ANALYST OUTLOOK & STOCK PICKS FOR FY22 - June 2021 - Bell Potter
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ANALYST OUTLOOK & STOCK PICKS FOR FY22. June 2021
ANALYST OUTLOOK & STOCK
PICKS FOR FY22
CONTENTS Listed Investment Companies
Agricultural & FMCG
Hayden Nicholson, ETF/LIC Specialist
Jonathan Snape, Senior Industrials Analyst
3
4
To learn more about the stocks Technology Chris Savage, Industrials Analyst 5
mentioned in this report, speak to your
adviser or refer to the Client Access Discretionary Retail & Professional Services Sam Haddad, Research Analyst – Emerging Growth 6
Research Library.
Please note that Speculative securities Industrials Hamish Murray, Industrials Analyst 7
may not be suitable for retail clients
James Filius, Analyst 8
(refer to final page of this report).
Alex McLean, Analyst 9
Engineering & Construction Steven Anastasiou, Research Analyst 10
Healthcare John Hester, Analyst - Healthcare 11
Tanushree Jain, Healthcare Analyst 12
Elyse Shapiro, Healthcare Analyst 13
Resources & Precious Metals David Coates, Senior Resources Analyst 14
Energy Stuart Howe, Senior Analyst (Resources & Energy) 15
Joseph House, Resources Analyst
Strategic Minerals Stuart Howe, Senior Analyst (Resources & Energy) 16
Disclaimer & Disclosures 17
2
ANALYST OUTLOOK & STOCK
PICKS FOR FY22
LISTED
INVESTMENT
COMPANIES WAM Alternative Assets (WMA)
WMA currently invests in a diverse
MFF Capital Investments (MFF)
MFF’s primary focus is to invest in
Ellerston Asian Investments
Limited (EAI)
range of alternative asset classes, large listed international companies Asia has attracted significant fund
including but not limited to: (1) where the Investment Manager flows, however historic US-China
Hayden Nicholson private equity, (2) real assets, (3) real has identified attractive business relations have undermined the
ETF/LIC Specialist estate and (4) cash. Wilson Asset characteristics at a discount to their expansion of this capital allocation. The
Management, by way of appointment assessed intrinsic values. We believe new Biden Administration and the Fed’s
as the Investment Manager of the there is a potential for share price avoidance to address tapering targets
The S&P/ASX 200 Index recovered and Fund in October 2020, has also appreciation given strong reported for quantitative easing may be set to
then exceeded its pre-pandemic high in agreed to adhere to a ‘Premium profit reserves, franking credits benefit Emerging Markets. Positive
the space of approximately 15 months, Target’, an uncommon objective in the and supportive guidance from the prospects for China’s growth trajectory
notwithstanding a 36.5% drawdown 22 Australian LIC market which would Company’s Directors to revise the are supported by tailwinds such as:
days into March last year. Using pre-tax see shareholders empowered to vote dividend policy from a 3cps 6 monthly (1) an increase in the administration
NTA growth as a gauge for underlying on wind-up if shares fail to trade above fully franked dividend to 5cps within of vaccinations, (2) a focus on carbon
investment portfolio performance, the pre-tax NTA at least 3 times over the next two years. An overhang does neutrality with the production of
Domestic Equity, International Equity the next 5 years. With yields remaining exist from in-the-money options, electric vehicles and renewables
and Alternative Strategy Managers all depressed, alternative assets, like however the low cost base embedded infrastructure and; (3) an improvement
on average added substantial value over fixed income securities, exhibit a within the portfolio makes the turnover in living standards with increased
their respective benchmarks during similar low correlation to equities of investments with reasonable risk- domestic consumption and services.
the last 12 months. While the market with strong annuity-style returns. adjusted returns undesirable. MFF EAI provides access to a benchmark
average discount to underlying asset Leveraged to Australia’s comparative has historically outperformed its agnostic, concentrated portfolio of
value has materially contracted since advantage, the substantial allocation benchmark MSCI World Index (in AUD) high growth companies across the Asia
the onset of the pandemic, we anticipate to agricultural assets and water by 3.7% p.a. over the last 10 years, and region with a proprietary integrated
income dependency, sector consolidation, entitlements may be the driver of we believe this injection of liquidity will Environmental, Social, and Corporate
shareholder activism and recent strong future returns amid further supply- facilitate further long-term growth. Governance approach through the
performance of actively managed alpha chain disruptions and price increases. investment process.
generating solutions to drive further
contraction and realisation of value.
3
ANALYST OUTLOOK & STOCK
PICKS FOR FY22
AGRICULTURAL
& FMCG
Elders (ELD) Bega Cheese (BGA) The a2Milk Company (A2M)
ELD is a leading supplier of fertiliser, Bega Cheese (BGA) is engaged in: The a2 Milk Company (A2M) is in the
Jonathan Snape agricultural chemicals and animal (1) the processing, manufacturing, business of producing, marketing and
Senior Industrials Analyst health products to rural and regional distribution and marketing of dairy and selling branded dairy and infant milk
Australia, with strong agency positions associated products to both Australian formula (IMF) products in Australia,
in livestock, wool and real estate. and international markets: and (2) New Zealand, China, US and UK. A2M
The recent share price of ELD has the processing and manufacturing of branded milk contains only A2 Protein
Investments in the Agricultural & spreads and condiments for consumer rather than both A1 and A2 proteins
benefited from rainfall and strong
FMCG sector should be considered cattle prices . However, we continue markets. which are found in Regular Cows’ Milk.
high risk and come with volatility. to see upside to consensus FY21-22e The acquisition of Lion Dairy & Drinks While not without near term risks as
For this reason we tend to focus earnings reflecting the annualised (LDD) and the targeted synergy base supply chains stabilise, at its core
on stocks where we see either: a benefit of the AIRR acquisition (and is expected to drive a material step we see A2M as a business that, once
structural uplift in ROIC through synergy realisation), a normalisation change in returns for BGA over the MVM is consolidated, has baseline
the cycle, cyclical growth stories, or in the summer crop (sales flow in next three years. In addition, we see revenue of ~NZ$1.4-1.5Bn and EBITDA
counter-seasonal crop exposures. 1H21e), gains from integrating three BGA benefiting from an improved of ~NZ$300m, with a pathway to
generic portfolios across the combined competitive position at the farmgate being a ~NZ$1.7Bn revenue business
ELD + AIRR business (and from in FY22e on the back of recent generating ~NZ$445m in EBITDA on
migrating independents onto the AIRR operational issues at competitors and its existing China offline distribution
platform); and continued business the material outperformance of SMP footprint (with a materially higher
investment (which traditionally has relative to other dairy ingredients in portion of direct China sales than in the
averaged ~$40m pa at 3-5x EBIT). recent months. In the medium term past). We do not see FY21e earnings as
Buy, Price Target $13.75 we see the potential for additional LDD reflective of the returns the business
synergies to be realised as seasonal can generate in the medium term,
milk flows are better utilised. but acknowledge the high level of risk
Buy, Price Target $7.35 involved in timing the inflection point at
which destocking activity concludes.
Buy, Price Target A$8.50
4
ANALYST OUTLOOK & STOCK
PICKS FOR FY22
TECHNOLOGY
Chris Savage
Industrials Analyst Nitro Software (NTO) Life360 (360) Adacel Technologies (ADA)
Nitro is a global document productivity Life360 provides a market leading Adacel is a leading global provider of
software company that enables digital app for families – called Life360 simulation and control systems for
transformation in organisations – with features that range from the civil aviation and defence sectors.
We continue to be positive on the
around the world through a suite communications to driving safety and The company has already upgraded
technology sector in Australia as, in of products built to enable digital location sharing. The company is its FY21 guidance once – it now
an environment of low interest rates workflows. The company has had a likely to be a major beneficiary of the forecasts PBT b/w $7.0-7.3m – and
and low growth, we believe there strong start to the calendar year with widespread rollout of COVID vaccines we believe it will at least achieve the
are a number of good quality stocks annual recurring revenue (ARR) at 31 – particularly in its home market of guidance if not exceed it. Adacel has
in the sector with reasonable to March 2021 up 66% compared to 31 the USA – as the return to normality net cash of several million dollars and
strong growth outlooks. What we are March 2020 and the CEO saying there and outdoor life will see demand for recommenced a share buyback at the
cognisant of, however, is the threat is “accelerating sales momentum” its app increase. This was evident in start of the year (and has been quite
of inflation and a return to some sort in the business. We believe there is the Appendix 4C release in late April active). The company has already paid
a reasonable chance the company and we expect this trend to continue an interim dividend of 2.75c this year
of normality post the widespread
will upgrade its 2021 guidance at or over the remainder of the year and and we expect another reasonable
rollout of the COVID vaccines which around the release of the 1H result into next. The stock is not cheap on dividend at year end. The stock looks
may result in a sector rotation out of in August and our forecasts already an EV/Revenue multiple of c.5x in 2022 value on an FY22 PE ratio of around
technology and into more value or reflect this. The stock is not cheap on but, like Nitro, looks reasonable value 13x.
cyclical stocks. We therefore believe an EV/Revenue multiple of c.7x in 2022 relative to global comps. Buy, Price Target $1.25
it is now more of a stock picker’s but looks reasonable value relative to Buy, Price Target $7.00
market and are particularly focused global comps.
on those technology stocks where Buy, Price Target $3.75
we believe there is either relative or
absolute value.
5ANALYST OUTLOOK & STOCK
PICKS FOR FY22
DISCRETIONARY
RETAIL & PROF.
SERVICES City Chic Collective (CCX) InvoCare (IVC) Propel Funeral Partners (PFP)
Sam Haddad CCX is a global multichannel IVC is the largest provider of funeral PFP is the second largest provider
Research Analyst – Emerging Growth retailer, with >70% of sales online, services in Australia and New of funeral services in Australia
specialising in plus-size women’s Zealand, with also a presence in and New Zealand. PFP’s portfolio
apparel, accessories and footwear. It Singapore. Across its markets, IVC footprint comprises 138 locations,
Discretionary retailers continue to be is a collective of customer-led brands operates ~290 funeral locations and 17 including 32 cremation facilities and
buoyed by international travel restrictions, including City Chic, Avenue, Evans, cemeteries and crematoria. Following 9 cemeteries. Based on a proven
the low interest rate environment and CCX, Hips & Curves and Fox & Royal. a challenging CY20, we believe growth strategy and the leadership of
an improved employment backdrop.
Following CCX’s recent acquisition of tailwinds will emerge for IVC through an experienced management team,
The listed retail sector has experienced
a strong rally over the past 12 months, Evans, the company now has three 2H21/CY22. We forecast a rebound in we believe PFP is well positioned to
however looking forward into FY22 we high traffic online platforms, each with earnings driven by: 1) the cycling of drive further industry consolidation.
are cautious based on several factors a strong customer following, across low case volumes; 2) opex re-leverage; PFP also stands to benefit from the
including: 1) the continued risks three key markets. These include City and 3) benefits from completion of attractive industry fundamentals (that
surrounding the pandemic which may stall Chic in ANZ, Avenue in the USA and IVC’s Protect & Grow program. We IVC is also leveraged to), including
economic recovery/consumer spending; Evans in the UK. With this foundation, believe completion of Protect & Grow the positive long term trend in case
2) the significant stimulus and sales we believe CCX is well placed to will: reduce disruption to operations; volumes underpinned by an ageing
pull-forward that needs to be cycled; 3) grow market share across these key reduce capex spend; and enable full population, the industry’s highly
the expected resumption of international markets. Furthermore, with ~$83m in benefits of the program to be realised. defensive attributes and the relatively
travel in CY22; 4) emerging inflationary net cash, CCX is well placed to acquire IVC’s balance sheet is conservatively high barriers to entry. We also believe
pressures; and 5) the current elevated additional brands/businesses to geared (leverage ratio ~1.3x), providing PFP’s internalisation proposal will
valuation multiples. We have retained accelerate its international expansion. strong foundation to pursue growth help unlock the intrinsic value of
retailer CCX amongst our preferred stock
Buy, Price Target $4.90 opportunities. PFP’s assets, operations and growth
picks. To switch exposure to a more
defensive sector, we recommend funeral Buy, Price Target $12.20 prospects.
service providers IVC and PFP. Throughout Buy, Price Target $4.25
CY20, the funeral services industry was
impacted by below trend case volumes
and COVID-19 limits on funeral attendees.
While timing is difficult, we expect case
volumes will normalise, providing re-
leverage benefits for both IVC and PFP off
a depressed pcp.
6ANALYST OUTLOOK & STOCK
PICKS FOR FY22
INDUSTRIALS
Hamish Murray
Industrials Analyst IMDEX (IMD) Mader Group (MAD) Emeco Holdings (EHL)
IMDEX (IMD) is the market leader Mader Group (MAD) is a leading Emeco Holdings (EHL) is a leading
in downhole instrumentation provider of specialised contract labour provider of earthmoving equipment
solutions for mining exploration and for maintenance of heavy mobile rental and maintenance services to the
development, with a presence on ~70% equipment in the resources industry. Australian mining industry.
of mineral drill sites globally. Easing interstate border restrictions We see a strong outlook for FY22e, with
Trading in 2H21e has been and new hiring initiatives continue to the business expected to capitalise on
characterised by record demand for ease pressure on growth impediments strong demand in WA and surging east
high margin tools and accelerating in the strong WA market, while ongoing coast coal prices. A large proportion of
adoption of the IMDEXHUB-IQ cloud growth in the US business, a potential latent equipment on the east coast and
platform which should support a market entry into Canada and a steady a skew towards dry hire reduces the
strong FY21e result. return to the ‘Rest of World’ business risk of tight labour markets.
We continue to see a strong outlook for should drive margin expansion. EHL is expected to recommence capital
FY22e, given: (1) supportive commodity Balance sheet headroom to support management at the end of FY21e and
pricing; (2) record capital raising strategic bolt-on acquisitions is a likely in our view, the heightened FCF profile
activity; (3) strong results from global medium-term catalyst. and large franking credits balance
drillers; and (4) increasing exploration Labour availability is the key risk, increase the likelihood of dividends.
forecasts from majors, while the net although MAD is well placed to Buy, Price Target $1.55
cash position provides potential for attract talent and pass through wage
high payouts or acquisitions. increases.
Buy, Price Target $2.35 Buy, Price Target $1.30
7ANALYST OUTLOOK & STOCK
PICKS FOR FY22
INDUSTRIALS
James Filius
Analyst Money3 (MNY) ikeGPS (IKE)
Money3 is a specialist consumer ikeGPS (IKE) is a specialist technology
finance provider in Australia and New company that delivers a platform
Zealand with a focus on providing used in the collection, measurement,
Secured Commercial and Consumer analysis, and data management of
Automotive loans to near-prime and power pole infrastructure assets. The
non-conforming customers. MNY company services the North American
Communications and Utilities markets,
manages a growing and profitable
which collectively utilise and own
loan book of ~$556.7m and services
~220m pole assets across their
over 60,000 active customers across respective networks.
its 3 core brands: Money3, Automotive
IKE is leveraged to the US 5G & fibre
Financial Services (AFS) Australia, and investment cycle, which is projected
Go Car Finance (NZ). to see Communication infrastructure
MNY recently completed the providers invest ~US$300bn to upgrade
refinancing of its loan book into a new existing networks and deploy new 5G
$250 million warehouse securitisation capabilities across the U.S. over the
facility, providing the company with next 3-5 years.
headroom to leverage and grow More recently, IKE has seen an
its loan receivables. This is also increasing number of contract
anticipated to deliver a significant cost wins, including from AT&T, Verizon,
saving of ~$10m once fully drawn. Crown Castle and Corning. As
network expansion activity within the
We believe MNY now has a solid Communications market continues
platform to deliver strong loan book to accelerate, we believe IKE is well
growth, greater credit quality, and positioned to deliver strong top line
improved ROE over the medium term, growth as its customers increasingly
with the company targeting ~$1bn of require fast, accurate and secure
gross loan receivables by FY24. capture and assessment of pole asset
Buy, Price Target $3.70 data.
Buy (Spec), Valuation $1.35
8ANALYST OUTLOOK & STOCK
PICKS FOR FY22
INDUSTRIALS
Alex Mclean
Analyst Flight Centre (FLT) Rhipe (RHP)
FLT is a diversified provider of travel RHP provides cloud-based
services across leisure, corporate subscription software and service
and wholesale. We are most attracted licenses to a growing channel of IT
to FLT’s Corporate business which service providers across Asia Pacific
generated 67% of FLT’s profit (APAC). Software subscriptions are
despite making up only 43% of the distributed at a wholesale level from
company’s TTV. The company also world leading software vendors such
has a significant presence in the as Microsoft, Citrix and Symantec. We
leisure travel market, particularly believe RHP remains well positioned to
in Australia. This business - which deliver another year of strong growth
naturally carries a high fixed cost- in FY21 despite the uncertainty facing
base due to its extensive in-store
markets due to its lean operating
network has undergone a significant
model and exposure to the digital
restructure since Covid-19 strangled
economy. Ultimately, we believe the
the demand for travel – provides
significant leverage to a rebound in cloud computing megatrend – RHP’s
long-haul international travel to and key structural growth driver - remains
from Australia. Despite near term intact post Covid-19 and supports
uncertainty, the recovery of FLT’s RHP’s long-term growth outlook. We
leisure business at higher margins see two positive catalysts for the stock
due to its structural cost-out program over the medium term: (1) RHP’s entry
and market leadership from FLT’s into the Japanese market starting to
corporate business will be the key become a reality; and (2) the continued
value drivers over the long-term. With deployment of the Company’s $45m
trading conditions gradually improving, net cash position on complementary
an acceleration of Australia’s acquisitions, boosting EPS by up to
vaccination program provides upside +35%.
bias to FLT’s 2022 recovery profile. Buy, Price Target $2.60
Buy, Price Target $20.00
9ANALYST OUTLOOK & STOCK
PICKS FOR FY22
ENGINEERING &
CONSTRUCTION
Monadelphous Group (MND) Lycopodium (LYL) GR Engineering Services (GNG)
While MND’s heavy WA focus, large With LYL generating the bulk of its The only E&C top pick in our last
Steven Anastasiou revenue and employee base have revenue from African gold projects Analyst Outlook, GNG has delivered
Research Analyst impacted productivity and margins in recent years, COVID presented solid shareholder returns over 1H
on account of resourcing constraints difficulties, with operating conditions CY21. GNG’s operations have been
Following a rebound from lockdown (which also increases short-term and new contract awards impacted supported by high commodity prices,
induced uncertainty, contract momentum project risks), we believe that MND’s by global travel restrictions and which have in turn supported project
has steadily built across the Engineering medium-term outlook is positive. lockdown measures. With economies activity from junior/mid-tier resources
& Construction (E&C) space, with high Strong commodity prices should reopening, and global travel companies – GNG’s core client base.
levels of global stimulus and monetary spur both new resources projects, restrictions being gradually rolled GNG is expected to deliver record
debasement resulting in strong and sustaining capital opportunities. back, LYL has recently secured several revenue and EBITDA in FY21, and has
commodity prices, and resources and MND’s Zenviron JV, which holds a new resources projects in Africa. We a solid outlook for FY22. Like LYL, GNG
infrastructure project activity. This solid position in Australian wind anticipate that further opportunities has a solid track record of profits and
backdrop is expected to continue over farm developments, and its Chilean will arise over coming halves should dividend payments, and maintains a
coming halves. maintenance and construction commodity prices remain strong. solid net cash position. We continue to
Nevertheless, investor sentiment across business, Buildtek, provide further While current resourcing constraints have a Buy rating, and maintain GNG
the E&C space has materially soured in growth opportunities. With MND’s may be impacting its Australian as a top pick, though are cognisant that
light of significant resource constraints shares trading much closer to 10- based Mondium JV (of which MND is GNG’s shares have already delivered
– particularly in Western Australia – on year lows than highs, we believe the other partner), we believe LYL’s material capital returns over the past
account of high demand combining those investors with a medium-term medium-term outlook is bright, with a 12 months.
with sporadic border closures. These timeframe will benefit from a gradual solid track record of profits, dividend Buy, Price Target $1.60
constraints have impacted margins improvement in margins, and in turn, payments, and a large net cash
across much of the sector. While these investor sentiment. position supporting our Buy rating.
pressures are expected to remain in the Buy, Price Target $13.95 Buy, Price Target $6.50
short-term, we hold a positive medium-
term outlook, with margins expected
to gradually improve as work priced
pre-pandemic is completed, and replaced
with new work priced in accordance with
the current operating environment.
10ANALYST OUTLOOK & STOCK
PICKS FOR FY22
HEALTHCARE
John Hester
Analyst - Healthcare Avita Medical (AVH) Kazia Therapeutics (KZA) Mayne Pharma (MYX)
AVH’s spray on skin technology Lead asset Paxalisib is in development FDA approval of Nextstellis –
was developed in Australia and was for the treatment of glioblastoma the company’s next generation
approved by the US FDA in September (primary brain cancer). The open contraceptive pill has the potential to
Over the next 6 months we are
2018. Revenue growth declined in label phase 2 study is due to read significantly move the earnings dial.
expecting significant news flow from FY21 when COVID hit. As normal out headline data later this year. The product was launched in the June
Mesoblast, Kazia Therapeutics and levels of activity in the US economy The interim data showed a 5 month 2021 quarter and is supported by a 75
Aroa Biopharmaceuticals amongst resume, the number of burn injuries is extension in overall survival. The strong marketing team who will deliver
others. Mesoblast is expected returning to pre COVID levels. Access company was invited to join the thousands of samples to prescribers
to consummate its development to hospitals for Avita staff is improving international platform study GBM and patients over the coming weeks.
agreement with Novartis in COVID as reflected in the recently upgraded Agile in the United States. This is The product is highly differentiated
ARDS. Kazia is expected to release guidance for 4Q21. AVH is pursuing an approval study and patients are from competitors because it contains
final data from its phase 2 study adjacent markets for the treatment currently recruiting. If approved the the first new form of estrogen to the
of vitiligo and soft tissue injury where drug will have exclusivity until at least market in over 50 years. Clinical trials
investigating the use of paxalisib
clinical trials are under way. Approval 2031 and likely longer following the have shown it to have an outstanding
in glioblastoma. Aroa along with is expected in FY23/24 respectively. grant of further patents. More recently side effect profile with minimal impact
Avita Therapeutics operate in the Approval in Japan is expected by the the company in-licenced a second on blood clotting and weight gain. We
US hospital sector and both will end of CY21. asset, being a next generation VEGFR3 estimate Nextstellis will become a
benefit from the reopening of the Buy, Target Price $9.80 inhibitor. Clinical trials start in CY21. leading branded contraceptive in the
US economy as it recovers from Buy (Speculative), Target Price $2.50 US and Australia.
COVID. Aroa recently launched its Buy, Price Target $0.56
new MYRIAD soft tissue matrix for
surgical use while Avita has already
had a material lift in activity levels
during the June quarter.
11ANALYST OUTLOOK & STOCK
PICKS FOR FY22
HEALTHCARE
Tanushree Jain
Healthcare Analyst Immutep (IMM) Genetic Signatures (GSS) Mesoblast (MSB)
Immutep is developing GSS is a molecular diagnostics Mesoblast is the leading allogeneic
immunotherapies for cancer and company developing PCR tests stem cell company. Stock has pulled
autoimmune diseases. It is the leader for infectious diseases using its back on change in the timing of
In FY22 the key thematic for the
in LAG-3, which has emerged as the proprietary platform technology, 3 first revenues from its lead asset
healthcare and biotech sector will next big immuno-oncology checkpoint base. COVID-19 test sales drove a remestemcel-L for paediatric GvHD
still be its ongoing response to with recent validation from pivotal data record 1HFY21. Stock price rallied and COVID-ARDS. In FY22 regulatory
COVID-19 with the focus shifting from on Bristol Myers Squibb’s relatlimab. last year but has been sold off as a pathway will be clarified for its two key
testing to vaccines and therapeutics. Clinical data released recently at ASCO slowdown in the volume of testing assets across 4 indications determining
IPOs and new issues will continue of IMM’s lead drug efti with Merck’s with vaccine roll out reduced 3Q21 next development steps, approval
although at more realistic valuations Keytruda in lung and head and neck revenues and future COVID revenue timeline and is important for partnering
for earlier stage companies. We cancer has increased our confidence outlook. Fundamentals remain intact discussions. FDA interactions have
continue to expect oncology as a in the asset. A $65m capital raise is and the accelerated path to customer progressed for paediatric GvHD, which
ongoing to extend the cash runway to acquisition provided by COVID-19 could see a resubmission in 2HCY21,
key area for deal activity and strong
4QCY23 and fund new trials including a should serve GSS well to market its with potential approval and sales by
performance. As investors move from Phase 3. We see the release of further other approved tests in the aftermath mid-CY22, earlier than our current
growth stocks to COVID 19 recovery clinical data as the key catalyst for of the pandemic. Key FY22 catalyst expectations and would be a material
value stocks, diagnostic companies the stock in FY22, driving subsequent representing a step change in revenue catalyst. Potential closure of Novartis
with COVID-19 tailwinds last year new collaborations and licensing/M&A will be the FDA approval of its enteric deal for remestemcel-L with US$50m
have been sold off and can re-rate interest. protozoa test and US launch in upfront in 3QCY21 will be a key catalyst.
once they dispel investor concerns Buy (Speculative), Valuation $0.85 2QCY22. Buy (Speculative), Valuation $3.60
about future growth. Buy (Speculative), Valuation $2.20
12ANALYST OUTLOOK & STOCK
PICKS FOR FY22
HEALTHCARE
Elyse Shapiro
Healthcare Analyst Aroa Biosurgery (ARX) Imricor (IMR) Alcidion (ALC)
Aroa developed and commercializes Imricor develops and commercializes Alcidion is a growing commercial
Endoform, a proprietary soft tissue MRI compatible cardiac ablation healthcare IT company with technology
regeneration platform. It provides a hardware and consumables devices. that aims to improve patient care and
The last few months have seen
“holy grail” solution to the notorious This unique feature addresses an operational efficiency in hospitals
a recovery in international non- trade-off between safety, efficacy, and unmet clinical need. The novel and healthcare systems. The product
emergent procedure volumes, fuelled cost versus competitors. FY22 revenue technology has evolved into a offering includes AI-driven clinical
by vaccine tailwinds. Providers have guidance incorporates conservative commercial execution story, with decision support tools that are
been focussed on the roll-out of growth assumptions and leaves CE Mark approval and presence in differentiated and unique, with full
large scale COVID-19 vaccination room for upside. The September- 10 European hospitals. Distribution mobile capability complete with active
programs, with 2.8b doses December quarter remains, in our partnerships with Phillips and patient monitoring and back-end
administered globally. At this point, view, the timing for an inflection point (pending) Siemens are validating and clinical workflow and patient flow.
hospitals can work towards business of account conversion and improved improve hospital awareness, with a Sales momentum in ANZ and the UK
sales momentum for both Myriad and more scalable growth opportunity. has been impressive, with the main
as usual and to treating patients
distribution partner Tela Bio. Current focus remains on the rate of focus now on the rate of new contract
across all care modalities with adding new hospital accounts, which additions in the UK. Long-term
significantly fewer restrictions. Speculative Buy, Valuation $2.00
is expected to accelerate significantly contracts provide a predictable largely
in 2H21, and on the recovery of patient recurring revenue base.
The pandemic also drew attention to volumes in existing sites, which is Buy, Price Target $0.45
weaknesses in healthcare systems, improving.
especially around diagnostic speed Speculative Buy, Valuation $2.60
and accuracy, patient management,
and infection control mechanisms.
Focus will begin to shift away from
pandemic control measures, to
making improvements across in and
out of hospital care modalities.
13ANALYST OUTLOOK & STOCK
PICKS FOR FY22
RESOURCES
& PRECIOUS
METALS Nickel Mines (NIC) Aeris Resources (AIS) Regis Resources (RRL)
NIC has grown to become the largest AIS has continued to leverage off the RRL recently completed the acquisition
nickel producer on the ASX and built transformational year it had in 2020 of a 30% interest in the Tropicana
David Coates a track record of achieving steady and is now a multi-mine copper-gold Gold Mine for a cash consideration of
Senior Resources Analyst state production and all-in costs producer offering a balanced exposure A$903m. We view this acquisition as a
better than our original forecasts and to two of our preferred metals. Strong positive, transformative deal for RRL
nameplate capacity. NIC has repaid free cash flows from high copper and that will support its elevation into the
Metals demand continues to benefit debt early and commenced paying gold prices enabled AIS to accelerate top ranks of ASX-listed gold producers
from the global economic recovery dividends. We forecast a dividend of debt repayments and invest in and create a strong foundation for
as Governments worldwide seek A3cps for FY21 for an unfranked yield exploration. AIS became net cash future growth. We believe benefits to
to stimulate growth, with a focus of ~3%. NIC remains on an aggressive positive in March 2021 for the first time RRL include exposure to a long-life,
on infrastructure and renewable growth trajectory, with the acquisition in many years and drilling at Tritton low cost asset that is immediately
energy investment. We believe this of a 70% equity interest in the Angel has delivered significant exploration cash generative, diversification of
remains positive for commodity Nickel Project set to lift attributable success with the Constellation its production base, de-risking the
production by +25ktpa (~74%), discovery. Constellation looks likely to funding of McPhillamys and setting
demand – particularly iron ore,
commissioning October 2022. Also add to mine life, increasing AIS’ copper a clear path to grow production to
copper and nickel. Despite China offering good value relative to peers exposure at a time when the market is ~700kozpa – all of which would be in
taking measures attempting to curb NIC remains one of our top picks for searching for it. Australia, making RRL unique among
commodity price rises, we believe 2HCY21. the top ASX-listed producers.
Buy, Price Target $0.235
these will have limited impact and Buy, Price Target $1.56 Buy, Price Target $4.08
tight fundamentals will prevail as key
market drivers. For gold, the recent
shift among Central Banks that
interest rate rises may be brought
forward has damaged sentiment.
Real interest rates, however, remain
in negative territory and we continue
to view this as supportive for the gold
price.
14ANALYST OUTLOOK & STOCK
PICKS FOR FY22
ENERGY
Stuart Howe
Senior Analyst (Resources & Energy)
Cooper Energy (COE) Central Petroleum (CTP) Beach Energy (BPT)
Joseph House We expect a step-change in COE’s CTP’s recent sell-down of interests in BPT is increasingly diversified across
Resources Analyst earnings from FY22 with the its Amadeus Basin producing assets asset and energy commodity, providing
Gippsland Basin Sole project gas significantly improved the company’s leverage to tightening east coast
sale agreements now operating and balance sheet strength and funding gas markets and to internationally
Global energy demand has further production improvements for future exploration. The company’s traded LNG and oil. The recent reset
rebounded strongly in 2021 as expected at this asset. In the Otway established producing portfolio is of expectations at its Western Flank
economies recover from lockdowns Basin, transitioning gas processing to highly prospective for resource and operations was a material hit to value.
and stimulus measures are enacted. the Athena Gas Plant should improve production growth. The assets could However, BPT continues to trade on
The transition to renewable energy gas production and pricing through further benefit from a proposed new lower resource, reserve, production
is gathering pace. However, existing uninterrupted delivery terms. COE gas pipeline which would increase the and earnings multiples compared with
installed electricity generation has long-life conventional gas assets Amadeus Basin’s reach into Australia’s most peers. This discount is despite
capacity and transport infrastructure to support production leveraged to east coast gas markets. CTP is also BPT having a strong FY22-23 earnings
Australia’s tightening east coast appraising the Range coal seam gas growth outlook, low levels of balance
remains highly reliant on fossil fuel
market. Longer term, the company has project for FID in 2022 alongside sheet leverage and significantly
supply. Increased Government and a portfolio of prospective exploration joint venture partner Incitec Pivot, more project diversification than its
financing community focus on ESG and expansion projects to potentially potentially delivering first gas from this peers. BPT is also at the forefront of
adds risk to the expansions and new support further production growth. asset into the east coast market from participating in carbon capture and
projects required to replace depleting In 2020, COE became Australia’s first 2024. storage technology.
energy resources. We believe that carbon neutral domestic gas producer. Buy, Price Target $0.23 Buy, Price Target $1.73
reduced supply reliability across Buy, Price Target $0.45
oil, gas and coal, in domestic and
internationally traded markets, will
support stronger energy commodity
prices in the medium term and
support the free cash flow of
incumbent producers.
15ANALYST OUTLOOK & STOCK
PICKS FOR FY22
STRATEGIC
MINERALS
Stuart Howe Alpha HPA (A4N) Agrimin (AMN)
Senior Analyst (Resources & Energy) A4N’s high purity aluminium products AMN’s Mackay Potash Project has the
have applications in lithium ion battery potential to deliver the world’s lowest
and micro-LED manufacturing; these cost source of sulphate of potash
Strategic minerals focused technologies are at the forefront of (SOP) supply into seaborne markets.
companies have benefited from the global decarbonising theme. The There is value potential as the project
increased debt and equity investor HPA First project continues to de-risk is de-risked through approvals,
emphasis on environment, social and with A4N accelerating development of FID (mid-2022), development and
governance criteria. In particular, a smaller scale precursor production then production. AMN has strong
decarbonisation and the expected facility ahead of its full-scale plant. ESG credentials, committing to
Market outreach programs continue developing the Mackay Potash Project
uptake of battery storage and electric
to expand A4N’s product suite, in alignment with the United Nations
vehicles has been dominant in driving applications and potential customer Sustainability Goals. Solar evaporation
battery minerals prices and equities base. We believe that it is increasingly of a potassium-rich brine Reserve and
higher (lithium, graphite, high purity likely that the commercialisation supporting infrastructure powered
alumina). of A4N’s proprietary process could by renewable energy results in a low
ESG and decarbonisation are long- involve investments beyond its initial carbon footprint. SOP provides key
term themes which we expect to Gladstone plant. Catalysts ahead nutrients to high-value crops and
include pending project approvals, its application rate in developing
continue driving strong strategic
offtake agreements and financial economies is still relatively low.
mineral demand. This structural approval, all expected in 2H 2021.
shift in demand, coupled with a Speculative Buy, Valuation $0.97
Speculative Buy, Valuation $0.83
constrained short-to-medium term
supply response and developing
supply chains, should support
higher minerals prices and therefore
positive equity sentiment.
16The following may affect your legal rights: Disclosures John Hester owns 1,000 shares in AVH, 4000 shares in application or use of the developed drug and even
ANALYST OUTLOOK & STOCK KZA and 7815 shares in MSB. after approval a drug can be the subject of an FDA
This document is a private communication to clients Bell Potter Securities Limited, its employees,
PICKS FOR FY22
and is not intended for public circulation or for the use consultants and its associates within the meaning Early Stage Company Risk Warning investigation of subsequently discovered possible
of any third party, without the prior approval of Bell of Chapter 7 of the Corporations Law may receive links between the drug and other diseases not
The stocks of early stage companies without regular previously diagnosed. Furthermore, the Australian
Potter Securities Limited. In the USA and the UK this commissions, underwriting and management fees revenue streams from product sales or ongoing exchange listed biotechnology sector is subject
research is only for institutional investors. It is not from transactions involving securities referred to in service revenue should always be regarded as to influence by the global biotechnology sector,
for release, publication or distribution in whole or in this document (which its representatives may directly speculative in character. Stocks with ‘Speculative’ particularly that in the USA. Consequently, Australian
part to any persons in the two specified countries. In share) and may from time to time hold interests in the designation are prone to high volatility in share price exchange listed biotechnology stocks can experience
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Potter Securities (HK) Limited which is licensed and Bell Potter was a Co-Manager of the MFF these risks before buying such a stock. in both valuations and share prices, as a result of a
regulated by the Securities and Futures Commission, Renounceable Rights Issue in May 2015 and received
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a fee for the service. in particular. Investors are advised to be cognisant of
issued and distributed by Bell Potter Securities (US) The stocks of resource companies without revenue
LLC which is a registered broker-dealer and member Bell Potter acted as joint lead manager and these risks before buying such a stock.
streams from product sales should always be
of FINRA. Any person receiving this report from Bell underwriter to Aroa’s IPO in July 2020 and received Analyst Certification
regarded as speculative in character. Since most
Potter Securities (US) LLC and wishing to transact in fees for that service. exploration companies fit this description, the Each research analyst primarily responsible for the
any security described herein should do so with Bell Bell Potter Securities acted as co-manager in speculative designation applies to all exploration content of this research report, in whole or in part,
Potter Securities (US) LLC. Alcidion’s placement in April 2021 and received fees stocks. The fact that the intellectual property base certifies that with respect to each security or issuer
This is general investment advice only and does not for that service. of an exploration company lies in science and is that the analyst covered in this report: (1) all of the
constitute personal advice to any person. Because this Bell Potter acted as Joint Lead Manager to A4N’s generally only accessible to the layman in a limited views expressed accurately reflect his or her personal
document has been prepared without consideration $50m placement in June 2021 and received fees for summary form adds further to the riskiness with views about those securities or issuers and were
of any specific client’s financial situation, particular that service. which investments in exploration companies ought prepared in an independent manner and (2) no part
needs and investment objectives (‘relevant personal to be regarded. Stocks with ‘Speculative’ designation of his or her compensation was, is, or will be, directly
Bell Potter Securities acted as Joint Lead Manager to
circumstances’), a Bell Potter Securities Limited are prone to high volatility in share price movements. or indirectly, related to the specific recommendations
AMN’s $7m placement and Share Purchase Plan in
investment adviser (or the financial services licensee, Exploration and regulatory risks are inherent in or views expressed by that research analyst in the
December 2020 and received fees for that service.
or the representative of such licensee, who has exploration stocks. Exploration companies engage research report.
Bell Potter Securities is acting as an executing broker in exploration programs that usually have multiple
provided you with this report by arrangement with
for ADA’s on market share buy-back and received fees phases to them where positive results at some
Bell Potter Securities Limited) should be made
for that service. stages are not indicative of ultimate exploration
aware of your relevant personal circumstances and
consulted before any investment decision is made on Steven Anastasiou holds a Long position in MND. success and even after exploration success, there is
the basis of this document. Bell Potter Securities acted as Joint lead manager often insufficient economic justification to warrant
and underwriter in BGA’s Nov’20 place-ment and development of an extractive operation and there is
While this document is based on information from
entitlement offer and received fees for that service. still significant risk that even a development project
sources which are considered reliable, Bell Potter with favourable economic parameters and forecast
Securities Limited has not verified independently Bell Potter acted as lead manager of IKEs Jul’20 outcomes may fail to achieve those outcomes.
the information contained in the document and Bell A$18.4m equity raising and received fees for that Investors are advised to be cognisant of these risks
Potter Securities Limited and its directors, employees service. before buying such a stock.
and consultants do not represent, warrant or
Bell Potter acted as lead manager for MSB’s A$75m Biotechnology Risk Warning
guarantee, expressly or impliedly, that the information
capital raise in Oct’19 and A$138m capital raise in
contained in this document is complete or accurate. The stocks of biotechnology companies without
May’20 and received fees for that service.
Nor does Bell Potter Securities Limited accept any strong revenue streams from product sales or
responsibility for updating any advice, views opinions, Bell Potter acted as a Lead Manager in Immutep’s ongoing service revenue should always be regarded
or recommendations contained in this document capital raising in July’19, April’20, Nov’20 and June’21 as speculative in character. Since most biotechnology
or for correcting any error or omission which may and received fees for that service. companies fit this description, the speculative
become apparent after the document has been Bell Potter Securities acted as a Participant in RRL’s designation also applies to the entire sector. The
issued. $650m Equity Placement of April 2021 and received fact that the intellectual property base of a typical
Except insofar as liability under any statute cannot fees for that service. biotechnology company lies in science not generally
be excluded. Bell Potter Securities Limited and its Bell Potter Securities acted as Joint Lead Manager regarded as accessible to the layman adds further to
directors, employees and consultants do not accept and Underwriter to AIS’s $40m Equity Raise of June the riskiness with which biotechnology investments
any liability (whether arising in contract, in tort or 2020 and their $50m Equity Raise of June 2021 and ought to be regarded. Stocks with ‘Speculative’
negligence or otherwise) for any error or omission received fees for that service. designation are prone to high volatility in share price
in this document or for any resulting loss or damage movements. Clinical and regulatory risks are inherent
Bell Potter Securities acted as Joint Lead Manager in biotechnology stocks. Biotechnology developers
(whether direct, indirect, consequential or otherwise) to NIC’s $213m Entitlements Issue of May 2020 and
suffered by the recipient of this document or any other usually seek US FDA approval for their technology
Joint Lead Manager and Underwriter to their $364m which is a long and arduous three phase process
person. Entitlements Issue of December 2020 and received to prove the safety, effectiveness and appropriate
fees for that service.
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