Australian Broker Call
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December 23, 2020
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COMPANIES DISCUSSED IN THIS ISSUE
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The number next to the symbol represents the number of brokers covering it for this report -(if more than 1).
Last Updated: 05:00 PM
Your daily news report on the latest recommendation, valuation, forecast and opinion changes.
This report includes concise but limited reviews of research recently published by Stockbrokers, 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.
For more info about the different terms used by stockbrokers, as well as the different methodologies behind similar sounding ratings, download our guide HERE
Today's Upgrades and Downgrades
| AHY - | Asaleo Care | Downgrade to Neutral from Buy | Citi |
| NHF - | nib Holdings | Downgrade to Neutral from Buy | Citi |
AHY ASALEO CARE LIMITED
Household & Personal Products
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Overnight Price: $1.34
Citi rates AHY as Downgrade to Neutral from Buy (3) -
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.
Target price is $1.40 Current Price is $1.34 Difference: $0.06
If AHY meets the Citi target it will return approximately 4% (excluding dividends, fees and charges).
Current consensus price target is $1.33, suggesting downside of -2.0% (ex-dividends)
The company's fiscal year ends in December.
Forecast for FY20:
Citi forecasts a full year FY20 dividend of 2.50 cents and EPS of 7.20 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 7.2, implying annual growth of 75.6%. Current consensus DPS estimate is 2.5, implying a prospective dividend yield of 1.8%. Current consensus EPS estimate suggests the PER is 18.9. |
Forecast for FY21:
Citi forecasts a full year FY21 dividend of 5.00 cents and EPS of 7.70 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 7.5, implying annual growth of 4.2%. Current consensus DPS estimate is 5.0, implying a prospective dividend yield of 3.7%. Current consensus EPS estimate suggests the PER is 18.1. |
Market Sentiment: 0.3
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
EOS ELECTRO OPTIC SYSTEMS HOLDINGS LIMITED
Hardware & Equipment
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Overnight Price: $5.90
Citi rates EOS as Buy (1) -
The company has withdrawn 2020 earnings (EBIT) guidance which, as Citi notes, highlights the uncertainty surrounding the timing of RWS deliveries to foreign customers because of the pandemic.
While the Australian Defence Force contract for 251 RWS has commenced this has not offset the headwinds such as freight bottlenecks and the adverse impact of a stronger Australian dollar.
The withdrawal of guidance was not surprising and the broker still maintains a Buy/High Risk rating given the exposure to high growth sectors. Target is reduced to $7.75 from $7.80.
Target price is $7.75 Current Price is $5.90 Difference: $1.85
If EOS meets the Citi target it will return approximately 31% (excluding dividends, fees and charges).
The company's fiscal year ends in December.
Forecast for FY20:
Citi forecasts a full year FY20 dividend of 0.00 cents and EPS of 0.40 cents. |
Forecast for FY21:
Citi forecasts a full year FY21 dividend of 0.00 cents and EPS of 26.20 cents. |
Market Sentiment: 1.0
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
FCL FINEOS CORPORATION HOLDINGS PLC
Cloud services
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Overnight Price: $3.53
Citi rates FCL as Initiation of coverage with Buy (1) -
Citi initiates coverage on FINEOS Corp with a Buy rating and $4.60 target. The broker believes the company is well-positioned to grow its share of the life, accident & health insurance industry.
The business has a larger exposure to professional services compared with peers but the broker finds the valuation attractive, with the stock trading at a -55% discount to vertical software peers and a -70% discount to its two closest listed peers.
Target price is $4.60 Current Price is $3.53 Difference: $1.07
If FCL meets the Citi target it will return approximately 30% (excluding dividends, fees and charges).
Current consensus price target is $4.86, suggesting upside of 35.6% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY21:
Citi forecasts a full year FY21 dividend of 0.00 cents and EPS of minus 3.31 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is -2.0, 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 N/A. |
Forecast for FY22:
Citi forecasts a full year FY22 dividend of 0.00 cents and EPS of minus 2.15 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is -0.1, 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 N/A. |
This company reports in EUR. All estimates have been converted into AUD by FNArena at present FX values.
Market Sentiment: 0.9
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $2.97
Citi rates MPL as Neutral (3) -
The federal government has approved rate increases from April 1, 2021 that are better than Citi anticipated, and should provide support for gross margins over the short term.
Medibank Private's increase of 3.25% is broadly in line with the industry average. Neutral maintained. Target rises to $2.95 from $2.80.
Target price is $2.95 Current Price is $2.97 Difference: minus $0.02 (current price is over target).
If MPL meets the Citi target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).
Current consensus price target is $2.90, suggesting downside of -4.0% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY21:
Citi forecasts a full year FY21 dividend of 11.50 cents and EPS of 13.60 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 13.9, implying annual growth of 21.9%. Current consensus DPS estimate is 11.7, implying a prospective dividend yield of 3.9%. Current consensus EPS estimate suggests the PER is 21.7. |
Forecast for FY22:
Citi forecasts a full year FY22 dividend of 12.80 cents and EPS of 14.60 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 14.3, implying annual growth of 2.9%. Current consensus DPS estimate is 12.0, implying a prospective dividend yield of 4.0%. Current consensus EPS estimate suggests the PER is 21.1. |
Market Sentiment: 0.3
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Overnight Price: $5.83
Citi rates NHF as Downgrade to Neutral from Buy (3) -
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.
Target price is $5.90 Current Price is $5.83 Difference: $0.07
If NHF meets the Citi target it will return approximately 1% (excluding dividends, fees and charges).
Current consensus price target is $5.35, suggesting downside of -8.9% (ex-dividends)
The company's fiscal year ends in June.
Forecast for FY21:
Citi forecasts a full year FY21 dividend of 16.50 cents and EPS of 26.70 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 26.5, implying annual growth of 33.8%. Current consensus DPS estimate is 16.1, implying a prospective dividend yield of 2.7%. Current consensus EPS estimate suggests the PER is 22.2. |
Forecast for FY22:
Citi forecasts a full year FY22 dividend of 19.50 cents and EPS of 30.60 cents. How do these forecasts compare to market consensus projections? Current consensus EPS estimate is 30.0, implying annual growth of 13.2%. Current consensus DPS estimate is 18.4, implying a prospective dividend yield of 3.1%. Current consensus EPS estimate suggests the PER is 19.6. |
Market Sentiment: 0.2
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
OTW OVER THE WIRE HOLDINGS LIMITED
Cloud services
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Overnight Price: $4.25
Morgans rates OTW as Hold (3) -
Over The Wire Holdings announced core earnings (EBITDA) for the first half FY20, which were around -18% below Morgans’ forecast. This was considered largely due to slower-than-expected non-recurring work.
The broker highlights organic growth is subdued and awaits signs of its return in the core business.
The company noted recent acquisitions (Zintel, FoneBox and Digital Sense) are performing well.
Morgans reduces FY21 EPS forecasts by circa -15%. The price target falls to $4.25 from $5.01 and the Hold rating is maintained.
Target price is $4.25 Current Price is $4.25 Difference: $0
If OTW meets the Morgans target it will return approximately 0% (excluding dividends, fees and charges).
The company's fiscal year ends in June.
Forecast for FY21:
Morgans forecasts a full year FY21 dividend of 4.00 cents and EPS of 26.00 cents. |
Forecast for FY22:
Morgans forecasts a full year FY22 dividend of 5.00 cents and EPS of 31.00 cents. |
Market Sentiment: 0.0
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
VHT VOLPARA HEALTH TECHNOLOGIES LIMITED
Medical Equipment & Devices
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Overnight Price: $1.39
Morgans rates VHT as Add (1) -
Volpara Health Technologies has signed a five-year SaaS contract with BreastScreen Queensland for the quality assurance platform, VolparaEnterprise. There is scope to expand the services to include VolparaDensity and VolparaLive.
The broker expects other state based screening programs will likely follow.
The analyst highlights the potential near-term catalyst regarding an FDA ruling to mandate a women’s breast density must be reported.
Morgans makes no changes to forecasts, and the Add rating and target price of $1.71 are unchanged.
Target price is $1.71 Current Price is $1.39 Difference: $0.32
If VHT meets the Morgans target it will return approximately 23% (excluding dividends, fees and charges).
The company's fiscal year ends in March.
Forecast for FY21:
Morgans forecasts a full year FY21 dividend of 0.00 cents and EPS of minus 4.15 cents. |
Forecast for FY22:
Morgans forecasts a full year FY22 dividend of 0.00 cents and EPS of minus 0.19 cents. |
This company reports in NZD. All estimates have been converted into AUD by FNArena at present FX values.
Market Sentiment: 0.5
All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources
Today's Price Target Changes
| Company | Last Price | Broker | New Target | Prev Target | Change | |
| AHY | Asaleo Care | $1.36 | Citi | 1.40 | 1.30 | 7.69% |
| EOS | ELECTRO OPTIC SYSTEMS | $5.98 | Citi | 7.75 | 7.80 | -0.64% |
| MPL | Medibank Private | $3.02 | Citi | 2.95 | 2.80 | 5.36% |
| NHF | nib Holdings | $5.87 | Citi | 5.90 | 5.15 | 14.56% |
| OTW | Over The Wire Holdings Ltd | $4.22 | Morgans | 4.25 | 5.01 | -15.17% |
Summaries
| AHY | Asaleo Care | Downgrade to Neutral from Buy - Citi | Overnight Price $1.34 |
| EOS | ELECTRO OPTIC SYSTEMS | Buy - Citi | Overnight Price $5.90 |
| FCL | Fineos Corp | Initiation of coverage with Buy - Citi | Overnight Price $3.53 |
| MPL | Medibank Private | Neutral - Citi | Overnight Price $2.97 |
| NHF | nib Holdings | Downgrade to Neutral from Buy - Citi | Overnight Price $5.83 |
| OTW | Over The Wire Holdings Ltd | Hold - Morgans | Overnight Price $4.25 |
| VHT | Volpara Health Technologies | Add - Morgans | Overnight Price $1.39 |
RATING SUMMARY
| Rating | No. Of Recommendations |
| 1. Buy | 3 |
| 3. Hold | 4 |
Wednesday 23 December 2020
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