Weekly Ratings, Targets, Forecast Changes – 25-12-20

This story features A2 MILK COMPANY LIMITED, and other companies. For more info SHARE ANALYSIS: A2M

By Rudi Filapek-Vandyck, Editor FNArena

Guide:

The FNArena database tabulates the views of seven major Australian and international stock brokers: Citi, Credit Suisse, 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: Monday December 21 to Friday December 25, 2020
Total Upgrades: 1
Total Downgrades: 2
Net Ratings Breakdown: Buy 51.65%; Hold 38.68%; Sell 9.67%

Upgrade

THE A2 MILK COMPANY LIMITED ((A2M)) Upgrade to Equal-weight from Underweight by Morgan Stanley .B/H/S: 4/1/1

The risks to guidance which have been present for some time have now become reality, Morgan Stanley observes. A2 Milk now expects FY21 operating earnings (EBITDA) of NZ$406m at the mid point, a -29% decline on prior guidance. This reflects a reduction in expected sales and a lower margin.

The main driver of the downgrade was the heavy reliance on the daigou channel, which has been constrained by travel disruptions related to the pandemic. The company had expected the CBEC channel would pick up some of the slack but this has not occurred.

As the stock is now down -45% since the August result it represents reasonable value, in the broker's view, and the rating is upgraded to Equal-weight from Underweight. Target is reduced to $11.00 from $12.40. Industry view is Cautious.

Downgrade

ASALEO CARE LIMITED ((AHY)) Downgrade to Neutral from Buy by Citi .B/H/S: 1/2/0

Asaleo Care will acquire TOM Organic for $12.75m. This is a feminine hygiene brand and a natural adjacency to the Libra business. Synergies in manufacturing and increased distribution are expected to be significant.

Citi estimates the deal will be accretive to earnings per share at around 5.5% by the second year of ownership.

The broker downgrades to Neutral from Buy given the increase in the share price following the indicative proposal from Essity. Target is raised to $1.40 from $1.30.

The broker suggests the acquisition is only one possible bolt-on for the company and may embolden the board to rebuff Essity's initial offer.

NIB HOLDINGS LIMITED ((NHF)) Downgrade to Neutral from Buy by Citi .B/H/S: 2/5/0

The federal government has approved premium rate increases from April 1, 2021 that are better than Citi anticipated. This is expected to provide support for gross margins in the short term.

Nib's rate increase was -30 basis points below the industry average last year but a 4.36% increase this year looks like an outlier to the broker. The broker downgrades to Neutral from Buy, given a strong rally in the share price. Target is lifted to $5.90 from $5.15.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Broker Rating

Order Company New Rating Old Rating Broker Upgrade 1 THE A2 MILK COMPANY LIMITED Neutral Sell Morgan Stanley Downgrade 2 ASALEO CARE LIMITED Neutral Buy Citi 3 NIB HOLDINGS LIMITED Neutral Buy Citi

Recommendation

Positive Change Covered by > 2 Brokers Order Symbol Company New Rating Previous Rating Change Recs 1 PRU PERSEUS MINING LIMITED 100.0% 67.0% 33.0% 3 2 SAR SARACEN MINERAL HOLDINGS LIMITED 50.0% 25.0% 25.0% 4 3 SWM SEVEN WEST MEDIA LIMITED 100.0% 75.0% 25.0% 4 4 Z1P ZIP CO LIMITED 10.0% -10.0% 20.0% 5 5 EBO EBOS GROUP LIMITED 80.0% 60.0% 20.0% 5 6 A2M THE A2 MILK COMPANY LIMITED 36.0% 21.0% 15.0% 7 7 CGF CHALLENGER LIMITED 43.0% 33.0% 10.0% 7 8 FCL FINEOS CORPORATION HOLDINGS PLC 88.0% 83.0% 5.0% 4

Negative Change Covered by > 2 Brokers Order Symbol Company New Rating Previous Rating Change Recs 1 AHY ASALEO CARE LIMITED 33.0% 67.0% -34.0% 3 2 NEA NEARMAP LTD 67.0% 100.0% -33.0% 3 3 NHF NIB HOLDINGS LIMITED 21.0% 42.0% -21.0% 7 4 BOQ BANK OF QUEENSLAND LIMITED 14.0% 29.0% -15.0% 7 5 NCM NEWCREST MINING LIMITED 50.0% 64.0% -14.0% 7 6 QBE QBE INSURANCE GROUP LIMITED 50.0% 64.0% -14.0% 7 7 CPU COMPUTERSHARE LIMITED 8.0% 21.0% -13.0% 6 8 MPL MEDIBANK PRIVATE LIMITED 29.0% 33.0% -4.0% 7

Target Price

Positive Change Covered by > 2 Brokers Order Symbol Company New Target Previous Target Change Recs 1 SWM SEVEN WEST MEDIA LIMITED 0.350 0.285 22.81% 4 2 CGF CHALLENGER LIMITED 4.983 4.672 6.66% 7 3 NHF NIB HOLDINGS LIMITED 5.350 5.100 4.90% 7 4 AHY ASALEO CARE LIMITED 1.333 1.300 2.54% 3 5 BOQ BANK OF QUEENSLAND LIMITED 7.150 7.036 1.62% 7 6 CPU COMPUTERSHARE LIMITED 13.622 13.433 1.41% 6

Negative Change Covered by > 2 Brokers Order Symbol Company New Target Previous Target Change Recs 1 A2M THE A2 MILK COMPANY LIMITED 12.770 15.658 -18.44% 7 2 NEA NEARMAP LTD 2.883 3.150 -8.48% 3 3 PRU PERSEUS MINING LIMITED 1.450 1.533 -5.41% 3 4 SAR SARACEN MINERAL HOLDINGS LIMITED 5.463 5.688 -3.96% 4 5 QBE QBE INSURANCE GROUP LIMITED 10.953 11.403 -3.95% 7 6 NCM NEWCREST MINING LIMITED 32.673 33.597 -2.75% 7 7 Z1P ZIP CO LIMITED 6.508 6.670 -2.43% 5 8 FCL FINEOS CORPORATION HOLDINGS PLC 4.855 4.940 -1.72% 4

Earning Forecast

Positive Change Covered by > 2 Brokers Order Symbol Company New EF Previous EF Change Recs 1 COE COOPER ENERGY LIMITED 0.166 0.146 13.70% 5 2 NEC NINE ENTERTAINMENT CO. HOLDINGS LIMITED 12.236 10.980 11.44% 5 3 BAP BAPCOR LIMITED 35.472 33.457 6.02% 6 4 Z1P ZIP CO LIMITED -11.200 -11.620 3.61% 5 5 BSL BLUESCOPE STEEL LIMITED 145.133 140.617 3.21% 6 6 FMG FORTESCUE METALS GROUP LTD 344.681 335.397 2.77% 7 7 SGM SIMS LIMITED 27.018 26.418 2.27% 6 8 EBO EBOS GROUP LIMITED 112.820 110.820 1.80% 5 9 ABC ADBRI LIMITED 15.753 15.510 1.57% 7 10 BEN BENDIGO AND ADELAIDE BANK LIMITED 53.267 52.600 1.27% 7

Negative Change Covered by > 2 Brokers Order Symbol Company New EF Previous EF Change Recs 1 PPH PUSHPAY HOLDINGS LIMITED 3.716 14.935 -75.12% 4 2 VEA VIVA ENERGY GROUP LIMITED 0.698 1.298 -46.22% 5 3 QBE QBE INSURANCE GROUP LIMITED -62.066 -44.231 -40.32% 7 4 FCL FINEOS CORPORATION HOLDINGS PLC -2.067 -1.653 -25.05% 4 5 PRU PERSEUS MINING LIMITED 5.550 7.027 -21.02% 3 6 NIC NICKEL MINES LIMITED 6.885 7.930 -13.18% 3 7 SM1 SYNLAIT MILK LIMITED 34.334 38.358 -10.49% 4 8 A2M THE A2 MILK COMPANY LIMITED 45.729 50.601 -9.63% 7 9 SBM ST BARBARA LIMITED 25.850 27.964 -7.56% 5 10 RRL REGIS RESOURCES LIMITED 45.286 48.903 -7.40% 7

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