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Australian Broker Call *Extra* Edition – Mar 13, 2019

Daily Market Reports | Mar 13 2019

Part Two concludes this Extra Edition of the Broker Call Report highlighting some of the stand-out smaller cap stocks that caught FNArena's attention during the February 2019 reporting season.

An additional news report on the recommendation, valuation, forecast and opinion changes for ASX-listed equities.

In addition to The Australian Broker Call Report, which is published and updated daily (Mon-Fri), FNArena has now added The Australian Broker Call *Extra* Edition, featuring additional sources of research and insights on ASX-listed stocks, also enlarging the number of stocks that make up the FNArena universe.

One key difference is the *Extra* Edition will not be updated daily, but merely "regularly" depending on availability of suitable quality content. As such, the *Extra* Edition tries to build a bridge between daily updates via the Australian Broker Call Report and ad hoc news stories, that are not always timely for investors hungry for the next information update.

Investors using the *Extra* Edition as a source of input for their own share market research should thus take into account that information after publication may not be up to date, or yet awaiting another update by FNArena's team of journalists.

Similar to The Australian Broker Call Report, this *Extra* Edition includes concise but limited reviews of research recently published by Stockbrokers and other experts, which should be considered as information concerning likely market behaviour rather than advice on the securities mentioned. Do not act on the contents of this Report without first reading the important information included at the end of this Report.

The Australian Broker Call *Extra* Edition is a summary that has been prepared independently of the sources identified. Readers will check the full text of the recommendations and consult a Licenced Advisor before making any investment decision.

The copyright of this Report is owned by the publisher. Readers will not copy, forward or disseminate this Report to any other person. For more vital information about the sources included, see the bottom of this Report.

COMPANIES DISCUSSED IN THIS ISSUE

Click on a symbol for fast access.
The number next to the symbol represents the number of brokers covering it for this report -(if more than 1)

MAQ   MCP (2)   MYE   NVL   PGX   QHL   RHP   SDA   SMR (2)   SOM   SSM   SXE   TNK   VTG (2)   WLL  

MAQ    MACQUARIE TELECOM GROUP LIMITED

Telecommunication – Overnight Price: $19.20

Canaccord Genuity rates ((MAQ)) as Buy (1) –

The business has a high level of revenue and earnings reliability and Canaccord Genuity believes the stock deserves to trade on a higher multiple.

First half results were in line with forecasts and FY19 operating earnings (EBITDA) guidance has been provided for the first time at $51-53m.

The company has also announced Brent Henley will move to the position of group executive and chief commercial officer in the telecom business, highlighting for Canaccord Genuity the opportunity that lies in the telco segment, with the SD-WAN roll-out and NBN wholesale agreement.

Buy rating maintained. Target is $27.10. This report was published on February 26, 2019.

Target price is $27.10 Current Price is $19.20 Difference: $7.9
If MAQ meets the Canaccord Genuity target it will return approximately 41% (excluding dividends, fees and charges).

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

MCP    MCPHERSON'S LIMITED

Health & Nutrition – Overnight Price: $1.14

Moelis rates ((MCP)) as Buy (1) –

Moelis observes strong growth continues in the company's skincare business, despite the discontinuation of the Coty fine fragrances contract in the first half.

Earnings (EBIT) margins declined to 7.7% in the period, because of cost pressures for Multix from the strong US dollar and elevated resin prices. Both A'kin and Dr LeWinn's grew ahead of the category at 35% and 18%, respectively.

The broker is disappointed with the discontinuation of the Trilogy contract, which leaves a -$11m revenue hole. However, the company has identified $2.2m in cost savings which should more than offset the EBIT impact (-$1.7m).

Moelis maintains a Buy rating and reduces the target to $1.60 from $1.65.

This report was published on February 21, 2019.

Target price is $1.60 Current Price is $1.14 Difference: $0.46
If MCP meets the Moelis target it will return approximately 40% (excluding dividends, fees and charges).
The company's fiscal year ends in June.

Forecast for FY19:

Moelis forecasts a full year FY19 dividend of 11.00 cents and EPS of 12.40 cents.
At the last closing share price the estimated dividend yield is 9.65%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 9.19.

Forecast for FY20:

Moelis forecasts a full year FY20 dividend of 8.00 cents and EPS of 13.70 cents.
At the last closing share price the estimated dividend yield is 7.02%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 8.32.

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources


Shaw and Partners rates ((MCP)) as Buy (1) –

Many Australian businesses use daigou-based pathways into the Chinese market. McPherson's, instead, uses free trade zone entry into bonded warehouses amid a combination of direct distribution arrangements.

Shaw and Partners considers the export opportunity large, but typically volatile. The company's Chinese sales have grown to $11m from $1m within a year. McPherson's is one of the largest suppliers of consumer specialty products in Australia, supporting its substantial export drive.

First half results were in line with the broker's expectations and growth for FY19 pre-tax profit was reiterated at 10-15%. Shaw and Partners flags the flexibility in the balance sheet, demonstrated by the fully franked dividends, including a two cents special dividend.

Buy rating maintained. Target is raised to $1.51 from $1.49.

This report was published on February 20, 2019.

Target price is $1.51 Current Price is $1.14 Difference: $0.37
If MCP meets the Shaw and Partners target it will return approximately 32% (excluding dividends, fees and charges).
The company's fiscal year ends in June.

Forecast for FY19:

Shaw and Partners forecasts a full year FY19 dividend of 9.20 cents and EPS of 12.40 cents.
At the last closing share price the estimated dividend yield is 8.07%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 9.19.

Forecast for FY20:

Shaw and Partners forecasts a full year FY20 dividend of 9.00 cents and EPS of 13.80 cents.
At the last closing share price the estimated dividend yield is 7.89%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 8.26.

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

MYE    MASTERMYNE GROUP LIMITED

Mining Sector Contracting – Overnight Price: $1.01

Wilsons rates ((MYE)) as Buy (1) –

The first half result delivered strong cash conversion and, Wilsons observes, phenomenal growth in the order book. The broker believes the company can win significant new work as coal mines expand over the next 12-24 months.

Mastermyne remains the underground contractor of choice and, although whole-of-mine opportunities have been scaled back, the broker still expects the company will make headway in coming years.

All current contracts are extended beyond FY19 and the broker envisages a path to revenue of around $300m in FY20. Hence, Wilsons assesses the shares are significantly undervalued and the current share price presents a compelling entry point.

The broker retains a high conviction Buy rating and $1.70 target.

This report was published on February 20, 2019.

Target price is $1.70 Current Price is $1.01 Difference: $0.69
If MYE meets the Wilsons target it will return approximately 68% (excluding dividends, fees and charges).

Forecast for FY19:

Wilsons forecasts a full year FY19 dividend of 0.00 cents and EPS of 10.70 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 9.44.

Forecast for FY20:

Wilsons forecasts a full year FY20 dividend of 3.50 cents and EPS of 14.20 cents.
At the last closing share price the estimated dividend yield is 3.47%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 7.11.

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

NVL    NATIONAL VETERINARY CARE LTD

Healthcare services – Overnight Price: $1.96

Wilsons rates ((NVL)) as Buy (1) –

National Veterinary Care's result beat Wilsons' forecast and should restore market faith in the company's strategy, execution and earnings outlook, the broker suggests. The core practice achieved organic growth on stable margins while the Pet Doctors acquisition in NZ has now been integrated.

The company is well-funded, has a strong free cash flow outlook and should benefit from a protracted period of constrained asset pricing with large competitors diverted and/or struggling, Wilsons believes. National Vets is the broker's top pick in small-cap healthcare services with growing corporate appeal. Buy retained, target $2.80.

Report issued Feb 27, 2019.

Target price is $2.80 Current Price is $1.96 Difference: $0.84
If NVL meets the Wilsons target it will return approximately 43% (excluding dividends, fees and charges).
The company's fiscal year ends in June.

Forecast for FY19:

Wilsons forecasts a full year FY19 dividend of 4.00 cents and EPS of 13.20 cents.
At the last closing share price the estimated dividend yield is 2.04%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 14.85.

Forecast for FY20:

Wilsons forecasts a full year FY20 dividend of 4.50 cents and EPS of 16.00 cents.
At the last closing share price the estimated dividend yield is 2.30%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 12.25.

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

PGX    PRIMERO GROUP LIMITED

Mining Sector Contracting – Overnight Price: $0.42

Canaccord Genuity rates ((PGX)) as Buy (1) –

The company's FY19 operating earnings (EBITDA) guidance of $10.5-12.0m is in line with Canaccord Genuity's expectations. The broker focuses on the strength in the balance sheet, with $35m flagged for funding growth opportunities.

The first half result was boosted by around $2.9m in working capital movements but still reflects exceptionally strong cash conversion.

Expenditure was higher than forecast because of the purchase of two cranes for the Wartsila contract. The broker does not expect any substantial purchases in the remainder of FY19.

The broker also points out the tender pipeline is incredibly strong, with $800m in qualified tenders, equating to 9x total FY18 revenue. Canaccord Genuity maintains a Buy rating and $0.63 target.

This report was published on February 26, 2019.

Target price is $0.63 Current Price is $0.42 Difference: $0.21
If PGX meets the Canaccord Genuity target it will return approximately 50% (excluding dividends, fees and charges).
The company's fiscal year ends in June.

Forecast for FY19:

Canaccord Genuity forecasts a full year FY19 dividend of 1.00 cents and EPS of 5.00 cents.
At the last closing share price the estimated dividend yield is 2.38%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 8.40.

Forecast for FY20:

Canaccord Genuity forecasts a full year FY20 dividend of 1.00 cents and EPS of 5.00 cents.
At the last closing share price the estimated dividend yield is 2.38%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 8.40.

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

QHL    QUICKSTEP HOLDINGS LIMITED

Commercial Services & Supplies – Overnight Price: $0.09

State One Stockbroking rates ((QHL)) as Buy/High Risk (1) –

The takeaway quote from State One's research update is that Quickstep Holdings is on its way to report its first ever profit by August this year. Moreover, profits will be backed up by positive operating cash flow for the full financial year, so it's not just an accountancy phenomenon either.

The broker who has been a long time supporter of the stock, notes this milestone event is about to occur despite the impact of a key machine (PMM) failure during the December 2018 quarter which will impact March 2019 production.

In addition, management at the company anticipates to win new composite manufacturing contracts, primarily in the aerospace sector. FY19 outlook has room for upside surprise, suggests the broker, which may well attract "a new cohort of growth-based investors". Price target 15c. Buy/High Risk.

This report was published on 22 February 2019.

Target price is $0.15 Current Price is $0.09 Difference: $0.06
If QHL meets the State One Stockbroking target it will return approximately 67% (excluding dividends, fees and charges).
The company's fiscal year ends in June.

Forecast for FY19:

State One Stockbroking forecasts a full year FY19 dividend of 0.00 cents and EPS of 0.20 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 45.00.

Forecast for FY20:

State One Stockbroking forecasts a full year FY20 dividend of 0.00 cents and EPS of 1.30 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 6.92.

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

RHP    RHIPE LIMITED

Cloud services – Overnight Price: $1.75

Shaw and Partners rates ((RHP)) as Buy (1) –

Shaw and Partners likes Rhipe because of the structural tailwinds for cloud adoption and the operating leverage across its recurring business. The company has a strong and flexible capital position.

The broker assesses, if the business stopped growing and just consolidated its current public cloud ARR, this would generate $1.6m in gross margin alone.

Revenues grew 22% in the first half and the company has upgraded FY19 guidance by 8%. Shaw and Partners notes this was the strongest first half cash flow on record and the business has no debt.

Buy rating maintained. Target rises 20% to $1.87.

This report was published on February 18, 2019.

Target price is $1.87 Current Price is $1.75 Difference: $0.12
If RHP meets the Shaw and Partners target it will return approximately 7% (excluding dividends, fees and charges).
The company's fiscal year ends in June.

Forecast for FY19:

Shaw and Partners forecasts a full year FY19 dividend of 2.60 cents and EPS of 6.20 cents.
At the last closing share price the estimated dividend yield is 1.49%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 28.23.

Forecast for FY20:

Shaw and Partners forecasts a full year FY20 dividend of 3.80 cents and EPS of 7.60 cents.
At the last closing share price the estimated dividend yield is 2.17%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 23.03.

Market Sentiment: 0.5
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

SDA    SPEEDCAST INTERNATIONAL LIMITED

Hardware & Equipment – Overnight Price: $3.80

E.L. & C Baillieu rates ((SDA)) as Buy (1) –

Guidance for 2019 operating earnings (EBITDA) of $160-171m is in line with Baillieu expectations. Growth is seen coming from Globecomm, cost reductions and organic growth.

The broker notes de-leveraging is a priority and the 2019 dividend may be adjusted for this. The energy market is observed to be recovering in 2019 and other divisions are considered to be performing well.

The broker updates its model to reflect the 2018 results and the acquisition of Globecomm, as well as updated cost synergies and debt financing. Target is reduced to $4.57 from $5.05. Buy rating maintained.

This report was published on February 28, 2019.

Target price is $4.57 Current Price is $3.80 Difference: $0.77
If SDA meets the E.L. & C Baillieu target it will return approximately 20% (excluding dividends, fees and charges).
Current consensus price target is $3.35, suggesting downside of -12.0%(ex-dividends)
The company's fiscal year ends in December.

Forecast for FY19:

E.L. & C Baillieu forecasts a full year FY19 dividend of 9.68 cents and EPS of 16.76 cents.
At the last closing share price the estimated dividend yield is 2.55%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 22.67.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 34.2, implying annual growth of N/A.
Current consensus DPS estimate is N/A, implying a prospective dividend yield of N/A.
Current consensus EPS estimate suggests the PER is 11.1.

Forecast for FY20:

E.L. & C Baillieu forecasts a full year FY20 dividend of 9.95 cents and EPS of 22.49 cents.
At the last closing share price the estimated dividend yield is 2.62%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 16.90.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 42.7, implying annual growth of 24.9%.
Current consensus DPS estimate is N/A, implying a prospective dividend yield of N/A.
Current consensus EPS estimate suggests the PER is 8.9.

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.
Market Sentiment: 0.0
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

SMR    STANMORE COAL LIMITED

Coal – Overnight Price: $1.21

Bell Potter rates ((SMR)) as Buy (1) –

Bell Potter believes the value opportunity for the near term is to fill the capacity of the company's existing coal preparation plant and transport infrastructure in order to have the highest-margin product available.

This means dragline mining at Isaac Plains East. The next opportunity is to de-risk the progression of mining to the Isaac Downs area over the next two years.

Isaac Downs will deliver better quality coal and lower open pit strip ratios. This should substantially lift margins per tonne.

The broker upgrades longer-term production assumptions out to 2025 to match the infrastructure capacity.

Buy rating maintained. Target is raised to $1.55 from $1.30.

This report was published in February 28, 2019.

Target price is $1.55 Current Price is $1.21 Difference: $0.34
If SMR meets the Bell Potter target it will return approximately 28% (excluding dividends, fees and charges).

Forecast for FY19:

Bell Potter forecasts a full year FY19 dividend of 8.00 cents and EPS of 35.00 cents.
At the last closing share price the estimated dividend yield is 6.61%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 3.46.

Forecast for FY20:

Bell Potter forecasts a full year FY20 dividend of 7.00 cents and EPS of 28.00 cents.
At the last closing share price the estimated dividend yield is 5.79%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 4.32.

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources


Wilsons rates ((SMR)) as Buy (1) –

Wilsons believes a real attraction of Stanmore Coal lies with the growth levers that are available over the next 2-3 years. The first half result was supported by exceptional growth and margin expansion.

The stock is trading at just 2.1x enterprise value/EBITDA on FY19 estimates, and ongoing strength in the coal price and cash generation leads the broker to believe it deserves a higher rating. Buy rating and $1.40 target maintained.

Wilsons retains a robust outlook for coal demand and coal prices. The company is developing the Isaac Plains complex of coal mines including a CHPP and load-out capacity of 3.5mt ROM coal.

Approved mining leases and reserves support a mine life of over 10 years.

This report was published on February 12, 2019.

Target price is $1.40 Current Price is $1.21 Difference: $0.19
If SMR meets the Wilsons target it will return approximately 16% (excluding dividends, fees and charges).

Forecast for FY19:

Wilsons forecasts a full year FY19 dividend of 7.10 cents and EPS of 34.30 cents.
At the last closing share price the estimated dividend yield is 5.87%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 3.53.

Forecast for FY20:

Wilsons forecasts a full year FY20 dividend of 2.70 cents and EPS of 26.30 cents.
At the last closing share price the estimated dividend yield is 2.23%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 4.60.

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

SOM    SOMNOMED LIMITED

Medical Equipment & Devices – Overnight Price: $1.75

Wilsons rates ((SOM)) as Buy (1) –

SomnoMed reported ahead of Wilsons' forecast and featured margin expansion across all three geographies. Management is confident the brand will survive any damage in the US due to the RSS debacle and that it has regained control over cash flow. A new product cycle is expected this year.

A "connected" device could integrate SomnoMed into the "connected care" theme, Wilsons suggests, that has changed OSA treatment in all major markets. The broker retains Buy on a revised $2.00 target.

Report issued Feb 25, 2019.

Target price is $2.00 Current Price is $1.75 Difference: $0.25
If SOM meets the Wilsons target it will return approximately 14% (excluding dividends, fees and charges).
The company's fiscal year ends in June.

Forecast for FY19:

Wilsons forecasts a full year FY19 dividend of 0.00 cents and EPS of minus 6.30 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is minus 27.78.

Forecast for FY20:

Wilsons forecasts a full year FY20 dividend of 0.00 cents and EPS of 5.20 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 33.65.

Market Sentiment: 1.0
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

SSM    SERVICE STREAM LIMITED

Industrial Sector Contractors & Engineers – Overnight Price: $2.15

Canaccord Genuity rates ((SSM)) as Buy (1) –

First half results were comfortably ahead of Canaccord Genuity's forecasts, supported by organic earnings growth across all divisions. Fixed communications delivered operating earnings (EBITDA) growth of 16% while network construction was up 22%.

Guidance indicates positive momentum will continue into the second half, with the broker noting the key driver is volume growth for NBN-related work across multiple contracts.

The initial six-month contribution from Comdain is also expected to be a highlight. Buy rating maintained. Target is raised to $2.45 from $2.25.

This report was published on February 7, 2019.

Target price is $2.45 Current Price is $2.15 Difference: $0.3
If SSM meets the Canaccord Genuity target it will return approximately 14% (excluding dividends, fees and charges).
The company's fiscal year ends in June.

Forecast for FY19:

Canaccord Genuity forecasts a full year FY19 dividend of 8.99 cents and EPS of 14.60 cents.
At the last closing share price the estimated dividend yield is 4.18%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 14.73.

Forecast for FY20:

Canaccord Genuity forecasts a full year FY20 dividend of 10.00 cents and EPS of 16.00 cents.
At the last closing share price the estimated dividend yield is 4.65%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 13.44.

Market Sentiment: 1.0
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

SXE    SOUTHERN CROSS ELECTRICAL ENGINEERING LTD

Mining Sector Contracting – Overnight Price: $0.55

Moelis rates ((SXE)) as Buy (1) –

The company reported in-line, but, more importantly, it seems poised for continued growth, also supported by a strong balance sheet, suggest the analysts. Commercial and Infrastructure work should ensure ongoing growth for now, with a meaningful pick up in Resources work expected from CY20 onwards.

The latter is explained by the fact this company provides typical late in the cycle services to the Resources sector. Shorter term, a couple of large Resources projects is coming to completion, but the analysts see offset through strong activity levels in the Commercial and Infrastructure sectors.

Moelis thinks of this stock as "undervalued", with a price target of $0.88 accompanied by a Buy rating. Only minor amendments have been made to forecasts.

This report was released on 27 February 2019.

Target price is $0.88 Current Price is $0.55 Difference: $0.33
If SXE meets the Moelis target it will return approximately 60% (excluding dividends, fees and charges).

Forecast for FY19:

Moelis forecasts a full year FY19 dividend of 3.00 cents and EPS of 5.30 cents.
At the last closing share price the estimated dividend yield is 5.45%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 10.38.

Forecast for FY20:

Moelis forecasts a full year FY20 dividend of 3.00 cents and EPS of 6.10 cents.
At the last closing share price the estimated dividend yield is 5.45%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 9.02.

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

TNK    THINK CHILDCARE AND EDUCATION LIMITED

Childcare – Overnight Price: $1.84

Moelis rates ((TNK)) as Buy (1) –

Moelis believes Think Childcare's current strategy of investing in its platform and brand will improve its competitive position, ensuring acquisitions can be integrated effectively without sacrificing quality.

2018 results provided the validation of its strategy, in the broker's opinion, and were ahead of estimates. Momentum appears to have carried into the new year, setting the stage for strong growth in earnings per share of over 30%, Moelis calculates.

Moelis assesses the business can continue to grow and provide a return on capital invested at the same time it undertakes a step change in service quality. Buy rating and $2.50 target maintained.

This report was published on March 1 2019.

Target price is $2.50 Current Price is $1.84 Difference: $0.66
If TNK meets the Moelis target it will return approximately 36% (excluding dividends, fees and charges).

Forecast for FY19:

Moelis forecasts a full year FY19 dividend of 9.70 cents and EPS of 14.80 cents.
At the last closing share price the estimated dividend yield is 5.27%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 12.43.

Forecast for FY20:

Moelis forecasts a full year FY20 dividend of 12.00 cents and EPS of 18.40 cents.
At the last closing share price the estimated dividend yield is 6.52%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 10.00.

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

VTG    VITA GROUP LIMITED

Telecommunication – Overnight Price: $1.53

Canaccord Genuity rates ((VTG)) as Buy (1) –

While the interim report beat management's guidance range to the upside, Canaccord analysts are quick to point out FY19 is not being impacted by further remuneration reductions, which comes as part of the company's Master License Agreement with Telstra ((TLS)).

They add company management still expects to absorb remuneration reductions of circa -$11m at the gross margin line in FY20. It's because of this impact that Canaccord is not projecting any growth on the foreseeable horizon. Meanwhile, the network of 107 Telstra retail stores continues performing well, as well as the new and larger Telstra Business Technology Centres (TBTC).

Equally, Vita Group's move into the "Non-invasive medical aesthetics" (NIMA) market continues to progress. It appears, judging from Canaccord's forecasts, investors will have to wait until FY21 to see growth (7%) returning to this company's bottom line and EPS. Buy. Estimates have been lifted. Target price increases to $1.80.

This report was released on 24 February 2019.

Target price is $1.80 Current Price is $1.53 Difference: $0.27
If VTG meets the Canaccord Genuity target it will return approximately 18% (excluding dividends, fees and charges).
The company's fiscal year ends in June.

Forecast for FY19:

Canaccord Genuity forecasts a full year FY19 dividend of 10.21 cents and EPS of 17.30 cents.
At the last closing share price the estimated dividend yield is 6.67%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 8.84.

Forecast for FY20:

Canaccord Genuity forecasts a full year FY20 dividend of 10.50 cents and EPS of 17.40 cents.
At the last closing share price the estimated dividend yield is 6.86%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 8.79.

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources


E.L. & C Baillieu rates ((VTG)) as Buy (1) –

On Baillieu's observation, Vita Group's interim report beat forecasts with ICT (devices, connectivity and accessory categories) in particular performing well against a background of a challenging retail environment.

The analysts note management's ongoing tight focus on costs while store portfolio optimisation was maintained. Vita Group also extended its agreement with Telstra ((TLS)) by a year to 2024. The analysts believe 2H19 will be seasonally weaker than 1H19, but the strong performance in ICT and steady rollout of NIMA ("Non-invasive medical aesthetics") should continue. Buy. Target $1.60.

Note: despite the positive commentary, current forecasts imply no growth for each of the two years beyond FY19. See update by Canaccord Genuity for explanation. Dividend yield is relatively high with 100% franking added on top.

This report was released on 25 February 2019.

Target price is $1.60 Current Price is $1.53 Difference: $0.07
If VTG meets the E.L. & C Baillieu target it will return approximately 5% (excluding dividends, fees and charges).
The company's fiscal year ends in June.

Forecast for FY19:

E.L. & C Baillieu forecasts a full year FY19 dividend of 9.70 cents and EPS of 15.90 cents.
At the last closing share price the estimated dividend yield is 6.34%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 9.62.

Forecast for FY20:

E.L. & C Baillieu forecasts a full year FY20 dividend of 9.80 cents and EPS of 15.80 cents.
At the last closing share price the estimated dividend yield is 6.41%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 9.68.

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

WLL    WELLCOM GROUP LIMITED

Media – Overnight Price: $5.11

E.L. & C Baillieu rates ((WLL)) as Buy (1) –

Baillieu reiterates a Buy rating and envisages good momentum in the business, the stock offering value and a two-year compound growth rate in earnings per share of 12%.

Interim results were in line with forecasts. Earnings guidance for FY19 is maintained for growth of 10-15%.

The company also announced an important contract win with the Christie's auction house. Target is raised to $5.80 from $5.60.

This report was published on February 20, 2019.

Target price is $5.80 Current Price is $5.11 Difference: $0.69
If WLL meets the E.L. & C Baillieu target it will return approximately 14% (excluding dividends, fees and charges).
The company's fiscal year ends in June.

Forecast for FY19:

E.L. & C Baillieu forecasts a full year FY19 dividend of 23.50 cents and EPS of 33.90 cents.
At the last closing share price the estimated dividend yield is 4.60%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 15.07.

Forecast for FY20:

E.L. & C Baillieu forecasts a full year FY20 dividend of 26.50 cents and EPS of 37.70 cents.
At the last closing share price the estimated dividend yield is 5.19%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 13.55.

Market Sentiment: 1.0
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources


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As part of emerging new trends overseas, The Australian Broker Call *Extra* Edition also includes providers of sponsored research. Readers should bear in mind, sponsored research, while not necessarily of lower quality, has the embedded complication that the company that is the subject of the research has paid for this research. Providers of sponsored research that can potentially be included in this Report are Breakaway Research, Edison Investment Research, NDF Research, Pitt Street Research, and TMT Analytics.

Decisions about inclusions in this Report are made independently of the providers of stock market research and at full discretion of the team of journalists responsible for content at FNArena. Inclusion does not equal endorsement, in any way, shape or form. This Report is provided for informational purposes only.

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