Australian Broker Call *Extra* Edition – May 08, 2020

Daily Market Reports | May 08 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)

ABA   AUB   BTH   CCP   CCX (2)   EML   EQT   EVT   GNX   GOR   HSN   IEL   IFM   JLG   KMD   OSL   PSQ (2)   RBL   SLK   SOL   UMG  

PSQ    PACIFIC SMILES GROUP LIMITED

Healthcare services - Overnight Price: $1.21

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

The Pacific Smiles Group, impacted by covid-19, has withdrawn FY20 guidance along with closing down 76 centres and standing down affected employees with two weeks’ pay, notes Bell Potter. The broker reports cost management measures taken include freezing capex, curbing non-essential expenses, reducing rent and salaries of the board, CEO and executive management. Further, no final dividend is expected in FY20.

Bell Potter is of the view that the group could benefit from some pent-up demand once the situation normalises and also expects it could take some market share from smaller practices in the aftermath. The broker makes large reductions to EPS forecasts for FY20-22 driven by a double percentage reduction in forecasts for revenue and operating income.

Buy retained with target price at $1.17.

The report was published on April 1, 2020.

Target price is $1.17 Current Price is $1.21 Difference: minus $0.04 (current price is over target).
If PSQ meets the Bell Potter target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).
The company's fiscal year ends in June.

Forecast for FY20:

Bell Potter forecasts a full year FY20 dividend of 2.40 cents and EPS of minus 0.70 cents.
At the last closing share price the estimated dividend yield is 1.98%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is minus 172.86.

Forecast for FY21:

Bell Potter forecasts a full year FY21 dividend of 1.10 cents and EPS of 0.70 cents.
At the last closing share price the estimated dividend yield is 0.91%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 172.86.

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


Wilsons rates ((PSQ)) as Overweight (1) -

Pacific Smiles Group has closed the majority of its dental centres due to covid-19. Most employees have been stood down with two weeks’ pay and salaries of senior management have taken a hit.

Wilsons notes circa $19m worth in cash and $10m in undrawn debt facilities are available to the company.

The broker anticipates a -90% drop in the activity levels with the group expected to report a loss in the first half of FY21. The situation is expected to recover rapidly thereafter.

The group’s access to capital may help in targeting new jurisdictions while local competition is weak, with the broker calculating the scope to reach about 275-300 practices.

Wilsons expects to see a ramp-up in the group’s greenfield and brownfield activities. The stock is rated Overweight with target price at $1.20.

The report was published on April 1, 2020.

Target price is $1.20 Current Price is $1.21 Difference: minus $0.01 (current price is over target).
If PSQ meets the Wilsons target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).
The company's fiscal year ends in June.

Forecast for FY20:

Wilsons forecasts a full year FY20 dividend of 2.40 cents and EPS of minus 3.90 cents.
At the last closing share price the estimated dividend yield is 1.98%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is minus 31.03.

Forecast for FY21:

Wilsons forecasts a full year FY21 dividend of 0.00 cents and EPS of minus 17.60 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is minus 6.87.

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

RBL    REDBUBBLE LIMITED

Software & Services - Overnight Price: $0.95

Canaccord Genuity rates ((RBL)) as Buy (1) -

Redbubble has withdrawn previous guidance and Canaccord Genuity notes a modest contraction in revenue due to covid-19. The broker predicts a decline of -5-10% in group sales but acknowledges volatility in trading patterns.

Government stimulus in Europe, US and Australia may help boost Redbubble’s growth, predicts the broker, adding that the reduced ad spending on large online advertising platforms (think Google) will likely help the company’s customer acquisition cost (CAC) and offset lower website conversion rates.

Gross profit margins are expected to hold constant for now, the broker noting the company is implementing cost reduction measures including director/executive level pay cuts and decreasing the number of working days.

The broker has downgraded the gross profit after paid acquisition (GPAPA) forecasts by -11%, -19% and -19% for FY20-22. Points in the company’s favour include a shift towards online services, net cash position, flexible costs and a stable revenue base.

Buy retained with target price reduced to $1.50 from $1.80.

The report was published on April 1, 2020.

Target price is $1.50 Current Price is $0.95 Difference: $0.55
If RBL meets the Canaccord Genuity target it will return approximately 58% (excluding dividends, fees and charges).
The company's fiscal year ends in June.

Forecast for FY20:

Canaccord Genuity forecasts a full year FY20 dividend of 0.00 cents and EPS of minus 2.00 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is minus 47.50.

Forecast for FY21:

Canaccord Genuity forecasts a full year FY21 dividend of 0.00 cents and EPS of minus 1.00 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is minus 95.00.

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

SLK    SEALINK TRAVEL GROUP LIMITED

Travel, Leisure & Tourism - Overnight Price: $3.65

E.L. & C Baillieu rates ((SLK)) as Buy (1) -

SeaLink Travel Group has removed guidance for the second half and has taken a number of measures including scaling back some businesses, implementing cost reductions and postponing all non-essential capex, notes Baillieu.

Bus service of the Transit Systems Group (SeaLink Travel Group's latest acquisition), deemed essential, is operating as expected and is backed by contracts with nil fare risk to the group, notes the broker, adding others were not so lucky with Fraser Island operations and Captain Cook Cruises suspended.

The broker has downgraded operating income forecast by -14% for FY20. On the positive side, the group has 80% revenue coming from operating contracts without farebox risk. Buy maintained with target price at $3.60.

The report was published on March 31, 2020.

Target price is $3.60 Current Price is $3.65 Difference: minus $0.05 (current price is over target).
If SLK meets the E.L. & C Baillieu target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).
The company's fiscal year ends in June.

Forecast for FY20:

E.L. & C Baillieu forecasts a full year FY20 dividend of 14.00 cents and EPS of 22.20 cents.
At the last closing share price the estimated dividend yield is 3.84%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 16.44.

Forecast for FY21:

E.L. & C Baillieu forecasts a full year FY21 dividend of 16.00 cents and EPS of 25.10 cents.
At the last closing share price the estimated dividend yield is 4.38%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 14.54.

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

SOL    WASHINGTON H SOUL PATTINSON & COMPANY LIMITED

Diversified Financials - Overnight Price: $17.86

Shaw and Partners rates ((SOL)) as Buy (1) -

Washington H Soul Pattinson’s first-half net profit was $124.7m with a dividend of $0.25 and Net Asset Value (NAV) up 0.2% to $5.5b for the period.

Shaw and Partners considers the company a fundamentally attractive investment in these uncertain times, reminding investors of its defensive nature, comfortable debt position, a track record of paying increased dividends and management expertise.

Some of the priorities, notes the broker, include investing across new asset classes. Buy rating retained with target price reduced to $25 from $26.

The report was published on March 26, 2020.

Target price is $25.00 Current Price is $17.86 Difference: $7.14
If SOL meets the Shaw and Partners target it will return approximately 40% (excluding dividends, fees and charges).
The company's fiscal year ends in July.

Forecast for FY20:

Shaw and Partners forecasts a full year FY20 dividend of 51.00 cents and EPS of 84.20 cents.
At the last closing share price the estimated dividend yield is 2.86%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 21.21.

Forecast for FY21:

Shaw and Partners forecasts a full year FY21 dividend of 52.00 cents and EPS of 78.20 cents.
At the last closing share price the estimated dividend yield is 2.91%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 22.84.

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

UMG    UNITED MALT GROUP LIMITED

Agriculture - Overnight Price: $4.10

Bell Potter rates ((UMG)) as Initiation of coverage with Buy (1) -

United Malt Group, the newly listed entity that demerged from GrainCorp, is the fourth largest commercial maltster globally with a capacity of about 1.25 Mtpa. The group has net debt of $433m, at the upper end yet considered manageable with the broker forecasting a 60% payout ratio.

Bell Potter initiates coverage on the stock noting various characteristics investors should pay attention to; a continuous demand for beer, high levels of contracted volumes, foreign income with exposure to a weakening AUD and capacity expansion plans in FY22.

The broker initiates coverage with a Buy rating and target price at $5.

The report was published on March 27, 2020.

Target price is $5.00 Current Price is $4.10 Difference: $0.9
If UMG meets the Bell Potter target it will return approximately 22% (excluding dividends, fees and charges).
The company's fiscal year ends in September.

Forecast for FY20:

Bell Potter forecasts a full year FY20 dividend of 8.00 cents and EPS of 25.80 cents.
At the last closing share price the estimated dividend yield is 1.95%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 15.89.

Forecast for FY21:

Bell Potter forecasts a full year FY21 dividend of 18.80 cents and EPS of 31.30 cents.
At the last closing share price the estimated dividend yield is 4.59%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 13.10.

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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