUP NL ((IGO)) Downgrade to Neutral from Outperform by Credit Suisse and Downgrade to Neutral from Buy by Citi .B/H/S: 4/3/0

First half earnings were pre-released and held no surprises for Credit Suisse. The reported net loss was larger than expected. The broker notes FY16 guidance is unchanged.

Given the relative share price outperformance the broker downgrades to Neutral from Outperform and continues to await a recovery in nickel prices. The $3.00 target is retained.

Citi analysts have updated their modeling for the latest insights, including a rallying share price. While the target price has lifted to $3.15 on the recognition of higher earnings from Nova in later years, the recommendation has been pulled back to Neutral following the recent share price appreciation.

ILUKA RESOURCES LIMITED ((ILU)) Downgrade to Neutral from Buy by UBS .B/H/S: 2/4/1

Iluka will suspend mining and concentrate production at Jacinth-Ambrosia. While there will be an increase in charges for idling and rehabilitation the suspension is expected to increase net cash flow.

UBS suspects the market may interpret this as a response to subdued or slowing demand but believes, instead, the announcement reflects a desire to manage and run down the heavy mineral concentrate inventory.

Rating is downgraded to Neutral from Buy because of the share price movement. The $7 target is retained.

JAPARA HEALTHCARE LIMITED ((JHC)) Downgrade to Hold from Add by Morgans .B/H/S: 3/2/0

Japara's first half results were in line with the broker's expectations.

There has been no change to the broker's FY16 through FY18 forecasts, although these could be impacted by changes to aged care funding in the future.

Morgans has downgraded the stock to Hold from Add and the price target remains at $3.09.

KAROON GAS AUSTRALIA LIMITED ((KAR)) Downgrade to Equal-weight from Overweight by Morgan Stanley .B/H/S: 5/1/0

Oil markets may take longer to recover than many market participants believe, in Morgan Stanley's view. The broker lowers long-term oil price forecasts to US$60/bbl and believes reserves reporting may emerge as the new debate in 2016.

The broker downgrades Karoon Gas to Equal-weight from Overweight. In-line industry view retained. target falls to $1.87 from $2.58.

NANOSONICS LIMITED ((NAN)) Downgrade to Hold from Add by Morgans .B/H/S: 0/1/0

Nanosonics first half loss was no surprise to the broker. The company's move into the US market seems to be paying off, with gross margins improving significantly.

The next driver of share price could be publication of decontamination guidelines in the UK and Scotland favourable to Nanosonic products.

Morgans has downgraded the stock to Hold from Add and retains the $2.06 target.

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

Orora's first-half profit outpaced the broker, and the target price rises to $2.55 from $2.45 in line with a 1-3% uptick in the earnings per share estimate.

Strong Australasian and North American performances partially offset higher depreciation and amortisation, and the broker pegs the fundamentals as firm.

But Credit Suisse downgrades the stock to Neutral from Outperform given the recent share-price rally.  

RECKON LIMITED ((RKN)) Downgrade to Underperform from Neutral by Macquarie and Downgrade to Hold from Buy by Ord Minnett .B/H/S: 0/3/1

Reckon's profit fell short of consensus due to the cost of growth initiatives, including marketing and amortisation of the accelerated development of Reckon's "cloud clouding" platform. The results of a strategic review will see further investment in marketing and offshore expansion, Macquarie notes.

It will take time for such a strategy to prove it is the best way to increase shareholder value, thus long term uncertainty suggests a possible PE de-rating in the meantime, Macquarie warns. With Reckon trading at a significant PE premium to the Emerging Leaders, the broker downgrades to Underperform. Target falls to $1.65 from $2.26.

2015 results were weaker than expected. The company is ramping up its investment through FY16-17 in new product and markets.

While the efforts to return to sustainable revenue and free cash flow growth are to be commended, Ord Minnett considers the risks cannot be ignored. The broker expects investors will remain cautious until the evidence of a return on the investment becomes clearer.

The broker downgrades to Hold from Buy and reduces the target to $1.85 from $2.35.

SONIC HEALTHCARE LIMITED ((SHL)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 4/2/2

Sonic's revenue was in line with Macquarie but earnings fell short. International pathology posted a strong result but mostly due to a combination of currency gains, the Swiss acquisition and the new JV in the UK, the broker notes. Domestic businesses delivered declines, with collection centre costs again to blame.

Sonic has nevertheless retained full year guidance and despite ongoing risks surrounding federal budget changes, Macquarie believes the company can weather domestic issues well. But following share price gains the broker sees value as fair, and thus downgrades to Neutral. Target falls to $20 from $23.

SEALINK TRAVEL GROUP LIMITED ((SLK)) Downgrade to Hold from Buy by Ord Minnett .B/H/S: 0/1/0

First half earnings growth of 23% was attributed to lower fuel prices and a higher yielding passenger mix. South Australia performed incredibly well, Ord Minnett observes, while earnings at Captain Cook declined because of start-up investment costs.

Ord Minnett upgrades FY16 earnings estimates by 12% but considers the valuation looks stretched. The price target is raised to $4.00 from $3.27. Despite the positive trends and high regard for the business a lack of capital upside means the broker downgrades to Hold from Buy.

SMS MANAGEMENT & TECHNOLOGY LIMITED ((SMX)) Downgrade to Underweight from Equal-weight by Morgan Stanley .B/H/S: 0/3/1

Morgan Stanley envisages a heightened risk that the company does not deliver on the earnings skew in the second half, given the magnitude of upside required and the soft conditions.

The broker reduces earnings forecasts by 28% for FY16 and 24% for FY17 and downgrades to Underweight from Equal-weight. Target is cut to $2.10 from $4.30. In-Line sector view retained.

SPARK NEW ZEALAND LIMITED ((SPK)) Downgrade to Underperform from Neutral by Credit Suisse .B/H/S: 1/4/1

First half results met Credit Suisse's expectations. The company remains confident of delivering growth of 0-3% in FY16.

The broker remains focussed on some of the trends in the business that are a reminder of the challenges faced. In particular, fixed connection numbers in both retail and wholesale.

Rating is downgraded to Underperform from Neutral on valuation and risks. The target is reduced to NZ$2.88 from NZ$2.94.

SANTOS LIMITED ((STO)) Downgrade to Underweight from Equal-weight by Morgan Stanley .B/H/S: 5/1/2

Oil markets may take longer to recover than many market participants believe, in Morgan Stanley's view. The broker lowers long-term oil price forecasts to US$60/bbl and believes reserves reporting may emerge as the new debate in 2016.

The broker believes Santos is one of the most exposed of the major oil stocks to the lower-for-longer oil price, given the debt issues. Rating is downgraded to Underweight from Equal-Weight. Industry-view In-Line. Target is reduced to $2.53 from $4.11.

Updated oil price forecasts assume US$41/bbl in 2016, US$48/bbl in 2017, US$52/bbl in 2018 and US$60/bbl long-term.

SENEX ENERGY LIMITED ((SXY)) Downgrade to Equal-weight from Overweight by Morgan Stanley .B/H/S: 5/2/0

Oil markets may take longer to recover than many market participants believe, in Morgan Stanley's view. The broker lowers long-term oil price forecasts to US$60/bbl and believes reserves reporting may emerge as the new debate in 2016.

The broker believes parts of the Cooper Basin are more challenged in the lower commodity environment and downgrades Senex Energy to Equal-weight from Overweight.

In-Line industry view retained. Target slips to 20c from 22c.

SYDNEY AIRPORT HOLDINGS LIMITED ((SYD)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 3/4/0

Sydney Airport's result fell short of Macquarie on disappointing revenue growth, reflecting little of the leverage anticipated to passenger growth across aeronautical and retail. Dividend guidance exceeds consensus but is in line with the broker.

Macquarie continues to believe traffic growth will drive earnings ahead. But the stock is trading in line with valuation and with upgraded dividend guidance provided, there is no scope for upside surprise. The broker therefore downgrades to Neutral. Target falls to $6.51 from $6.61.

TRADE ME GROUP LIMITED ((TME)) Downgrade to Sell from Neutral by UBS .B/H/S: 1/3/2

Trade Me Group reported in line with the broker, although the result was skewed towards the recovering Classifieds market.

The company's CFO has resigned and will leave in three months.

UBS downgrades earnings per share estimates 2% to 3% over FY16-FY18, given guidance remained cautious.

Despite confidence in the company strategy, the broker pegs the stock as over-valued in the near term (trading 19% above the revised discounted cash flow valuation and on a price-earnings multiple of 19.8x) and downgrades to Sell from Neutral.

Target price over 12 months rises to NZ$3.65 from NZ$3.40 to reflect changes to longer-term assumptions.

WOODSIDE PETROLEUM LIMITED ((WPL)) Downgrade to Neutral from Buy by UBS .B/H/S: 1/7/0

Woodside Petroleum's full-year result beat consensus and the broker despite recording a 53% dive in net profit after tax as average realised prices slumped 36%.

But the beat was struck on the exclusion of $128 million lease provision from underlying NPAT calculations.

Woodside reported a 43c per share dividend, well up on UBS's forecast 29c, maintaining its 80% payout ratio. The company announced a fully underwritten dividend reinvestment program (DRP).

UBS downgrades to Neutral from Buy to reflect the recent share-price rally. Target price unchanged at $27.70.

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