Weekly Ratings, Targets, Forecast Changes

This story features 3P LEARNING LIMITED, and other companies. For more info SHARE ANALYSIS: 3PL

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 21 to Saturday February 25, 2017
Total Upgrades: 26
Total Downgrades: 36
Net Ratings Breakdown: Buy 43.05%; Hold 42.78%; Sell 14.17%

The final week of the February reporting season saw no less than 36 downgrades in broker ratings for individual ASX-listed stocks versus 26 upgrades. To conclude that stockbroking analysts were busy during the week would be a serious understatement.

19 out of the 26 upgrades moved to Buy with McMillan Shakespeare the sole recipient of two upgrades. There were a lot more receivers of more than one downgrade during the week. Brambles stole the show, so to speak, receiving four downgrades, all to Neutral. It remains open for discussion whether this is better/worse than WorleyParsons, who received two downgrades, both to Sell.

The ASX received two downgrades, as did Baby Bunting, as did Cleanaway Waste Management, and Coca Cola Amatil, and Medibank Private.

All in all, the gap between total Buy and Hold/Neutral ratings for the eight stockbrokerages monitored has narrowed over the reporting season, but Buys are still ahead (43.05% versus 42.78%) implying below the surface this remains a highly polarised share market.

As is usually the case, the week saw some hefty increases to consensus price targets with Cimic grabbing pole position for the week, enjoying an increase of 18.8%, followed by Tassal (+13.5%), BlueScope Steel (+12.6%) and Webjet (+12.1%).

On the other side of the ledger, iSentia turned into the week's biggest loser, seeing price targets shrink by 23%. Next came IPH Ltd with a fall of 16%, followed by Baby Bunting (-11.6%) and Village Roadshow (-8.4%).

The table for increases to earnings estimates is almost completely dominated by mining and energy companies. Santos crowned itself king for the week, enjoying an increase of no less than 523%. It beat Alacer Gold whose estimates "only" went up by 300%. Macquarie Atlas and Virgin Australia are the sole non-resources stocks in the week's Top Ten, enjoying gains of 76% and 55% respectively.

Negative changes were massive, albeit nowhere near as big as the positive changes recorded. The week's wooden spoon goes to ERM Power, suffering cuts to consensus forecasts of -98%. The damage for DUET, the next one in line, was -21%. For Qube Holdings the damage was -19%.

This week will see the final reports and adjustments flowing in for the local corporate February reporting season.

Upgrade

3P LEARNING LIMITED ((3PL)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 2/0/0

3P's first half result was ahead of the broker's expectations. No specific guidance was provided, but the company reiterated it is on track to deliver a $2m annualised cost saving relative to the second half of FY16, and expects to deliver revenue growth ahead of cost growth.

Macquarie has raised FY17 earnings forecast by 3.8%, reflecting the improved operational outlook.

The broker upgrades the stock to Outperform from Neutral and raises the target price to $1.25 from $1.00.

ASALEO CARE LIMITED ((AHY)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 2/1/0

2016 results were ahead of forecasts. Credit Suisse notes some of the growth was in channels that are not readily observed such as 14% growth in the Pacific islands and high single digit growth in Australian industry tissue.

Credit Suisse upgrades 2017 estimates by 10%. Rating is upgraded to Outperform from Neutral. Target is raised to $1.75 from $1.50.

ALTIUM LIMITED ((ALU)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 2/1/0

First half results were ahead of expectations and the company has reiterated its target for long-term revenue of US$200m by FY20. Credit Suisse believes targets are within reach.

The broker acknowledges the stock is not cheap but believes this should be viewed in the context of over 20% growth in earnings per share, and multiple avenues for further incremental growth. Rating is upgraded to Outperform from Neutral. Target is raised to $9.50 from $9.00.

APA GROUP ((APA)) Upgrade to Buy from Accumulate by Ord Minnett .B/H/S: 2/2/3

First half operating earnings beat forecasts. Ord Minnett remains positive on the stock, believing the regulatory headwinds that have affected it in the past are now behind.

The broker upgrades to Buy from Accumulate Target is raised to $10.90 from $10.30.

APN NEWS & MEDIA LIMITED ((APN)) Upgrade to Buy from Neutral by UBS .B/H/S: 5/0/0

APN's result beat UBS, with a weaker performance from radio offset by a strong performance from Adshel. The dividend was reinstated for the first time since 2012.

UBS expects Adshel to be the main earnings driver in the second half. Factoring in higher contributions from Adshel, and a better net debt balance, the broker's valuation now suggests an upgrade to Buy, despite tax and re-contracting risk. Target rises to $3.30 from $3.00.

APN OUTDOOR GROUP LIMITED ((APO)) Upgrade to Add from Hold by Morgans .B/H/S: 4/1/0

The company's 2016 results were in line with the broker's estimates. Digital screens grew by 31 in the second half, providing strong revenue uplift potential.

Regardless of the outcome of the ACCC ruling on the proposed merger with oOh! media ((OML)) the broker still considers the stock looks cheap relative to its growth profile.

Morgans upgrades to Add from Hold and the target price rises to $6.37 from $5.66.

BEACH ENERGY LIMITED ((BPT)) Upgrade to Neutral from Sell by Citi .B/H/S: 1/3/1

Citi analysts have upgraded to Neutral/High Risk, inspired by a significant fall in the share price. Price target price gained 9% to $0.80.

The released interim performance proved better-than-expected. The analysts point at the non-recurring tax benefit, as well as the fact management kept FY17 guidance unchanged.

Citi analysts suggest it remains an open question whether management can add shareholder value through M&A, as is its current focus.

BLUESCOPE STEEL LIMITED ((BSL)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 5/2/0

BlueScope's profit was in line with Credit Suisse and the broker notes second half guidance is based on more conservative parameters than current prices suggest. The company has announced 30-50% of free cash flow will be used for a buyback and to maintain steady dividends.

Credit Suisse has increased forecasts to above guidance using the broker's own price assumptions. Target rises to $13.30 from $10.70. Upgrade to Outperform.

See also BSL downgrade.

CLEANAWAY WASTE MANAGEMENT LIMITED ((CWY)) Upgrade to Add from Hold by Morgans .B/H/S: 2/3/0

First half EBITDA beat forecasts. Morgans notes the turnaround continues, with growth in revenue combined with cost control.

The broker expects bolt-on acquisitions to be an ongoing theme for the company.

Target lifts to $1.22 from $1.19 and the rating is upgraded to Add from Hold, given the total potential return of 10%.

See also CWY downgrade.

DUET GROUP ((DUE)) Upgrade to Buy from Neutral by Citi .B/H/S: 1/5/0

First half proportionate earnings were -11% below Citi's estimates because of weaker realised pricing and volumes in Energy Developments (EDL).

Citi upgrades to Buy from Neutral, noting CKI would have known of the weak EDL results in the first half before launching its bid. Therefore, the broker does not envisage a weak EDL result is likely to change the suitor's view. Target is $3.

FLIGHT CENTRE LIMITED ((FLT)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 2/4/2

Credit Suisse attributes most of the deterioration in first half profit to cyclically low air fare prices and finds enough justification to move to an Outperform rating from Neutral.

While a slow structural decline in share is expected to continue the broker believes the company is likely to witness a positive impact on revenue and profit from a cyclical recovery in air fares in FY18. Target is reduced to $34.90 from $36.49.

G8 EDUCATION LIMITED ((GEM)) Upgrade to Buy from Accumulate by Ord Minnett .B/H/S: 3/1/0

2016 EBIT was up 11% and in line with expectations. The main news is the $212m investment from China First Capital. Ord Minnett considers this a positive as it provides financial flexibility to pursue growth options.

Forecasts, while upgraded, sit below management's FY19 target for earnings per share of 40c (Ords: 31.2c). Rating is upgraded to Buy from Accumulate. Target is raised to $4.11 from $3.78.

HUON AQUACULTURE GROUP LIMITED ((HUO)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 2/0/0

Huon's earnings result beat Ord Minnett by 22% on higher salmon prices and lower than expected costs. Management described conditions as near perfect. The broker materially upgrades forecasts on production cost guidance.

While assuming a decline ahead in wholesale prices, the broker upgrades to Accumulate from Hold noting price upside risk. Target rises to $5.31 from $4.17.

INSURANCE AUSTRALIA GROUP LIMITED ((IAG)) Upgrade to Neutral from Underperform by Credit Suisse .B/H/S: 0/7/1

First half net profit was ahead of forecasts. Credit Suisse upgrades to Neutral from Underperform following the underperformance of the share price and an expectation that reserve releases will continue in the near term.

The broker suspects original FY17 guidance was too optimistic and the softer underlying margin in the first half is more in line with expectations.  The deterioration in the underlying margin is expected to slow or even turn around from the first half level. Target is raised to $6.05 from $5.75.

See also IAG downgrade.

IRESS MARKET TECHNOLOGY LIMITED ((IRE)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 3/1/0

Iress' result missed Ord Minnett and consensus at the headline, and the broker expects earnings downgrades will follow, but underlying organic trends in the second half were a positive, the broker suggests. The Canadian and UK businesses appear to have bottomed.

Given conservative accounting compared to other IT stocks and very strong cash flow conversion, the broker is more confident now in medium term growth. Upgrade to Accumulate from Hold. target rises to $12.50 from $11.00

MCMILLAN SHAKESPEARE LIMITED ((MMS)) Upgrade to Outperform from Neutral by Macquarie and Upgrade to Buy from Neutral by Citi .B/H/S: 3/0/1

First half results were just below the broker's expectations. No FY17 guidance was forthcoming, other than management's statement that early performance on the QLD contract was solid.

Macquarie has raised FY17 and FY18 earnings estimates by 0.2% and 0.6% respectively.

The broker has upgraded the stock to Outperform from Neutral and raised the target price to $13.20 from $13.17.

Upgrade to Buy as Citi analysts have become a lot more comfortable with the risks surrounding the QLD government contract, while momentum is seen building.

The analysts see clearly defined organic growth opportunities with Government clients while valuation is still at a considerable discount vis-a-vis other small industrials.

Despite small reductions in core profit estimates, target price jumps by 19% to $14.33 as the 15% risk discount (QLD contract) is removed.

MANTRA GROUP LIMITED ((MTR)) Upgrade to Buy from Neutral by UBS .B/H/S: 4/2/1

First half results were in line with the broker's forecasts. Soft CBD was offset by resort strength and the Ala Moana acquisition. Management has confirmed FY17 guidance, in line with UBS expectations.

In FY18, the broker expects mid single digit organic growth, together with new property acquisitions, to drive an 11% increase in EPS.

UBS upgrades the stock to Buy from Neutral and lowers the target price to $3.15 from $3.48.

MYOB LIMITED ((MYO)) Upgrade to Neutral from Underperform by Credit Suisse .B/H/S: 3/3/0

2016 results were in line with expectations. The company has guided to double digit revenue growth in 2017. Paycorp, with which MYOB already collaborates, will be acquired for $48m.

Credit Suisse rolls forward valuation and upgrades to Neutral from Underperform. Target is raised to $3.50 from $3.20. The broker continues to envisage downside risk to the company's market position from intense competition in the SME accounting software space.

NIB HOLDINGS LIMITED ((NHF)) Upgrade to Neutral from Underperform by Credit Suisse .B/H/S: 2/5/0

Nib's profit result beat Credit Suisse by 22% driven by record net margins. The broker considers upgraded FY guidance to be conservative.

The broker's prior negative stance was premised on the government addressing the exorbitant profits being made by insurers at the expense of policyholders. This result, and Nib's increased premiums, suggest this is not going to happen anytime soon. Upgrade to Neutral. Target rises to $5.50 from $4.55.

PLATINUM ASSET MANAGEMENT LIMITED ((PTM)) Upgrade to Hold from Sell by Ord Minnett .B/H/S: 0/2/2

The company's strong first half result surprised the broker, with both management fee margins and costs beating forecasts.

Ord Minnett believes the balance sheet is well positioned, with net cash of $365m, and while the company has a buy-back program it has so far not bought back a single share despite the price having dipped below $4.80.

As a result, the broker has removed the buy-back from its estimates, preferring instead to see Platinum returning cash to shareholders via higher dividends.

Upgrade to Hold from Sell and target rises to $4.93 from $4.69.

RHIPE LIMITED ((RHP)) Upgrade to Add from Hold by Morgans .B/H/S: 2/0/0

First half results were slightly below expectations. The broker suspects investors panicked because of a slowing in revenue growth and the perception the company was losing market share from increased competition.

The broker suspects that the company's public cloud program is partly cannibalising the private cloud and overall growth remains intact. Rating is upgraded to Add from Hold. Target reduced to 63c from 86c.

SMARTGROUP CORPORATION LTD ((SIQ)) Upgrade to Neutral from Sell by Citi .B/H/S: 3/2/0

Citi analysts saw the company reporting a strong result, but they remain of the view that future growth will be a challenge, including via acquisitions. The interim report did surprise and thus estimates have gone up by double-digits.

Stronger organic growth pushes up the target price by 13% to $6.61. Upgrade to Neutral from Sell. Catalysts to watch out for include the outcomes from the WA Salary Packaging panel, new client wins and client churn rates post acquisitions, point out the analysts.

SOMNOMED LIMITED ((SOM)) Upgrade to Add from Hold by Morgans .B/H/S: 1/0/0

Morgans found the underlying first half results positive. FY17 guidance is reiterated. A further 10 centres will be rolled out by the end of FY18.

Rating is upgraded to Add from Hold. The target price falls to $4.05 from $4.11. The main risk on the downside the broker envisages is slower-than-expected growth in the key markets of North America and Europe.

TASSAL GROUP LIMITED ((TGR)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 3/1/0

First half margins were better than Credit Suisse expected and, given the first half is likely to represent the toughest point in terms of operating conditions, earnings are expected to improve.

The broker expects the market to focus on increasing momentum and FY18 growth. Rating is upgraded to Outperform from Neutral. Target is raised to $5.20 from $4.50.

WORLEYPARSONS LIMITED ((WOR)) Upgrade to Hold from Sell by Deutsche Bank .B/H/S: 2/2/1

First half results were below the broker's expectations. However, margins and earnings were better than Deutsche Bank had been expecting.

The broker has reduced its revenue forecasts, but increased margin assumptions, to reflect the expanded cost out program. The net impact has been a 10% to 18% EPS increase between FY17 and FY19,

The stock has been upgraded to Hold from Sell and the target price raised to $8.60 from $8.39.

See also WOR downgrade.

Downgrade

ARDENT LEISURE GROUP ((AAD)) Downgrade to Sell from Buy by Citi .B/H/S: 1/5/1

The deterioration in like-for-like sales at Main Event has Citi analysts worried. As the analysts have come to the conclusion the situation is unlikely to improve short term, they downgrade to Sell from Buy (that's a double notch downgrade).

The deterioration in momentum is especially concerning, point out the analysts, given Main Event is cycling an undemanding 3Q16 growth comparison. Clearly, the initiatives announced at FY16 results have not successfully improved sales. Is competition starting to impact?

Earnings estimates have been culled by -17% to -29% for FY17-FY19. Target Price crashes by -42% to $1.55.

ACONEX LIMITED ((ACX)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 2/4/0

First half results were were soft, but expected following the previous month's warning. Credit Suisse observes the company was roughly breaking even on an operating cash-flow basis.

The company has backed away from guidance for expanded margins. While the company has a good offering and a large addressable market, the broker expects concerns around growth and unproven unit economics will weigh.

Rating downgraded to Neutral from Outperform. Target is reduced to $3.50 from $3.75.

ASX LIMITED ((ASX)) Downgrade to Underperform from Neutral by Credit Suisse and Downgrade to Equal-weight from Overweight by Morgan Stanley .B/H/S: 0/3/4

First half results were slightly better than the broker's forecasts. The result was partially muted by 6% cost growth, but Credit Suisse notes above inflation costs are not much of a headwind.

ASX has previously flagged an impact from the transition of its investment portfolio, to meet new guidelines, leading to lower investment earnings in FY17, with the full impact from FY18. It appears this transition will predominantly show up in second half FY17.

The broker downgrades the stock to Underperform from Neutral and raised the target price to $49.00 from $48.00.

The stock lacks near-term catalysts and has closed the gap to global peers so Morgan Stanley downgrades to Equal-weight from Overweight.

Despite this, the strength of the franchise was evident to the broker in the first half earnings. Target is $53. Industry view: In-Line.

BABY BUNTING GROUP LIMITED ((BBN)) Downgrade to Hold from Add by Morgans and Downgrade to Neutral from Outperform by Macquarie .B/H/S: 1/2/0

First half results were largely in line with Morgans. A wide guidance range for FY17 EBITDA of $21.5-24.5m has been reiterated but the broker suspects the top end is now more of a stretch, given softer gross margins.

Morgans downgrades to Hold from Add on valuation grounds. The broker still believes the company will continue to extend its power over competitors in coming years and that the store footprint can double. Target is reduced to $2.54 from $2.83.

Baby Bunting's first half results were below Macquarie's estimates. Total sales increased in the period, driven by 8.2% LFL growth and ongoing store rollouts.

Full year guidance of $21.5m to $24.5m, representing 15% to 31% growth was reiterated. Macquarie has lowered FY17 and FY18 forecasts by -9%.

The broker downgrades to Neutral from Outperform and target drops to $2.60 from $3.20.

BLACKMORES LIMITED ((BKL)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 1/2/0

First half underlying EBITDA missed expectations. While Credit Suisse believes the worst is behind the company the road ahead is not smooth.

March/June quarter revenue could be flat sequentially, with weaker seasonality in China, while cost savings continue to be re-invested in price.

The company appears to the broker to be behind competitors in building up its China presence. Rating is downgraded to Neutral from Outperform. Target is reduced to $110 from $125.

BLUESCOPE STEEL LIMITED ((BSL)) Downgrade to Hold from Accumulate by Ord Minnett .B/H/S: 5/2/0

First half results were largely pre-reported Ord Minnett observes and the main issue is capital management and guidance. The company has announced a $150m buy-back and guided towards incrementally better volumes at both its Australian and US steel-making operations.

Ord Minnett suspects earnings are reaching a cyclical peak and, given the stock is also approaching valuation, downgrades to Hold from Accumulate. Target is raised to $13.00 from $12.50.

See also BSL upgrade.

BRAMBLES LIMITED ((BXB)) Downgrade to Hold from Buy by Deutsche Bank and Downgrade to Neutral from Buy by Citi and Downgrade to Hold from Add by Morgans and Downgrade to Neutral from Outperform by Macquarie .B/H/S: 1/5/1

Brambles' first half results were in line with broker's forecasts. The company has removed its 2019 target of 20% ROCI and has indicated the current return levels of 16% strike the right balance between returns and growth.

The business in the Americas appears to be facing increased competition, and Deutsche Bank does not know if these issues are temporary or structural.

Deutsche Bank downgrades the stock to Hold from Buy and lowers the target price to $10.45 from $13.20.

As it turned out, Brambles' interim result was even weaker than what was suggested at the time of the sudden profit warning in January. Plus management has now abandoned medium term financial targets.

At least the dividend was in line with expectations, Citi analysts observe. Disappointing is the term that sums it all up in Citi's initial response. The analysts already had been taken by surprise in January.

Downgrade to Neutral from Buy. Target price falls to $10.15 from $12.33. It has become clear, suggest the analysts, competition in the US is having a much larger impact than previously anticipated.

First half results were weaker than expected but the outlook for FY17 disappointed Morgans even more so.

While the broker believes the long-term fundamentals are sound the results suggest that structural problems will take longer to be addressed than previously expected.

Morgans downgrades to Hold from Add. Target is reduced to $9.72 from $11.61.

First half results were in line with the profit warning in January. The company has guided to FY17 constant currency underlying profit to be in line with FY16.

The company has also withdrawn its FY19 returns target of 20%, as Macquarie suspected.

The broker now only expects modest 3% growth in FY18 and downgrades to Neutral from Outperform. Target is reduced to $10.25 from $12.65.

CABCHARGE AUSTRALIA LIMITED ((CAB)) Downgrade to Neutral from Buy by UBS .B/H/S: 0/2/0

UBS has downgraded Cabcharge to Neutral from Buy. Uber's momentum in Australia is stronger than the broker expected, and whilst Cabcharge is fairing better than peers it is yet to really drive its technology strategy.

The company's new driver terminal product could potentially win back share from traditional competitiors and provide some upside. Price target is reduced to $3.95 from $4.00.

COCA-COLA AMATIL LIMITED ((CCL)) Downgrade to Neutral from Buy by Citi and Downgrade to Equal-weight from Overweight by Morgan Stanley .B/H/S: 0/7/0

2016 results signal to Citi the company remains on message. Cost savings drove earnings and more is expected in Australia.

The broker upgrades forecasts for earnings per share by less than 2% and expects growth of 7% in 2017, helped by the share buy-back.

Citi downgrades to Neutral from Buy, given the rise in the share price and caution surrounding the upcoming container deposit scheme in NSW. Target is raised to $11.00 from $10.80.

2016 results revealed strong cash generation and the buy-back surprised Morgan Stanley although it shows the company is going well. The broker continues to like the stock and envisages little earnings risk.

Now the risk/reward is more balanced the rating is downgraded to Equal-weight from Overweight. Target is $10.50. In-Line sector view.

CROWN RESORTS LIMITED ((CWN)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 3/2/1

First half results were in line. Credit Suisse expects Crown to fully exit the MPEL and Las Vegas joint ventures and return further capital to shareholders. Once paid out the broker suggests the stock should return to an appropriate trading multiple of 9 times FY19 EBITDA, or $10.50.

The broker upgrades FY17 EBITDA 6-9% to incorporate the company's signals on cost reductions and the target is raised to $13.00 from $12.50. Rating is downgraded to Neutral from Outperform, given the rally in the share price.

CLEANAWAY WASTE MANAGEMENT LIMITED ((CWY)) Downgrade to Neutral from Buy by UBS and Downgrade to Neutral from Outperform by Macquarie .B/H/S: 2/3/0

An in-line result from Cleanaway implies a significant improvement in core operations, UBS suggests. Unchanged FY guidance also meets expectation. 

Management is now free to pursue operational improvements and cost-outs, the broker suggests, and a modestly better looking macro-economic backdrop may signal the start of a multi-year upgrade cycle. But given the stock is trading in line with international peers, UBS sees limited share price upside.

Downgrade to Neutral. Target rises to $1.16 from $1.15.

Cleanaway's first half results were in line with the broker's expectations. FY17 guidance is for little change in economic conditions but for both divisions to grow earnings.

Collections are expected to increase earnings as recent cost, volume and pricing initiatives take effect. Industrials are also expected to increase earnings, largely due to cost out.

Macquarie has cut FY17 EPS forecast by -3.5% and FY18 EPS forecast by -3.7%. The broker downgrades the stock to Neutral from Outperform and $1.14 target retained.

See also CWY upgrade.

ERM POWER LIMITED ((EPW)) Downgrade to Sell from Neutral by Citi .B/H/S: 0/0/3

US margins disappointed and this means the financial result overall missed expectations, even before adjusting for the -$2.9m loss moved into discontinued operations, comment the analysts.

Citi analysts acknowledge the operational leverage to any future improvements is huge, but they've nevertheless decided to downgrade to Sell from Neutral. Target price dives by -20% to $1.05.

Earnings estimates have received a double-digit haircut for the years ahead. Citi doesn't think the market is accurately pricing in this prospect.

GODFREYS GROUP LIMITED ((GFY)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 0/1/0

First half results disappointed Credit Suisse, although marginally ahead of subdued expectations. Until the company can demonstrate a sustainable return to positive like-for-like growth the broker does not envisage a material re-rating emerging.

While more favourable FX should benefit margins the broker remains cautious and downgrades to Neutral from Outperform. Target is reduced to 95c from $1.35.

GWA GROUP LIMITED ((GWA)) Downgrade to Underperform from Neutral by Macquarie .B/H/S: 0/3/3

GWA's first half results were broadly in line with the broker expectations. No specific guidance was provided, but based on current market conditions, second half earnings are expected to match or slightly beat the first half.

Macquarie has raised FY17 forecast by 0.3% but lowered FY18 forecast by -4.8%.

The stock has been downgraded to Underperform from Neutral and the target price reduced to $2.60 from $2.72.

INSURANCE AUSTRALIA GROUP LIMITED ((IAG)) Downgrade to Underperform from Neutral by Macquarie .B/H/S: 0/7/1

IAG's first half results were better than Macquarie's forecasts. FY17 outlook is for better premium growth, largely driven by claims inflation, offset by softer margins.

The broker has cut FY17 earnings forecasts by -0.9%, FY18 by -7.7% and FY19 by -3.3%.

Macquarie downgraded the stock to Underperform from Neutral and price target drops to $5.70 from $5.80.

See also IAG upgrade.

ISENTIA GROUP LIMITED ((ISD)) Downgrade to Hold from Buy by Deutsche Bank .B/H/S: 1/2/0

First half results missed expectations. Margins declined to 25.4%, reflecting losses in King Content and higher publishing costs in the core business.

Deutsche Bank observes the core Australasian business has reached a limit in its ability to harvest returns through price increases. King Content disappointed the broker, reinforcing concerns around the quality of the business and execution.

Recent trends suggest to the broker that a turnaround will be difficult, increasing the likelihood of further disappointment. Rating is downgraded to Hold from Buy. Target is reduced to $2.10 from $2.90.

LOVISA HOLDINGS LIMITED ((LOV)) Downgrade to Hold from Add by Morgans .B/H/S: 1/2/0

First half results were ahead of forecasts and Morgans found little to fault. Management continues to expect gross margin trends will moderate in the second half as the exit of a competitor is cycled.

The half year was a strong period for execution and Morgans downgrades to Hold from Add. Target is raised to $4.37 from $4.30.

MEDIBANK PRIVATE LIMITED ((MPL)) Downgrade to Reduce from Hold by Morgans and Downgrade to Hold from Accumulate by Ord Minnett .B/H/S: 1/5/2

First half net profit beat expectations but mostly on the back of lower quality items, Morgans observes. Gross profit margin was a positive but the broker remains concerned about the decline in policy holder numbers.

The broker believes the stock is expensive, given the near- term headwinds. Rating is downgraded to Reduce from Hold. Target is reduced to $2.40 from $2.47.

The interim report was broadly in-line, say the analysts, but volume trends remain a challenge. Gross margin held up, but the analysts are concerned due to consumers increasingly opting for a lower, cheaper level of cover.

Given these concerns, Ord Minnett downgrades to Hold from Accumulate. Price target drops to $2.95 from $3.The analysts acknowledge the share price looks "undemanding", but there are no short term catalysts in sight.

ST BARBARA LIMITED ((SBM)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 2/1/0

St Barbara's first half results were in line with the broker's expectations. The company retired $172m of debt and moved to a net cash position. The final US$20m of senior notes will be retired this quarter, leaving the company debt free.

Macquarie has raised FY17 earnings forecast by 7% while cutting longer term forecasts by 7% to 8%.

The broker downgrades the stock to Neutral from Outperform and target rises to $3.00 from $2.90.

SOUTHERN CROSS MEDIA GROUP ((SXL)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 0/4/1

First half results were in line with expectations but the full-year outlook is disappointing for Credit Suisse. Regional TV ad revenue grew 29% in the first half, below the 30-35% flagged for the full year back in August.

Credit Suisse believes corporate activity is a potential catalyst. With lower earning forecasts, the rating is downgraded to Neutral from Outperform on valuation grounds. Target is reduced to $1.40 from $1.50.

SENEX ENERGY LIMITED ((SXY)) Downgrade to Sell from Neutral by Citi .B/H/S: 3/2/1

Citi analysts have decided to downgrade to Sell/High Risk with an increased price target of 35c (was 31c). The analysts make an effort to emphasise they do like the potential as well as company management, but the share price has simply run too hard too fast.

Given the industry's track record, the analysts argue it is not wise to pay up for future potential too early in the process. Citi reduces FY17-19 Core NPAT estimates due to higher D&A plus higher interest costs.

VOCUS COMMUNICATIONS LIMITED ((VOC)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 5/3/0

First half results were in line with forecasts. Credit Suisse notes cash conversion was weak although the company is mindful of this and intent on making improvements.

The broker retains FY17 EBITDA forecasts at the lower end of the $430-450m range. Rating is downgraded to Neutral from Outperform and the target to $5.00 from $5.70.

VILLAGE ROADSHOW LIMITED ((VRL)) Downgrade to Hold from Buy by Deutsche Bank .B/H/S: 1/3/0

Village Roadshow's first half results were slightly below the broker's expectations, with earnings weakness across the whole group. Management has highlighted that it is actively pursuing potential asset sales and undertaking a review of costs and capex reduction.

No formal FY17 guidance was forthcoming. Deutsche Bank's lower margin assumptions see FY17 and FY18 earnings predictions for cinema and film distribution reduce by -3-9%.

The broker has downgraded the stock to Hold from Buy and the target price falls to $4.20 from $4.60.

WEBJET LIMITED ((WEB)) Downgrade to Neutral from Buy by UBS .B/H/S: 2/3/0

Webjet's result beat UBS forecasts across all divisions. FY guidance has been increased and the balance sheet is in good shape.

Messy cash flows and working capital adjustments nevertheless reduced the quality of the beat, the broker suggests. UBS believes there's still plenty of momentum in the business but this is priced in, to the point of near perfection. Forecasts increased but rating pulled back to Neutral. Target rises to $11.50 from $10.72.

WORLEYPARSONS LIMITED ((WOR)) Downgrade to Underperform from Neutral by Macquarie and Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 2/2/1

First half results were below expectations. Revenue disappointed Macquarie although margins were better. The balance sheet is now back in focus as net debt increased to $1.015bn.

Macquarie reduces FY17 forecasts for earnings per share by -14%. Recovery is expected to be gradual and cost cutting momentum to slow, putting the pressure on the top line to deliver.

Rating is downgraded to Underperform from Neutral. Target falls to $8.28 from $9.00.

WorleyParsons' FY16 result alleviated a lot of balance sheet concerns for investors, Credit Suisse notes. The company's weak first half FY17 result has reignited those concerns. Most worrying for the broker is that "slow progress" on reducing days sales outstanding (DSO) on remaining receivables is actually no progress.

While there is considerable leverage in the business to growth in development & contracting, the broker needs to be more confident in the company's ability to reduce debt. Downgrade to Neutral. Target falls to $8.50 from $9.20.

See also WOR upgrade.

WOOLWORTHS LIMITED ((WOW)) Downgrade to Underperform from Neutral by Credit Suisse .B/H/S: 3/1/3

First half earnings were broadly in line with forecasts. Credit Suisse increases forecast food EBIT on the back of improvements in key operating metrics and envisages trend total sales growth at 3-4% as realistic.

The balance sheet was helped by a significant slowing in property investment, payments for the divestment of home improvement assets and property disposals.

Credit Suisse downgrades to Underperform from Neutral. Competitive risks are not abating and the stock appears a little expensive to the broker. Target is raised to $24.50 from $24.30.

WISETECH GLOBAL LIMITED ((WTC)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 2/2/0

Wisetech Global's first half result was better than the broker had expected. Macquarie believes the company is well on track to meet the reaffirmed FY17 guidance.

The broker has raised FY17 forecasts by 15% and FY18 forecasts by 12%. Maquarie downgrades the stock to Neutral from Outperform and target is raised to $5.80 from $5.30.

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