Australian Broker Call *Extra* Edition – May 05, 2021

Daily Market Reports | May 05 2021

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)

ARF   AZJ   BGA   BHP   CGF   DSE   ELO   FPH   HDN   HUB   OSL   PBH   RIO   SCP   WSA  

ARF    ARENA REIT

REITs - Overnight Price: $3.43

Jarden rates ((ARF)) as Initiation of coverage with Overweight (2) -

Jarden likes passive yield REIT’s for attractive valuations, total shareholder returns and support from demand for real Australian assets. Also, there’s considered capacity to fund investment and growth. 

Some REIT’s are trading at a discount to valuation which may drive potential M&A activity, explains the broker. Jarden prefers exposure to non-discretionary Retail for the ability to boost growth with developments and acquisitions. 

The broker also likes the childcare/social infrastructure thematic and the Arena REIT for its development-based approach. It's considered funds from operations (FFO) and DPU should benefit from deployment of IPO proceeds from last year.

The analyst initiates coverage with an Overweight rating and $3.45 target and believes an attractive dividend yield and 5-7% annual FFO growth should continue to support the share price.

This report was published on April 14, 2021.

Target price is $3.45 Current Price is $3.43 Difference: $0.02
If ARF meets the Jarden target it will return approximately 1% (excluding dividends, fees and charges).
Current consensus price target is $3.14, suggesting downside of -8.4%(ex-dividends)
The company's fiscal year ends in June.

Forecast for FY21:

Jarden forecasts a full year FY21 dividend of 14.60 cents and EPS of 14.80 cents.
At the last closing share price the estimated dividend yield is 4.26%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 23.18.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 14.7, implying annual growth of -36.6%.
Current consensus DPS estimate is 14.6, implying a prospective dividend yield of 4.3%.
Current consensus EPS estimate suggests the PER is 23.3.

Forecast for FY22:

Jarden forecasts a full year FY22 dividend of 15.60 cents and EPS of 15.70 cents.
At the last closing share price the estimated dividend yield is 4.55%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 21.85.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 16.0, implying annual growth of 8.8%.
Current consensus DPS estimate is 15.8, implying a prospective dividend yield of 4.6%.
Current consensus EPS estimate suggests the PER is 21.4.

Market Sentiment: 0.7
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

BGA    BEGA CHEESE LIMITED

Dairy - Overnight Price: $6.30

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

Following the announcement at first half 2021 that Reckitt Benckiser (RB) will cease operations at the Derrimut IMF canning facility, RB has now advised Bega Cheese the company will also cease the services agreement at MSD2 at TMI.

The termination of these agreements, which ran until December 26, results in combined payments to Bega Cheese of $55.5m over FY21-22. Bega originally sold these facilities to then Mead Johnson for $200m and entered a services agreement to manage the facilities in 2017.

While the magnitude of the services agreement has never been disclosed, Bell Potter had previously estimated $7-8m in earnings (EBITDA) across both facilities to Bega. In light of the larger settlement payment, the broker has raised this estimate to around $10m earnings (EBITDA) (i.e. $55.5m spread over the remaining 5.5 years).

At the first half 2021 result, Bell Potter had removed all earnings from the RB service agreement across both facilities. However, the broker has lifted the void by an additional $2m earnings (EBITDA) to reflect the higher settlement payment.

For the most part this is mitigated by expected net interest savings resulting in a sub-1% downgrade to Bell Potter’s FY22-23 earnings per share (EPS) forecasts.

Buy rating unchanged, with the target price increasing to $7.35 from $7.00.

This report was published on April 21, 2021.

Target price is $7.35 Current Price is $6.30 Difference: $1.05
If BGA meets the Bell Potter target it will return approximately 17% (excluding dividends, fees and charges).
Current consensus price target is $6.78, suggesting upside of 7.7%(ex-dividends)
The company's fiscal year ends in June.

Forecast for FY21:

Bell Potter forecasts a full year FY21 dividend of 11.00 cents and EPS of 13.40 cents.
At the last closing share price the estimated dividend yield is 1.75%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 47.01.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 16.4, implying annual growth of 67.9%.
Current consensus DPS estimate is 9.7, implying a prospective dividend yield of 1.5%.
Current consensus EPS estimate suggests the PER is 38.4.

Forecast for FY22:

Bell Potter forecasts a full year FY22 dividend of 18.00 cents and EPS of 30.10 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 20.93.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 29.8, implying annual growth of 81.7%.
Current consensus DPS estimate is 11.8, implying a prospective dividend yield of 1.9%.
Current consensus EPS estimate suggests the PER is 21.1.

Market Sentiment: 0.8
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

BHP    BHP GROUP

Bulks - Overnight Price: $48.23

Goldman Sachs rates ((BHP)) as Buy (1) -

Following BHP Group’s better than expected reported oil, met coal, copper and iron ore production for the March Quarter 2021, Goldman Sachs has made some adjustments to production guidance.

March quarter highlights included: Pilbara production (iron ore) decreased -5% quarter-on-quarter (QoQ) to 67Mt; Copper -9% QoQ to 391kt; and Petroleum up 7% QoQ to 25.4Mmboe.

The broker is forecasting -3% production decline (in copper equivalent terms) in FY21, due in part to coal (met and thermal) downgrades on wet weather and weak demand, and other copper (Spence ramp-up) trimmed slightly.

But Goldman Sachs is forecasting 3-6% growth in FY22/23 with the ramp-up of Spence hypogene copper in Chile, together with production from several new conventional oil projects.

Goldman Sachs has increased FY22-FY23 earnings per share (EPS) by 2%/3% on higher copper production and lower costs at Escondida versus the broker’s prior forecasts.

This results in Goldman Sachs’ net asset value (NAV) increasing 1% to $49.4/sh.

Buy rating retained, and target price increases to $54.2 from $53.50.

This report was published on April 21, 2021.

Target price is $54.20 Current Price is $48.23 Difference: $5.97
If BHP meets the Goldman Sachs target it will return approximately 12% (excluding dividends, fees and charges).
Current consensus price target is $47.71, suggesting downside of -1.1%(ex-dividends)
The company's fiscal year ends in June.

Forecast for FY21:

Goldman Sachs forecasts a full year FY21 dividend of 330.74 cents and EPS of 437.34 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 11.03.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 419.5, implying annual growth of N/A.
Current consensus DPS estimate is 325.9, implying a prospective dividend yield of 6.8%.
Current consensus EPS estimate suggests the PER is 11.5.

Forecast for FY22:

Goldman Sachs forecasts a full year FY22 dividend of 338.94 cents and EPS of 483.81 cents.
At the last closing share price the estimated dividend yield is 7.03%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 9.97.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 422.0, implying annual growth of 0.6%.
Current consensus DPS estimate is 322.7, implying a prospective dividend yield of 6.7%.
Current consensus EPS estimate suggests the PER is 11.4.

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.
Market Sentiment: 0.4
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

DSE    DROPSUITE LIMITED

Cloud services - Overnight Price: $0.20

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

Following significant first quarter 2021 growth across annual recurring revenue (ARR), average return per user (ARPU) and Users metrics, Shaw and Partners has upgraded Dropsuite’s revenue forecasts by 6.7%, 5.8% and 5.8% and underlying earnings forecasts (EBITDA) by 4.0%, 10.1% and 7.5% across FY21 - FY23 respectively.

Commenting on the result, Shaw notes, on a constant currency basis, Dropsuite has managed to maintain a massive 77% year-on-year (YoY) growth in ARR alongside expanding ARPU and gross margins.

Shaw forecasts $20m-plus of ARR by the end of FY22 which on the current EV/ARR multiple would imply a share price greater than 2x higher than current levels.

With Dropsuite still trading at -70% discount to peers, Shaw believes a re-rating is justified as the business continues to deliver results above market expectation.

Buy rating is maintained, target price increases to $0.30 from $0.28.

This report was issue on April 21, 2021

Target price is $0.30 Current Price is $0.20 Difference: $0.1
If DSE meets the Shaw and Partners target it will return approximately 50% (excluding dividends, fees and charges).
The company's fiscal year ends in June.

Forecast for FY21:

Shaw and Partners forecasts a full year FY21 dividend of 0.00 cents and EPS of minus 0.10 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is minus 200.00.

Forecast for FY22:

Shaw and Partners forecasts a full year FY22 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 100.00.

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


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