We have upgraded our recommendation of Pacific Brands Limited (PBG) to a Buy. PBG previously expected group EBIT to be around $105 million in FY14. Challenging markets, declines in consumer sentiment and a warm autumn have led to lower than expected sales growth and increased margin pressure. FY14 EBIT is now expected to be in the range of $90-93 million with sales growth of c.3% versus the prior year. The Board appointed Macquarie Capital Limited in April to undertake a strategic review. Pacific Brands has five strong brands - Bonds, Berlei, Sheridan, King Gee and Hard Yakka, which we believe are worth around $840 million versus the current market capitalization of $465 million. This drives our upgrade to a Buy.