Weekly Ratings, Targets, Forecast Changes

This story features CREDIT CORP GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: CCP

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 January 22 to Saturday January 26, 2019
Total Upgrades: 25
Total Downgrades: 24
Net Ratings Breakdown: Buy 46.75%; Hold 40.66%; Sell 12.59%

The February reporting season is still one week away, with a few early birds scheduled to report this week, and ahead of the "busy" season stockbroking analysts have started to dust off their sector views for retailers & consumer stocks, financials, gold producers and A-REITs and the result has been a long queue in recommendation upgrades and downgrades.

For the week ending Friday, 25th January 2019 FNArena registered no less than 25 upgrades in recommendations for individual ASX-listed entities on top of 24 downgrades. All the sectors mentioned are prominently represented.

Lendlease was the sole recipient of two upgrades during the week. On the flipside Dexus Property Group stands out with three downgrades, while gold producer Regis Resources was downgraded twice.

Outside of the dominant sector updates, we note upgrades to Buy for Ansell, Aristocrat Leisure and Brambles, and downgrades for Qantas, Rio Tinto and Woolworths; all to Neutral.

Target price increases remain benign with only Charter Hall, Dexus Property and Goodman Group worth mentioning. However, numerous large decreases can be observed for the likes of Challenger (profit warning), Sims Metal Management (profit warning), Unibail Rodamco Westfield, and others.

The table for positive revisions to earnings estimates is pretty much an all-miners affair, the exception is Unibail Rodamco Westfield, with junior gold producers on top of the week's table.

Again, the numbers look decisively bigger in the table for earnings estimates decreases, where nib Holdings' reduction in market consensus topples cuts for junior mining stocks including Western Areas, South32, Perseus Mining, and Galaxy Resources.

The February reporting season takes off this week with early birds Credit Corp ((CCP)), GUD Holdings ((GUD)) and Navitas ((NVT)) reporting. Gone are the days when we used to still pay attention to Energy Resources of Australia (ERA).

Meanwhile, there is plenty on the macro-calendar for investors to focus on, as well as plenty of corporate result releases in the USA.

Upgrade

ADELAIDE BRIGHTON LIMITED ((ABC)) Upgrade to Hold from Lighten by Ord Minnett .B/H/S: 1/5/1

Ord Minnett believes the building materials backdrop has turned more challenging, as residential construction in Australia has pulled back and the US housing market has softened. Moreover, activity in New Zealand appears set to moderate.

Given the underperformance of the sector as a whole the broker upgrades Adelaide Brighton to Hold from Lighten, maintaining a $4.50 target. The broker remains cautious about the stock, nevertheless, because of its exposure to the Australasian housing market.

ABACUS PROPERTY GROUP ((ABP)) Upgrade to Buy from Neutral by Citi .B/H/S: 1/1/0

Citi believes the stock has sold off on concerns relating to the delays in realising the residential project in NSW, while a slowing residential market is weighing on earnings.

The broker suspects the new strategy of moving towards a higher recurring base simplifies the business and could lead to a multiple re-rating.

The broker does not believe much has been priced in for the land bank and upgrades to Buy from Neutral. Target is raised to $3.91 from $3.80.

ARISTOCRAT LEISURE LIMITED ((ALL)) Upgrade to Buy from Accumulate by Ord Minnett .B/H/S: 6/1/0

Ord Minnett puts Aristocrat Leisure at the top of its picks for the gaming sector and raises the rating to Buy from Accumulate. Target is $32.45.

The company remains the land-based market leader in North America while Australasian slot expenditure is expected to stay weak. Nevertheless, the company's expansion into casual/social gaming puts it to the fore.

ANSELL LIMITED ((ANN)) Upgrade to Buy from Hold by Deutsche Bank .B/H/S: 4/4/0

Deutsche Bank has a mixed outlook for Australian healthcare companies and expects lower growth in Australian hospital and GP markets. The broker has a positive outlook on the global plasma, OSA and hearing implant markets.

Those with exposure to global markets have a better outlook, in the broker's view, although this is already largely priced in, as valuations are at the upper end of historical ranges.

The broker upgrades Ansell to Buy from Hold. Target price improves to $29.78 from $27.25.

BRAMBLES LIMITED ((BXB)) Upgrade to Buy from Neutral by Citi .B/H/S: 4/4/0

Citi observes the share price has been pressured in recent years by the decline in earnings for the CHEP Americas business. These headwinds are expected to fade in the second half and lead to double-digit earnings growth from FY20.

The broker upgrades to Buy from Neutral and lifts the target to $12.10 from $11.00. Citi now forecasts underlying margins to decline by -190 basis points for the CHEP Americas division in the first half, affected by cost inflation and the timing of costs recovery strategies.

COCA-COLA AMATIL LIMITED ((CCL)) Upgrade to Neutral from Underperform by Macquarie .B/H/S: 0/6/2

Macquarie believes valuation support is emerging following the underperformance in the share price recently, and upgrades to Neutral from Underperform.

Australian beverages are still under pressure and management expects 2019 to be another "transitional year". Macquarie believes more money will need to be spent to meet growth targets. Target is raised to $8.28 from $8.26.

CARINDALE PROPERTY TRUST ((CDP)) Upgrade to Hold from Lighten by Ord Minnett .B/H/S: 0/1/0

In Ord Minnett's view, the outlook for property earnings is robust while balance sheets are well positioned. Nevertheless, various asset classes are at, or approaching, peak cycle conditions.

Capitalisation rates are expected to bottom in the first half of FY19 and real estate assets to soften around -25-75 basis points, because of an excess supply of assets for sale and softening rental growth.

Office remains the stronger segment but the key market, Sydney, is at risk of reaching an inflection point in 2020.

Ord Minnett upgrades to Hold from Lighten based on valuation. Target is reduced to $7.50 from $7.80.

CHARTER HALL GROUP ((CHC)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 3/1/0

Ord Minnett expects the company to end FY19 with assets under management of $29bn, up 25%. The broker also forecasts 12% growth in earnings per share.

FY20 is forecast to be a strong year for earnings, expected to be up 85%. Estimates are raised and the target is lifted to $8.25 from $7.50. Rating is upgraded to Accumulate from Hold.

CROMWELL PROPERTY GROUP ((CMW)) Upgrade to Accumulate from Lighten by Ord Minnett .B/H/S: 1/1/1

In Ord Minnett's view, the outlook for property earnings is robust while balance sheets are well positioned. Nevertheless, various asset classes are at, or approaching, peak cycle conditions.

Capitalisation rates are expected to bottom in the first half of FY19 and real estate assets to soften around -25-75 basis points, because of an excess supply of assets for sale and softening rental growth.

Office remains the stronger segment but the key market, Sydney, is at risk of reaching an inflection point in 2020.

Ord Minnett upgrades Cromwell to Accumulate from Lighten because of reduced risk and M&A potential. Target is raised to $1.10 from $1.05.

DEXUS PROPERTY GROUP ((DXS)) Upgrade to Neutral from Sell by UBS .B/H/S: 0/4/0

UBS upgrades to Neutral from Sell and raises the target to $11.17 from $9.39. The broker had expected office supply would pick up more quickly and there was downside risk to bullish rental expectations.

UBS now expects supply to remain constrained amid another good year for rental growth in Sydney. UBS is also attracted to the low gearing and balance sheet flexibility of Dexus.

See also DXS downgrade.

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

Macquarie assesses the growth outlook as solid, with gearing potentially declining to less than 20% and putting the business in a good position to capitalise on the next cycle.

The broker forecasts 2019 growth of around 5%. As well, a boost should be forthcoming from the sale of its 50% stake in the MLC centre (A-grade Sydney offices).

The broker upgrades to Outperform from Neutral. Target is raised to $5.95 from $5.47.

HOTEL PROPERTY INVESTMENTS ((HPI)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 1/1/0

In Ord Minnett's view, the outlook for property earnings is robust while balance sheets are well positioned. Nevertheless, various asset classes are at, or approaching, peak cycle conditions.

Capitalisation rates are expected to bottom in the first half of FY19 and real estate assets to soften around -25-75 basis points, because of an excess supply of assets for sale and softening rental growth.

Office remains the stronger segment but the key market, Sydney, is at risk of reaching an inflection point in 2020.

Ord Minnett upgrades to Accumulate from Hold. Target is steady at $3.25.

HARVEY NORMAN HOLDINGS LIMITED ((HVN)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 2/3/2

There are structural threats from online and a cyclical slowdown in housing, Macquarie acknowledges, but the international & property business, around 50% of operating earnings (EBITDA), is likely shielding the downside.

The broker upgrades to Outperform from Neutral, contending the stock is cheap. Target is steady at $4.10.

INDUSTRIA REIT ((IDR)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 1/2/0

Macquarie forecasts upside risk to valuations, noting strong re-valuations in suburban office and industrial assets over recent months. The broker also believes, with Growthpoint ((GOZ)) holding an 18% stake there is corporate support.

The broker upgrades to Outperform from Neutral and raises the target to $2.85 from $2.58.

KATHMANDU HOLDINGS LIMITED ((KMD)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 2/2/0

The stock sold off by -26% since its August highs, Credit Suisse observes. Disappointing Christmas trading drove a high percentage of this drop, but the broker believes the current share price overstates the impact from weak trading in a period that typically contributes only 25-30% of full year earnings.

The broker believes the stock offers attractive value for a company that is guiding towards earnings growth and has a strong balance sheet. Rating is upgraded to Outperform from Neutral and the target is reduced to NZ$2.90 from NZ$3.25.

LENDLEASE GROUP ((LLC)) Upgrade to Outperform from Neutral by Macquarie and Upgrade to Buy from Neutral by Citi .B/H/S: 4/1/0

The further provisions being undertaken in the Australian engineering business have resulted in a significant de-rating of the share price.

Macquarie observes, while risks continue to exist around completing underperforming projects, the current share price is implying negative value for the construction business.

The broker believes there is enough going on to have confidence in the company, and suspects engineering will be labelled non-core at the upcoming results.

Rating is upgraded to Outperform from Neutral. Target is raised to $15.15 from $15.08.

Citi forecasts the year ahead will be one of lower returns for A-REITs, expecting total returns of around 5% in 2019. The main risks are to the downside, in the broker's view, including falling shopping centre values and the risk that cap rates will rise in office/industrial.

A synchronised commercial property downturn is not the broker's base case but is slated as a possible occurrence if global and domestic economic growth risks recede and upward pressure resumes on global security yields.

Citi upgrades LendLease to Buy/High Risk from Neutral. Target is steady at $15.06.

METCASH LIMITED ((MTS)) Upgrade to Neutral from Underperform by Macquarie .B/H/S: 3/2/2

Macquarie accepts the outlook is still challenging and FY20 growth is hampered by the loss of the Drakes contract.

Still the recent de-rating of the share price means the broker upgrades to Neutral from Underperform, given the improving valuation. Target is steady at $2.41.

The broker notes, despite the difficult trading conditions, the company has done well on costs, although the gains in this area appear to be coming to an end.

SARACEN MINERAL HOLDINGS LIMITED ((SAR)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 1/0/1

Macquarie includes Saracen Mineral as one of its preferred producers, as the business displays organic growth prospects.

An improved earnings outlook across gold producers drives modest increase in the broker's target, to $3.20 from $2.90. Rating is upgraded to Outperform from Neutral.

SHOPPING CENTRES AUSTRALASIA PROPERTY GROUP ((SCP)) Upgrade to Accumulate from Hold by Ord Minnett .B/H/S: 1/1/3

In Ord Minnett's view, the outlook for property earnings is robust while balance sheets are well positioned. Nevertheless, various asset classes are at, or approaching, peak cycle conditions.

Capitalisation rates are expected to bottom in the first half of FY19 and real estate assets to soften around -25-75 basis points, because of an excess supply of assets for sale and softening rental growth.

Office remains the stronger segment but the key market, Sydney, is at risk of reaching an inflection point in 2020.

Ord Minnett upgrades to Accumulate from Hold. Target is steady at $2.75.

STOCKLAND ((SGP)) Upgrade to Buy from Neutral by Citi .B/H/S: 3/3/0

Citi forecasts the year ahead will be one of lower returns for A-REITs, expecting total returns of around 5% in 2019. The main risks are to the downside, in the broker's view, including falling shopping centre values and the risk that cap rates will rise in office/industrial.

A synchronised commercial property downturn is not the broker's base case but is slated as a possible occurrence if global and domestic economic growth risks recede and upward pressure resumes on global security yields.

The broker prefers fund managers and residential A-REITs in the sub-sector. Citi upgrades Stockland to Buy from Neutral and raises the target to $4.00 from $3.98.

SANTOS LIMITED ((STO)) Upgrade to Buy from Neutral by UBS .B/H/S: 4/3/0

Sales revenue in the December quarter beat estimates, largely because of higher domestic gas prices. UBS upgrades to Buy from Neutral and the stock is now its preferred pick of the Australian E&P majors.

The three-year production growth forecast is 13% and growth is expected from all core assets. UBS reduces the target to $7.20 from $7.55, setting the target based on an estimated oil price of US$65/bbl in 2019.

SUPER RETAIL GROUP LIMITED ((SUL)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 5/3/0

Credit Suisse analysts simply cannot believe the present share price accurately reflects the outlook for this company, suggesting things are probably a lot less bad as suggested by how low the share price has fallen.

Hence the upgrade to Outperform from Neutral. Target price does fall to $7.75 from $8.39 on downgraded forecasts. The announcement that Anthony Heraghty is the new CEO is considered a potential circuit breaker to negative sentiment.

SUNCORP GROUP LIMITED ((SUN)) Upgrade to Buy from Neutral by Citi .B/H/S: 4/3/1

Operating conditions, as anticipated, have probably worsened of late in Suncorp's banking division, Citi suggests.

Suncorp is confident that cost savings could drive a cost-to-income ratio below 50% and the broker continues to give the company the benefit of the doubt.

Citi factors in the impact of the life sale, including a likely capital return and stranded costs.

With operating conditions seemingly favourable in the core general insurance business. the broker upgrades to Buy from Neutral and reduces the target to $14.60 from $16.00.

SYDNEY AIRPORT HOLDINGS LIMITED ((SYD)) Upgrade to Overweight from Equal-weight by Morgan Stanley .B/H/S: 4/2/2

Morgan Stanley upgrades to Overweight from Equal-weight, in view of the recent underperformance in the stock and the value relative to global listed airports, as well as Australian infrastructure stocks.

The broker acknowledges investors may be wary of passenger growth this year, as airports are cycling higher comparables and forward capacity data is pointing to moderating near-term growth.

The broker believes Sydney Airport has the best potential returns in the grouping and will benefit from a diversity of traffic sources. Target is reduced to $7.07 from $7.47. Industry view is Cautious.

Downgrade

BANK OF QUEENSLAND LIMITED ((BOQ)) Downgrade to Hold from Add by Morgans .B/H/S: 1/3/3

The latest APRA data show Bank of Qld's home loan book contracting in the three months to November. Loan repricings announced earlier this month will go some way to providing an offset, Morgans notes.

Yet now that the St Andrew's sale is off, the broker is no longer expecting a special dividend. Morgans does not see any earnings growth over the forecast period and thus downgrades to Hold from Add. Target falls to $10.40 from $11.30.

BWP TRUST ((BWP)) Downgrade to Lighten from Hold by Ord Minnett .B/H/S: 0/0/1

In Ord Minnett's view, the outlook for property earnings is robust while balance sheets are well positioned. Nevertheless, various asset classes are at, or approaching, peak cycle conditions.

Capitalisation rates are expected to bottom in the first half of FY19 and real estate assets to soften around -25-75 basis points, because of an excess supply of assets for sale and softening rental growth.

Office remains the stronger segment but the key market, Sydney, is at risk of reaching an inflection point in 2020.

Ord Minnett downgrades BWP Trust to Lighten from Hold. Target is steady at $3.30.

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

The company has downgraded FY19 normalised earnings estimates. Citi lowers core estimates for earnings per share by -48% for FY19 and -8% for FY20.

The broker still expects the upcoming means test changes to be positive for the company's annuities. Uncertainty in the meantime, as well as the need for a new CEO to build market confidence, may not be enough to propel the stock forward.

There are also risks around the longer-term return-on-equity target. Rating is downgraded to Neutral from Buy. Target is reduced to $8.40 from $13.10.

CHARTER HALL LONG WALE REIT ((CLW)) Downgrade to Lighten from Hold by Ord Minnett .B/H/S: 0/1/1

In Ord Minnett's view, the outlook for property earnings is robust while balance sheets are well positioned. Nevertheless, various asset classes are at, or approaching, peak cycle conditions.

Capitalisation rates are expected to bottom in the first half of FY19 and real estate assets to soften around -25-75 basis points, because of an excess supply of assets for sale and softening rental growth.

Office remains the stronger segment but the key market, Sydney, is at risk of reaching an inflection point in 2020.

Ord Minnett downgrades to Lighten from Hold, because of a reduced growth outlook. Target is steady at $4.15.

CHARTER HALL RETAIL REIT ((CQR)) Downgrade to Lighten from Hold by Ord Minnett .B/H/S: 0/2/2

In Ord Minnett's view, the outlook for property earnings is robust while balance sheets are well positioned. Nevertheless, various asset classes are at, or approaching, peak cycle conditions.

Capitalisation rates are expected to bottom in the first half of FY19 and real estate assets to soften around -25-75 basis points, because of an excess supply of assets for sale and softening rental growth.

Office remains the stronger segment but the key market, Sydney, is at risk of reaching an inflection point in 2020.

Ord Minnett downgrades to Lighten from Hold. Target is steady at $4.30.

DEXUS PROPERTY GROUP ((DXS)) Downgrade to Lighten from Hold by Ord Minnett and Downgrade to Neutral from Outperform by Macquarie and Downgrade to Neutral from Buy by Citi .B/H/S: 0/4/0

In Ord Minnett's view, the outlook for property earnings is robust while balance sheets are well positioned. Nevertheless, various asset classes are at, or approaching, peak cycle conditions.

Capitalisation rates are expected to bottom in the first half of FY19 and real estate assets to soften around -25-75 basis points, because of an excess supply of assets for sale and softening rental growth.

Office remains the stronger segment but the key market, Sydney, is at risk of reaching an inflection point in 2020.

The broker downgrades Dexus to Lighten from Hold based on elevated multiples. Target is reduced to $10.60 from $11.00.

Macquarie reviews its stance on direct office markets and its investment thesis for Dexus, heading into the first half results. Strong rental growth in last few years is expected to underpin growth.

Market conditions are expected to soften from 2022 as major projects seeking pre-commitments may target tenants in existing stock and affect the outlook.

As the share price is trading largely in line with valuation, Macquarie downgrades to Neutral from Outperform. Target is raised to $11.51 from $11.06.

Citi forecasts the year ahead will be one of lower returns for A-REITs, expecting total returns of around 5% in 2019. The main risks are to the downside, in the broker's view, including falling shopping centre values and the risk that cap rates will rise in office/industrial.

A synchronised commercial property downturn is not the broker's base case but is slated as a possible occurrence if global and domestic economic growth risks recede and upward pressure resumes on global security yields.

Citi trims office exposure and reduces the Dexus rating to Neutral from Buy. Target is raised to $11.05 from $10.83.

See also DXS upgrade.

EVOLUTION MINING LIMITED ((EVN)) Downgrade to Neutral from Buy by Citi .B/H/S: 1/5/2

Citi analysts didn't like the fact that operational costs made quite a pronounced jump in the December quarter, even though a number of events can be held responsible. They have downgraded to Neutral from Buy, also noting the share price has appreciated by some 40% since the October low last year.

Evolution Mining is probably en route to meeting its FY guidance, but higher costs remain the disappointment. Target lifts to $3.70 from $3.35 nevertheless, due to additional Cowal value attribution.

GOODMAN GROUP ((GMG)) Downgrade to Sell from Lighten by Ord Minnett .B/H/S: 2/3/1

In Ord Minnett's view, the outlook for property earnings is robust while balance sheets are well positioned. Nevertheless, various asset classes are at, or approaching, peak cycle conditions.

Capitalisation rates are expected to bottom in the first half of FY19 and real estate assets to soften around -25-75 basis points, because of an excess supply of assets for sale and softening rental growth.

Office remains the stronger segment but the key market, Sydney, is at risk of reaching an inflection point in 2020.

Ord Minnett downgrades to Sell from Lighten. Target is steady at $9.10.

MIRVAC GROUP ((MGR)) Downgrade to Hold from Accumulate by Ord Minnett .B/H/S: 2/3/1

In Ord Minnett's view, the outlook for property earnings is robust while balance sheets are well positioned. Nevertheless, various asset classes are at, or approaching, peak cycle conditions.

Capitalisation rates are expected to bottom in the first half of FY19 and real estate assets to soften around -25-75 basis points, because of an excess supply of assets for sale and softening rental growth.

Office remains the stronger segment but the key market, Sydney, is at risk of reaching an inflection point in 2020.

Ord Minnett downgrades Mirvac to Hold from Accumulate and reduces the target to $2.50 from $2.55.

NATIONAL AUSTRALIA BANK LIMITED ((NAB)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 4/2/2

Macquarie suspects National Australia Bank will be unable to sustain its elevated pay-out ratio. The broker downgrades earnings growth forecasts and lowers the target to $25.50 from $28.50.

Rating is downgraded to Neutral from Outperform, given potential capital concerns following the announcement of NZ capital rules.

Healthy dividends, which should be sustained inside a lower growth environment, should still provide support for the sector at current levels.

NORTHERN STAR RESOURCES LTD ((NST)) Downgrade to Neutral from Buy by UBS .B/H/S: 1/3/3

December quarter production was -19% lower than UBS expected. The company has capitalised on higher Australian dollar gold prices to opportunistically mine lower grade and more marginal ore. This extends mine life but also lifts unit costs.

Unchanged guidance of 250-260,000 ounces in FY19 now appears to be a stretch. UBS believes the share price is factoring in positive momentum and the risk/return is now more balanced.

Rating is downgraded to Neutral from Buy on the back of the share price performance. Target is steady at $9.00.

PACT GROUP HOLDINGS LTD ((PGH)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 1/4/0

Credit Suisse observes the share price has rallied ahead of the result, due on February 20. As a result, the broker downgrades to Neutral from Outperform. Target is steady at $3.85.

Guidance signals FY19 operating earnings (EBITDA) of around $245m in earnings will be weighted towards the second half, with the full year inclusion of the TIC acquisition. Guidance assumes no changes to resin prices.

PEET & COMPANY LIMITED ((PPC)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 0/2/0

As the company's earnings are solely leveraged to the residential market, Macquarie believes there is a risk that earnings and margins decline.

The buyback provides support but the broker downgrades to Neutral from Outperform. The target is reduced by -28% to $1.06 to reflect the medium-term outlook for residential earnings.

QANTAS AIRWAYS LIMITED ((QAN)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 3/2/1

Credit Suisse suspects, at some point, a weak consumer environment and increasing geopolitical uncertainty will weigh on demand for air travel. The broker expects Qantas will respond with capacity adjustments, but there could be a lag.

The broker lowers second half domestic ticket yield growth forecasts to 2.5% from 4% and international to 3% from 4.4%. The broker is now less confident of an additional buyback in the second half.

Target is reduced to $6.70 from $7.35. While there remains plenty of upside at the current share price, the broker believes it is insufficient to justify the prior rating and downgrades to Neutral from Outperform.

RIO TINTO LIMITED ((RIO)) Downgrade to Hold from Add by Morgans .B/H/S: 4/3/0

Mined copper production in the December quarter surprised Morgans on the upside, driven by the ramping up of volumes from Escondida and solid output from Kennecott.

Healthy volumes were also delivered from the flagship Pilbara iron ore operations. The broker notes the company has built an incredibly strong position after multi-year process of refining the business.

With the stock supported by strong fundamentals and a positive share price performance, Morgans downgrades to Hold from Add. Target is raised to $82.55 from $82.28.

RESMED INC ((RMD)) Downgrade to Hold from Buy by Deutsche Bank .B/H/S: 3/4/1

Deutsche Bank has a mixed outlook for healthcare, being positive on the global plasma, OSA and hearing implant markets and expecting slower growth in Australian hospital and GP markets.

Companies with exposure to global markets generally have a better outlook, although this is largely priced into valuations. The broker downgrades ResMed to Hold from Buy. Target is raised to US$123 from US$122.

REGIS RESOURCES LIMITED ((RRL)) Downgrade to Underperform from Outperform by Credit Suisse and Downgrade to Lighten from Hold by Ord Minnett .B/H/S: 0/5/2

The company is reporting strong exploration results from the Rosemont underground central zone and the Garden Well depth extension underground.

Credit Suisse notes the McPhillamys project has been pushed out further, to around 2022. The broker notes new management has continued with the old strategy which has served the company well.

Rating is downgraded to Underperform from Outperform, purely on valuation because of the recent strength in the share price. Target is $4.45.

The company expects FY19 gold production to be in the mid to upper end of its 340-370,000 ounces guidance range and costs to be at the mid to lower end of guidance.

Ord Minnett is mostly concerned about the McPhillamys operation amid further delays. Completion of the definitive feasibility study is now expected for the June or September quarter.

The broker struggles to justify the valuation and downgrades to Lighten from Hold. Target is reduced to $4.30 from $4.40.

SCENTRE GROUP ((SCG)) Downgrade to Hold from Accumulate by Ord Minnett .B/H/S: 2/3/1

In Ord Minnett's view, the outlook for property earnings is robust while balance sheets are well positioned. Nevertheless, various asset classes are at, or approaching, peak cycle conditions.

Capitalisation rates are expected to bottom in the first half of FY19 and real estate assets to soften around -25-75 basis points, because of an excess supply of assets for sale and softening rental growth.

Office remains the stronger segment but the key market, Sydney, is at risk of reaching an inflection point in 2020.

Ord Minnett downgrades Scentre Group to Hold from Accumulate. Target is steady at $4.50.

SIMS METAL MANAGEMENT LIMITED ((SGM)) Downgrade to Sell from Neutral by UBS .B/H/S: 4/2/1

The company has guided to a downgrade to December half operating earnings (EBIT), to around $110m. UBS observes most of the weakness during the period has reflected for margins in Europe, which in turn reflects underinvestment and increased competition.

Municipal recycling was also weak. The broker remains cautious on the outlook, as global scrap markets face increasing disruption.

UBS acknowledges forecasting the company's earnings trajectory has not become easier. Forecasts are reduced by around -15-20% and downside risk is still envisaged.

The broker downgrades to Sell from Neutral and reduces the target to $8.50 from $12.50.

UNIBAIL-RODAMCO-WESTFIELD ((URW)) Downgrade to Accumulate from Buy by Ord Minnett .B/H/S: 2/2/0

Ord Minnett incorporates downgraded capital growth forecasts for retail property in the UK and Europe, following a challenging fourth quarter.

The broker believes the retail challenges will depress investor expectations of future rental growth.

This leads Ord Minnett to lower the target to $13 from $15 and downgrade the rating to Accumulate from Buy.

WOOLWORTHS LIMITED ((WOW)) Downgrade to Neutral from Buy by Citi .B/H/S: 1/5/2

Citi suspects the first half reporting season will be defined by retail trading through the Christmas period. Grocery remains the broker's preferred exposure, with favourable conditions continuing.

Citi downgrades Woolworths to Neutral from Buy as the valuation factors in upside from capital returns and margin expansion. Target is reduced to $31.30 from $33.00.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Click to view our Glossary of Financial Terms