Australian Broker Call *Extra* Edition – Feb 21, 2020

Daily Market Reports | Feb 21 2020

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)

AAC   ARQ   BKL   BRG   CGF   CKF   CQE   ELO   ENN   FBR   HRL (2)   IEL   IMA   IPH   JAN   MIN   MP1   NEA   OSL   PAL   PME   PNI   PPE   SM1  

AAC    AUSTRALIAN AGRICULTURAL COMPANY LIMITED

Agriculture - Overnight Price: $1.22

Bell Potter rates ((AAC)) as Buy (1) -

There has been a 31% rally in cattle prices with major implications for Australian Agricultural Company’s herd value and live cattle sales, both of which are expected to increase, forecasts Bell Potter.

Believing that an improved cost structure is unlikely to be in operation before FY21 and noting the importance of the same as an earnings drive, Bell Potter has not made any changes to the earnings forecast for the current period.

Bell Potter believes the issues faced by the company are cyclical and not structural, expecting an upturn in the company’s profitability. The broker retains its Buy rating with the target price at $1.40.

The report was published on February 7, 2020.

Target price is $1.40 Current Price is $1.22 Difference: $0.18
If AAC meets the Bell Potter target it will return approximately 15% (excluding dividends, fees and charges).
The company's fiscal year ends in March.

Forecast for FY20:

Bell Potter forecasts a full year FY20 dividend of 0.00 cents and EPS of minus 3.10 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is minus 39.35.

Forecast for FY21:

Bell Potter forecasts a full year FY21 dividend of 0.00 cents and EPS of 2.00 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 61.00.

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

ARQ    ARQ GROUP LIMITED

IT & Support - Overnight Price: $0.23

Bell Potter rates ((ARQ)) as Downgrade to Sell from Hold (5) -

Having announced the signing of an agreement to sell its Enterprise Services division for $35m, Bell Potter believes the net proceeds will be between $20-25m on account of deferred consideration, transaction costs, working capital and insurance cover. The broker states the funds from the proceeds would be used to reduce the debt of $60m.

Bell Potter believes the amount of debt left would still be huge given that the remaining SMB division is forecasted to generate operating profits of around $10m in 2019.

Having updated forecasts with only SMB division, the broker expects operating profits to be $11.8m in 2020 and grow modestly in 2021 and 2022.

The broker expects the sale of the SMB division in the future and has downgraded the rating to Sell with the target price at $0.25.

The report was published on February 12, 2020.

Target price is $0.25 Current Price is $0.23 Difference: $0.02
If ARQ meets the Bell Potter target it will return approximately 9% (excluding dividends, fees and charges).
The company's fiscal year ends in December.

Forecast for FY19:

Bell Potter forecasts a full year FY19 dividend of 0.00 cents and EPS of minus 2.90 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is minus 7.93.

Forecast for FY20:

Bell Potter 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 17.69.

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

BKL    BLACKMORES LIMITED

Health & Nutrition - Overnight Price: $70.94

Wilsons rates ((BKL)) as Underweight (5) -

Blackmores released the first-half result which was a little better than expected along with a disappointing full-year guidance. The operating cash flows were lower with lower marketing spend offset by higher costs.

The broker warns about an increase in the balance sheet risk due to significant earnings reduction in FY20. Sale of receivables which incurred in the first half is expected to be an ongoing feature. The broker also factors in supply chain disruptions due to coronavirus and anticipates a loss of circa -$15m in sales in the second half.

The broker's forecasts sit on the lower end of the guidance range for FY20 for both revenue and profit after taxes but an increase in the profit after taxes in FY21 and FY22 is expected.

Wilsons considers the stock overpriced and rates it as Underweight with the target price at $59.40.

The report was published on February 13, 2020.

Target price is $59.40 Current Price is $70.94 Difference: minus $11.54 (current price is over target).
If BKL meets the Wilsons target it will return approximately minus 16% (excluding dividends, fees and charges - negative figures indicate an expected loss).
Current consensus price target is $66.04, suggesting downside of -6.9%(ex-dividends)
The company's fiscal year ends in June.

Forecast for FY20:

Wilsons forecasts a full year FY20 dividend of 0.00 cents and EPS of 90.90 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 78.04.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 108.3, implying annual growth of -65.0%.
Current consensus DPS estimate is 16.4, implying a prospective dividend yield of 0.2%.
Current consensus EPS estimate suggests the PER is 65.5.

Forecast for FY21:

Wilsons forecasts a full year FY21 dividend of 134.40 cents and EPS of 192.00 cents.
At the last closing share price the estimated dividend yield is 1.89%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 36.95.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 209.7, implying annual growth of 93.6%.
Current consensus DPS estimate is 143.1, implying a prospective dividend yield of 2.0%.
Current consensus EPS estimate suggests the PER is 33.8.

Market Sentiment: -0.3
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

BRG    BREVILLE GROUP LIMITED

Household & Personal Products - Overnight Price: $22.32

Bell Potter rates ((BRG)) as Upgrade to Hold from Sell (3) -

Bell Potter notes strong double-digit revenue growth for Breville Group’s product segment across all markets with Europe having the highest revenue lift of 60%. The rollout in Europe continues to progress well with traction being achieved in Germany, Switzerland and Spain with France being next in line in the second half.

Bell Potter notes a direct go-to-market model enables the group to have an owned brand market presence and close engagement with retail partners in Europe, leading to deeper market penetration and stronger revenue growth.

The broker expects FY20 operating profits to be consistent with the current consensus of circa $110m. Bell Potter believes the valuations to be justified and upgrades to Hold from Sell with the target price at $25.15.

The report was published on February 13, 2020.

Target price is $25.15 Current Price is $22.32 Difference: $2.83
If BRG meets the Bell Potter target it will return approximately 13% (excluding dividends, fees and charges).
Current consensus price target is $22.01, suggesting downside of -1.4%(ex-dividends)
The company's fiscal year ends in June.

Forecast for FY20:

Bell Potter forecasts a full year FY20 dividend of 40.50 cents and EPS of 57.80 cents.
At the last closing share price the estimated dividend yield is 1.81%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 38.62.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 57.9, implying annual growth of 11.8%.
Current consensus DPS estimate is 40.3, implying a prospective dividend yield of 1.8%.
Current consensus EPS estimate suggests the PER is 38.5.

Forecast for FY21:

Bell Potter forecasts a full year FY21 dividend of 48.50 cents and EPS of 68.60 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 32.54.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 66.3, implying annual growth of 14.5%.
Current consensus DPS estimate is 45.8, implying a prospective dividend yield of 2.1%.
Current consensus EPS estimate suggests the PER is 33.7.

Market Sentiment: 0.0
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

CGF    CHALLENGER LIMITED

Wealth Management & Investments - Overnight Price: $10.38

Shaw and Partners rates ((CGF)) as Sell (5) -

Challenger released first-half results and Shaw and Partners notes a decline in the company’s cash operating earnings margin to 3.53% from 3.67% during the first half. The broker considers low returns on shareholders’ funds as well as low capital growth to be the reason behind the decline.

Shaw and Partners also notes the company’s spread of investment yield over the cost of funds is likely to decline. Added to this is a reduction of -$8m in investment income in the second half, further reducing the investment yield.

With domestic annuity sales down -24% along with an increase in maturities and repayments by -13% in the first half, the broker anticipates a net annuity flow decline of -81% for the period. The broker puts a Sell rating on the stock with the target price of $6.00.

The report was published on February 12, 2020.

Target price is $6.00 Current Price is $10.38 Difference: minus $4.38 (current price is over target).
If CGF meets the Shaw and Partners target it will return approximately minus 42% (excluding dividends, fees and charges - negative figures indicate an expected loss).
Current consensus price target is $9.10, suggesting downside of -12.3%(ex-dividends)
The company's fiscal year ends in June.

Forecast for FY20:

Shaw and Partners forecasts a full year FY20 dividend of 36.00 cents and EPS of 69.00 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 15.04.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 56.7, implying annual growth of 11.4%.
Current consensus DPS estimate is 35.5, implying a prospective dividend yield of 3.4%.
Current consensus EPS estimate suggests the PER is 18.3.

Forecast for FY21:

Shaw and Partners forecasts a full year FY21 dividend of 36.00 cents and EPS of 58.00 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 17.90.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 59.7, implying annual growth of 5.3%.
Current consensus DPS estimate is 35.9, implying a prospective dividend yield of 3.5%.
Current consensus EPS estimate suggests the PER is 17.4.

Market Sentiment: -0.1
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

CKF    COLLINS FOODS LIMITED

Food, Beverages & Tobacco - Overnight Price: $9.89

Wilsons rates ((CKF)) as Upgrade to Overweight from Market Weight (1) -

Wilsons notes robust trading conditions for Collins Foods, especially with an increase in KFC sales, while expecting the same for Taco Bells in FY22. The broker believes EPS growth would remain in low teens till FY21 before increasing to 20% in FY22, mostly on the back of Taco Bell shifting to positive earnings.

On the financial front, the broker expects the net debt to remain the same due to Collins Foods’ store openings, but the leverage ratio to decrease to 1.3x from 1.8x in FY22.

The stock price has declined by -10% since the first half of FY20 results and the broker considers the valuation attractive currently. Wilsons upgrades to Overweight from Market Weight with the target price at $10.65.

The report was published on February 12, 2020.

Target price is $10.65 Current Price is $9.89 Difference: $0.76
If CKF meets the Wilsons target it will return approximately 8% (excluding dividends, fees and charges).
The company's fiscal year ends in May.

Forecast for FY20:

Wilsons forecasts a full year FY20 dividend of 20.50 cents and EPS of 42.80 cents.
At the last closing share price the estimated dividend yield is 2.07%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 23.11.

Forecast for FY21:

Wilsons forecasts a full year FY21 dividend of 24.00 cents and EPS of 48.00 cents.
At the last closing share price the estimated dividend yield is 2.43%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 20.60.

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

CQE    CHARTER HALL SOCIAL INFRASTRUCTURE REIT

Childcare - Overnight Price: $3.83

Canaccord Genuity rates ((CQE)) as Hold (3) -

Charter Hall Social Infrastructure REIT delivered a solid first-half result with major metrics in-line with Canaccord Genuity’s expectations. The broker is positive about the REIT owing to factors like high occupancy, conservative triple net leases, strong yields, long lease expiry and a predictable earnings profile.

Canaccord Genuity notes the company signed 45 new long-term leases and is also upbeat about the childcare sector. The broker notes there to be no change in the company’s EPS and distribution guidance and believes the stock price is close to fair value.

The broker maintains the Hold rating with the target price at $3.54.

The report was published on February 12, 2020.

Target price is $3.54 Current Price is $3.83 Difference: minus $0.29 (current price is over target).
If CQE meets the Canaccord Genuity target it will return approximately minus 8% (excluding dividends, fees and charges - negative figures indicate an expected loss).
The company's fiscal year ends in June.

Forecast for FY20:

Canaccord Genuity forecasts a full year FY20 dividend of 16.70 cents and EPS of 17.20 cents.
At the last closing share price the estimated dividend yield is 4.36%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 22.27.

Forecast for FY21:

Canaccord Genuity forecasts a full year FY21 dividend of 17.50 cents and EPS of 18.20 cents.
At the last closing share price the estimated dividend yield is 4.57%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 21.04.

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


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