ANALYST OUTLOOK FOR 2020 - Our analysts share their outlook and top stock picks for 2020.
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ANALYST OUTLOOK FOR 2020.
Our analysts share their outlook and top stock picks for 2020.
DECEMBER 2019To learn more about the stocks mentioned in this CONTENTS
report, speak to your adviser or refer to the Client BANKS & GENERAL INSURERS 3
Access Research Library. LICS & LITS 4
AGRICULTURE & FMCG 5
Please note that Speculative securities may not be TECHNOLOGY 6
suitable for retail clients (refer to final page of this DISCRETIONARY RETAIL 7
report). TRAVEL & TOURISM 8
ENGINEERING & CONSTRUCTION 9
www.bellpotter.com.au INDUSTRIALS 10
1300 0 BELLS (1300 023 557) HEALTHCARE 11
info@bellpotter.com.au EMERGING COMPANIES 13
RESOURCES 14
HYBRIDS 16
DISCLAIMER & DISCLOSURES 17BANKS & GENERAL INSURERS. TS Lim
Our 2020 top three picks possess Macquarie Group (MQG) Suncorp Group (SUN) Insurance Australia Group (IAG)
strong risk management MQG’s value lies in its ability to manage SUN’s top line and cost trends in 1Q20 IAG is in our view the best pure play
capabilities and defensive risk and adapt to changing market remain in line with expectations and general insurer given its better
qualities including healthy conditions. This has allowed itself a higher natural hazard allowance risk-adjusted return profile, cost
to transform and push for higher would improve its capacity to deal with discipline and very strong reinsurance
balance sheets and surplus sustainable revenues. MQG is largely catastrophes. SUN is also committed arrangements. FY20 guidance is for
capital that could be returned to a global asset/risk manager with to repricing for higher hazard costs further improvement in underlying
shareholders. world-class expertise in infrastructure/ and this adds to its defensiveness. The performance (based on further
green investments and broad banking Capital S.M.A.R.T sale will generate premium increases in short tail
These specialist companies have capabilities. These attributes in addition ~$300m excess CET1 capital. Given personal and commercial lines, modest
undergone massive transformation to predominantly lower-risk and strong organic capital generation and volume growth, ongoing cost discipline
over the years to improve the quality higher return annuity-style earnings assuming natural hazards are in line and 16-18% reported insurance margin)
and consistency of their earnings. Our activities (60% of 1H20 Group net profit with allowance, another 8¢ special and was reaffirmed at its recent AGM.
selection comprises two diversified contribution, ~24% return on ordinary dividend and further return of surplus Organic capital generation remains
financials (MQG and SUN) and one equity) and capital management capital are highly likely in FY20. Longer strong and the recent sale of its 26%
general insurer (IAG). The operating flexibility (~$4.9bn surplus capital based term, we still expect SUN to divest its interest in SBI General will boost
environment remains positive for on 10.5% RWA) continue to underpin sub-scale bank that currently sits on surplus CET1 capital by $400m and
MQG (e.g. capitalising on rising global our bullish view. As a lower risk, higher ~$3bn CET1 capital. increase the likelihood of a special
demand for asset management services return investment proposition, MQG dividend and/or return of capital in
Buy, Price Target $14.80
and infrastructure/green investments) remains our top sector pick. FY20.
and SUN and IAG (e.g. continuation
Buy, Price Target $149.00 Buy, Price Target $8.40
of volume and rate tailwinds and
cost efficiencies backed by adequate
reinsurance arrangements). Our 2020
choice of companies also reflect fewer
sector headwinds and distractions
ahead when compared with the major
banks.
ANALYST OUTLOOK FOR 2020. 3LICs & LITs. Will Gormly
2019 was a testing time for the MFF Capital Investments Limited (MFF) Plato Income Maximiser Limited (PL8) MCP Master Income Trust (MXT)
closed-end listed managed MFF’s primary focus is to invest in large PL8 provides a well-diversified portfolio MXT is a fixed income LIT that aims
investment structure. The ALP’s listed international companies that have of Australian listed equites that aims to to provide exposure to the Australian
controversial franking credit attractive business characteristics at deliver shareholders with annual income corporate loans market with
policy would’ve diminished the a discount to their assessed intrinsic (incl. franking credits) in excess of the diversification by borrower, industry and
appeal of LICs for retirees, coupled values. The Directors believe that this will S&P/ASX 200 Franking Credit Adjusted credit quality. Of the 125 investments
generate superior risk adjusted returns Daily Total Return Index (Benchmark). in the portfolio at the end of October
with the tax-loss selling heading
over the medium to long term, while The Company will also aim to outperform 2019, 55% were of investment grade.
into June saw discounts widen minimising the risk of permanent capital (after fees) the Benchmark in total return Metrics Credit Partners (The Manager)
across the board. As a result, loss. As at the end of October 2019, we terms (incl. franking credits) over each is an alternative asset manager with an
attractive opportunities arose with calculate MFF had a 10 year share price full investment cycle. The Manager, experienced investment team that have
many large and reputable LIC/ annualised return (incl. net dividends) Plato Investment Management Limited, the capability to cover all fundamentals
LITs trading at historically large of 21.2% p.a. and a pre-tax NTA return achieves this by 3 means; dividend run- of direct lending and private credit
discounts. of 18.9% p.a. compared to the MSCI up effect, franking credits and running including originating, structuring and
World Index (in AUD) return of 12.4% a dividend trap model. PL8 invests distributing private debt. As at the end
Our top picks for 2020 are MFF Capital p.a. Performance is calculated after the directly into a ‘no fee’ class of one of the of October 2019, we calculate MXT had
Investments Limited (MFF) which has payment of tax, which is MFF’s greatest Manager’s unlisted funds. Due to this, a 1 year share price return (incl. net
delivered continued superior long-term expense. Tax paid can result in franking PL8’s investment portfolio is classified as dividends) of 4.1% and a NAV return of
performance, Plato Income Maximiser credits eventually being transferred long-term holding with the movements 5.7% compared to the RBA Cash Rate
Limited (PL8) which specialises in through to the benefit of shareholders in the underlying portfolio reported in +3.25% return of 4.5%. MXT has a target
maximising income for pension-phase and MFF had a franking reserve over other comprehensive income. PL8’s return of the RBA Cash Rate +3.25%
and SMSF investors, and MCP Master $58m as at 30 June 2019. The FY19 profits will therefore be derived from (currently 4.0%) net of fees. As at the end
Income Trust (MXT) which provides non- Indirect Cost Ratio of 0.44% was the the distributions of the underlying fund. of October 2019, the trailing 12 month
equity income diversification for investors lowest we calculated amongst global This creates greater confidence about yield was 5.5%. Management Fees are
seeking yield in a period of historically mandated LIC/LITs, whilst the Manager available profits from which to source 0.64% p.a. and there is no Performance
low rates. and the Company have agreed to cease payment of a franked dividend on a Fee.
the entitlement to a Performance Fee for monthly basis. Based on the 31 October
the period ending December 2019. share price, PL8 is trading on a 7.3%
annualised gross yield. Management
Fees are 0.82% p.a. (incl. GST & RITC)
and there is no Performance Fee.
ANALYST OUTLOOK FOR 2020. 4AGRICULTURAL & FMCG. Jonathan Snape
Investments in the Agricultural & Australian Agricultural Company (AAC) Elders (ELD) Rural Funds Group (RFF)
FMCG sector should be considered AAC is a vertically integrated cattle and ELD is a leading supplier of fertiliser, Rural Funds Group (RFF) is a listed
high risk and come with volatility. beef producer with operations that span agricultural chemicals and animal health agricultural REIT with a portfolio covering
For this reason we tend to focus the entire supply chain across genetics, products to rural and regional Australia, 50 properties, focused on almond
on stocks where we see either: a nutrition, pastoral operations, feedlots with strong agency positions in livestock, orchards, vineyards, cattle, cotton and
structural uplift in ROIC through and processing. wool and real estate. macadamias. Assets in the portfolio
the cycle (cyclical growth stories) or The issues that have faced AAC in FY19- The share price of ELD has been impacted are some of the most productive in the
20 (attrition, high feed costs and weaker by ongoing dry conditions across Eastern industry and leased to high quality tenants
counter-seasonal crop exposures.
cattle prices) are cyclical rather than Australia and subdued cattle prices. Our including Treasury Wine Estates, Olam,
Our key commodity call for 2020 Select Harvests, AACo and Stone Axe
structural in nature. Over the past 18 FY20 forecasts assume a normal winter
is the unwinding of the drought months, direct drought related costs have cropping season, a 10 month contribution Pastoral, with a WALE of 11.3 years. RFF
induced dislocation between resulted in a cost structure ~30% higher of AIRR and continued transition of is externally managed by Rural Funds
domestic cattle prices and export than what would be achieved in normal the ag-chem business to Titan. Rain is Management (RFM), who have been
meat prices on a normalisation in conditions. In our view, this additional the ultimate catalyst for ELD, with the managing agricultural investments since
weather patterns. Our three stocks cost is masking a 12% YOY uplift in meat benefits that naturally flow through to 1997.
carry varying degrees of exposure to supply chain returns (ex-Livingstone). the rural merchandise, livestock agency The RFF portfolio continues to transition
this dynamic. When more normal weather patterns and StockCo businesses. We estimate to natural resources (from 46% to 59% of
return we expect a to see a material EBITDA in a range of $130-140m under FY20e revenues), which are appreciating
improvement in the underlying returns more normalised seasonal conditions and rather than depreciating assets, and
per kilogram that AAC is delivering. In a stronger livestock pricing environment, towards assets with market linked rental
addition we would expect any material once Titan and AIRR are fully integrated. It reviews (from 37% to 43% of FY20e
pick-up in the cattle price would be is this view of operational leverage in ELD revenues). Over time as capex is deployed
beneficial for AAC’s NAV. which forms the basis of our Buy rating. we expect favourable asset revaluations
and growth in rental incomes from
newly acquired assets. In addition as the
investment in the cattle sector has lifted
so too has the exposure the business
has to cattle prices, through EYCI rent
linkages on some leases.
ANALYST OUTLOOK FOR 2020. 5TECHNOLOGY. Chris Savage
We continue to be positive on the Citadel Group (CGL) Uniti Group (UWL) Adacel Technologies (ADA)
technology sector in Australia. In Citadel is a software and services Uniti is a diversified provider of Adacel is a leading global provider of
an environment of low interest company that provides integration and telecommunications services, simulation and control systems for
rates and low growth, we believe managed service solutions to state specialising in fixed-wireless, fibre and the civil aviation and defence sectors.
there are a number of good and federal government departments specialty telecommunication services. The company had a difficult FY18 and
quality stocks in the sector with and the private sector in Australia. The company has grown rapidly FY19 which was driven by the loss of
The company has had a tumultuous through a number of acquisitions a key contract with the FAA in the US
reasonable to strong growth
2019 with a disappointing FY19 result over the past 12 months and is now and a cost blowout on a contract with
outlooks. and the resignation of the CEO which a strongly profitable and highly cash DSNA of France. FY20, however, has
We acknowledge many stocks in the have resulted in a significant fall in the generative business. Uniti looks set started much better with the company
sector have had a strong re-rating over share price. This, however, provides for further strong growth over the reiterating its guidance at the FY19
the past couple of years but believe an opportunity as the company is not next 12 months through both organic result in August and then slightly
there is still some value in the sector broken and in fact is getting better growth and likely further acquisitions upgrading the guidance at the recent
with a number of good quality stocks with investment in technical, delivery and is well positioned to fund this AGM in November. Importantly the
on reasonable forward PE ratios. Our and sales capabilities that ultimately growth with a strong Balance Sheet as problems on the DSNA contract now
goal is to find good quality tech stocks will deliver a much higher percentage well as the cash generated from the appear behind the company and there
with strong growth outlooks that are of repeatable revenue across a much existing businesses. The stock looks appears good potential for further
currently trading on forward PE ratios broader customer base. In our view reasonable value on an FY21 PE ratio contracts. The stock looks very good
of around 25x or less and that, over the stock looks good value on an FY20 ofDISCRETIONARY RETAIL. Sam Haddad
Macro stimulus from tax rebates City Chic Collective (CCX) Lovisa Holdings (LOV) Temple & Webster (TPW)
and interest rate cuts has to date CCX is a global multichannel retailer LOV is a leading specialist fast fashion TPW is Australia’s largest online only
had limited flow-through benefit to specialising in plus-size (size 14+) women’s jewellery retailer that is strategically furniture and homewares retailer with circa
apparel, accessories and footwear. It is a focused on the affordable jewellery segment. 150,000 products on sale from roughly 700
discretionary retailers. Consumers
collective of customer-led brands including Australia is LOV’s largest market exposure, suppliers. The business runs an innovative
are focusing more on the reasons City Chic, Avenue and Hips & Curves. City however the company is embarking on an drop-shipping model, where products are
behind the interest rate cuts and Chic appeals to fashion-forward women international store rollout strategy. Our sent directly to customers by suppliers,
becoming increasingly cautious and its multichannel model comprises: a positive view on LOV is supported by the enabling a larger product range, faster
on their discretionary spending network of >100 stores across Australia/ company’s strong long-term earnings delivery times and reducing the need to
New Zealand; multiple websites operating growth outlook underpinned by significant hold inventory. The drop ship range is
decisions. in Australasia and USA; marketplace and global store rollout opportunities. LOV has complemented by a private label range
With this challenging domestic backdrop, wholesale partnerships with major US entered a number of major new territories which is sourced directly by TPW from
we continue to prefer retailers that offer retailers such as Macy’s and Nordstrom; in the northern hemisphere including the overseas suppliers. We believe TPW is well
growth through-the-cycle prospects by being and a wholesale business with European USA, the UK and France (plus Spain in pilot). positioned to benefit from a number of
leveraged to global expansion opportunities partners such as ASOS and Zalando. Avenue Among these, the USA is the ‘big prize’ structural trends, including: the migration
or to structural tailwinds (such as the shift targets value-conscious women and Hips where we believe store rollout is progressing to online (only 4-5% of Australia’s furniture
to online). & Curves is an intimates brand; both are strongly. We believe LOV is well placed to and homewares sales is online, vs 14% in
online only with a significant customer execute on its international growth plans the US and UK); online savvy millennials
Three stocks that fit this profile very well are following throughout the USA. Led by a given a number of attractive business now entering TPW’s core demographic;
CCX, LOV and TPW. strong management team with a proven attributes. These include LOV’s vertical and faster internet/mobile speeds. With a
track record and backed by a strong balance business model that supports high gross stabilised platform and strong balance sheet
sheet, we believe CCX is well positioned to margins and brand control, compelling store in place (net cash of $13.5m at 30 June
grow globally. The key growth opportunity metrics with high sales intensity and short 2019), management is able to focus more on
is the significant USA market where we average payback period, fast supply chain driving top-line growth. There are several
believe the City Chic brand is building (only 8-10 weeks from product development initiatives underway to drive sales growth
strong traction. Also, we believe the recent to being in-store), and a regionally adaptable including: adding depth and breadth to the
acquisition of Avenue’s e-commerce product range. We also believe LOV has company’s core offer; continuing to invest in
assets is attractive on a number of fronts defensive attributes as customers are able the trade and commercial segment; adding
including: being highly EPS accretive; to treat themselves without putting pressure new adjacent categories; and the launch of a
provides immediate leading exposure to the on their budgets (given LOV’s low dollar mobile app.
US value segment; materially accelerates value transactions).
US customer acquisition, with cross-selling
potential; and includes opportunity to realise
synergies in buying disciplines and the
supply chain.
ANALYST OUTLOOK FOR 2020. 7TRAVEL & TOURISM. Alex McLean
Investments in the Travel & Corporate Travel (CTD) Helloworld Travel (HLO)
Tourism sector are generally CTD is a corporate travel service HLO is an Australian based travel
considered cyclical. For this provider with operations in distribution company comprising
reason we try to focus on stocks Australia & New Zealand, North retail travel businesses, destination
with a diversified business model America, the UK and Asia. CTD’s management services (inbound),
across multiple travel businesses business model revolves around its air ticket consolidation, wholesale,
with exposure to global growth customer value proposition which corporate and online operations. HLO
opportunities. combines superior client service and is well placed to generate earnings
technology solutions to deliver return growth on the back of merger
on investment and cost savings to synergies, cost savings and further
corporate clients. In our view, we acquisitions. Despite challenging
see CTD continuing to leverage macro conditions, momentum across
this value proposition, further HLO’s portfolio has been relatively
increasing its market share both resilient as highlighted by a strong
domestically and internationally. We Q1 trading update which included
continue to back CTD’s experienced Total Transaction Value (TTV) growth
management team and refer to the of 10.4% (9.2% organic growth) and
strong return on capital metrics EBITDA growth of 7.7%. We remain
when assessing the quality of the confident in management’s ability
business. Management have already to execute on its growth strategy
guided to a stronger second half in and with forecast EPS CAGR of
FY20 - suggesting a weaker first half. c.16% over the forecast period and a
We do however expect a number of forward P/E ratio of c.12x earnings,
key tailwinds to positively contribute HLO presents a compelling buying
to FY20 (FX/M&A/cost-synergies) and opportunity with limited downside
offset low expectations for organic risk.
growth to reach market expectations,
BUY, PT $5.85
which are now set at the lower end of
guidance.
BUY, PT $23.50
ANALYST OUTLOOK FOR 2020. 8ENGINEERING & CONSTRUCTION. Steven Anastasiou
Monadelphous (MND) Lycopodium (LYL) Service Stream (SSM)
MND is a premier Australian provider Having completed over 5000 studies Across its Telecommunications and
of Engineering Construction (EC) and and 300 projects in over 55 countries, Utilities segments, SSM provides
Maintenance & Industrial Services (M&IS) LYL has proven itself to be a premier outsourced services to Australia’s
to blue-chip clients in the resources, provider of full life cycle minerals telecommunications, gas, electricity and
energy and infrastructure sectors. processing services across a wide array water utilities with an impressive list of
Through a conservative management of commodities, including Gold, Copper, blue-chip customers which include NBN
style, MND has retained a net cash Graphite, Lithium, Iron Ore, Nickel, Co, Telstra, Sydney Water and APA Group.
position above $100m since FY08 and Mineral Sands and Diamonds. The Telecommunications segment
paid a fully franked dividend every year By establishing repeat relationships with comprises Fixed Communications
since 1994. numerous clients, including Rio Tinto, (completing nbn activations &
With Australian resources production BHP and Newcrest, LYL has amassed a maintenance) and Network Construction
reaching record levels, MND has seen ~$60m net cash balance, representing (now primarily focused on wireless
strong revenue growth in its M&IS ~28% of its market cap at a share price of mobile towers).
division of ~52.9% since FY17, with it $5.40. The Utilities segment comprises Energy
comprising ~62% of FY19 group revenue. Being particularly leveraged to gold, & Water (meter reading and replacement,
M&IS provides recurring style revenue LYL is set to benefit from any continued commercial solar installations, and
with most contracts awarded under strength in the gold price, which is likely electrical inspections) and Comdain
multi-year agreements. to drive demand for new studies and Infrastructure (end-to-end engineering
Additionally, MND’s construction division projects. In addition, LYL’s Mondium JV construction and asset management
is set to benefit from Australia’s iron ore with MND, which is targeting large-scale services to the water and gas sectors on
majors committing to ~US$11.4bn of new Australian EPC projects, is continuing Australia’s east coast).
projects, with MND currently having won to gain market traction, as evidenced by SSM has a strong track record, having
~$312m of work on BHP’s South Flank winning a ~$100m contract from Talison delivered 12 consecutive halves of profit
and Rio Tinto’s West Angelas projects. Lithium in May 2019. growth and tight working capital control
On a trailing dividend yield of ~5.6% and that routinely sees it deliver strong
BP forecast FY20 yield of ~5.9% (based operating cash flow conversion. Despite
on a $5.40 share price), LYL provides a a wind-down in nbn construction work,
rare opportunity for investors to both gain SSM’s long-term relationships with key
exposure to a rising gold price, and earn clients in defensive industries should
a strong income. help it to continue delivering solid
operational performance in the years
ahead.
ANALYST OUTLOOK FOR 2020. 9INDUSTRIALS. Hamish Murray &
James Filius
Hamish Murray capital to shareholders. We believe positions CBR at a significant inflection 1) 9 companies within FDV’s portfolio
shareholders are exposed to robust point. Successful execution of the are now annualising revenues of
Imdex (IMD)
FY20e growth in the core business, program can materially increase >A$1m, an important milestone for
IMDEX (IMD) is the market leader in while certainty surrounding the pricing manufacturing capacity, lower an early stage business; (2) 4 portfolio
downhole instrumentation solutions for models and adoption rates of the production unit costs and increase companies have now begun to trade
mining exploration and development, four emerging technologies presents the scalability of production; thereby profitably at the EBITDA level, and
with sales in 102 countries and the potential for material upside. providing the potential for much have become self-funding; 3) FDV
presence of an IMD product on ~70% broader adoption of carbon wheels in continually evaluates opportunities
Buy, Target Price $1.62ps
of mineral drill sites globally. The the automotive wheel market. While to optimise its portfolio (recently
company has been able to successfully Carbon Revolution (CBR) the execution of the industrialisation increasing its stake in fast growing
leverage its end-to-end product suite, Carbon Revolution (CBR) is a state of program presents execution risk, we South/Central American Property
portfolio of intellectual property and the art manufacturing company that believe the prospects for hypergrowth Portal, Infocasas); and 4) FDV has
market leading cloud-based platform has developed the only single piece and the current trajectory to be EBITDA ~A$10m in cash which ensures the
to grow revenues faster than global carbon fibre automotive wheels to positive in 4Q20e justifies CBR trading company has the ability to consider
exploration expenditure trends. Original Equipment Manufacturer on ~5-6x EV/Sales in the near-term. further investment opportunities.
We believe 2020 is positioned to be a (OEM) quality standards with Buy (Speculative), Valuation $5.80ps We believe FDV is well placed entering
transformational year for IMD given: commercial adoption across several FY20, as we forecast that FDV’s
(1) the company had a record first major OEM models. James Filius Portfolio companies will deliver strong
quarter, driven by improving trading CBR is currently contracted to supply Frontier Digital Ventures (FDV) double digit revenue growth in FY20,
conditions globally and growing interest wheels to nine different vehicle and believe that the company will
in its technologies; (2) momentum FDV offers unique exposure towards continue to benefit from increasing
programs for Ferrari, Ford, Renault
in capital raising, drilling data and fast growing frontier and emerging revenue diversification, as up and
and two additional undisclosed OEMs.
structural factors such as the gold markets where a structural shift coming businesses such as E24, Propzy
We believe there are push and pull
price, continue to point to a positive towards the use of online classified and Infocasas begin to contribute a
factors compelling other OEMs to offer
outlook for global exploration spend platforms is rapidly developing. The larger proportion of Group revenues
a carbon wheel option, including: (1)
which should provide a tailwind; and, company owns an assortment of stakes and earnings as these business edge
the increased average ticket size and
(3) material growth opportunities from in 12 online classifieds businesses closer to profitability.
margin; (2) carbon wheels act as a key
four new technologies that in our view located in Developing Asia, South/
differentiator for competitor vehicles; Buy (Speculative), Valuation $1.10ps
are not reflected in the current market Central America, and Africa/MENA.
and (3) there is limited downside risk
valuation. Whilst the prospect of investing in
to OEMs offering carbon wheels as
emerging markets is inherently risky,
IMD has a net cash position, which an option beyond the initial costs of
we believe FDV exhibits a number of
provides the ability to increase the design, testing and validation.
factors that have begun to “de-risk” the
payout ratio over time and return The ongoing industrialisation program company’s portfolio, including:
ANALYST OUTLOOK FOR 2020. 10HEALTHCARE. John Hester
The small to mid market cap Turning to the outlook for 2020 and a Oncosil Medical (OSL) (Speculative) Botanix Pharmaceuticals (BOT)
biotech/healthcare section of the predominantly new group of stocks are Following a long period of sustained effort, (Speculative)
market has had a banner year in included in our key picks including Oncosil Oncosil Medical is finally on the verge Botanix Pharmaceuticals is an Australian
Medical and Botanix Pharmaceuticals. of obtaining a CE Mark in Europe. This biotech company engaged in the
2019 with numerous stocks enjoying Both are undervalued in our view with should lead to first commercial revenues development of novel compounds for the
the benefit of success in the clinic significant news flow likely in 2020. in 2020. Oncosil has a brachytherapy treatment of a range of dermatological
(Paradigm Biopharmaceuticals) Longer term we believe stocks developing device for the treatment of inoperable conditions. All products utilise synthetic
as well as regulatory and gene therapies will be at the cutting edge pancreatic cancer as well as for use in cannabidiol (CBD) in conjunction with
commercialisation success (Avita of new drug development over the next down staging of borderline cases such that Permetrex skin delivery technology.
Medical). Among the medical device decade. These drugs have the potential patients become eligible for surgical cure. The company has exclusive rights to
stocks and those with an exposure to cure previously untreatable disease Data from the 42 patient trial conducted this technology for all drugs that treat
including many debilitating inherited in Europe and Australia demonstrated an dermatology conditions. The first two
to healthcare IT, Nanosonics,
genetic conditions of which there are impressive survival benefit compared to indications are for chronic acne and atopic
Promedicus and Volpara Health thousands. In our stock coverage the dermatitis (AD). Botanix recently reported
patients treated with the standard of care.
Technology have each enjoyed company with the nearest term drug The overall survival benefit is at least 3 results from a phase II trial in the treatment
significant gains in market share and candidates (albeit still pre-clinical) is Avita months with 50% of patients still alive and of moderate to severe acne. The trial did
revenue growth. Medical (AVH). in long term follow up. not meet the primary clinical endpoints,
We expect the company will receive a nevertheless we believe extenuating
humanitarian device exemption in the circumstances contributed materially
United States in 2020 and this is likely to to this outcome, namely the US DEA
be followed by a larger clinical program at restrictions regarding the transport and
some point. storage of drugs involved in the trial. These
restrictions have now been relaxed and will
allow for a much tighter level of control in
subsequent clinical programs. The results
from the Australian sites were in line with
earlier testing and are supportive of further
analysis.The company’s approach to testing
and registration of this controversial new
class of drug is no different to any new
chemical entity. Feedback from clinicians
and patients involved in the clinical
program has been highly encouraging with
the safety aspect of the drug representing a
significant advantage over competitors.
ANALYST OUTLOOK FOR 2020. 11HEALTHCARE & BIOTECH. Tanushree Jain
The fundamentals and demographic diagnostic companies in initial stages flexibility to evaluate all strategic options while Grunenthal in CY20, US$35m drawdown from
of commercial roll out, we expect preparing for Phase 3 registrational trials for existing debt facilities).
trends for the healthcare and biotech commercial momentum for their wet AMD. Strong re-rating catalysts in 2020 Buy, speculative, Valuation $5.10/sh.
sector remained strong in 2019 and marketed products to pick up, driven in include results from Phase 2A DME trial in
Pharmaxis (PXS)
we expect some of the key themes part by expansion into new geographic 2QCY20 and a potential global licensing deal in
markets. 2HCY20 (BPe worth over US$1bn). Pharmaxis is a biopharmaceutical company
from this year to continue to play out focused on the development of drugs for
We continue to believe that companies that Buy, speculative, Valuation $4.80/sh
in 2020: deliver solid, unequivocal data and commercial inflammatory and fibrotic diseases. Its
Mesoblast (MSB) (Speculative) lead assets Phase 2 SSAO/VAP-1 inhibitor
1. Supportive regulatory environment – outcomes in 2020 are likely to be rewarded
for their efforts in terms of stock price Mesoblast is the leading allogeneic BI_1467335 partnered in a multi-million
We believe the US FDA will continue to
appreciation and will attract investors and regenerative medicine player with one of dollar deal with Boehringer Ingelheim (BI)
balance its historical standards of safety
partners/suitors, with OPT, MSB and PXS our the most diversified pipelines and several and currently unpartnered Phase 1 LOXL-
and efficacy with its desire to speed drugs
Top 3 picks for having the potential to do so. products in late stage. It has strategic 2 inhibitors are targeting Non-alcoholic
to patients in need, through accelerated
licensing agreements in place with Tasly Steatohepatitis (NASH), a multibillion dollar
pathways. New FDA commissioner Opthea (OPT) (Speculative) for China (heart) and Grunenthal for EU market with currently no approved treatments.
Hahn may take a few months to get his
Opthea is a Melbourne-based and LATAM (back pain). The company is PXS is approaching key inflexion points – a)
bearings, but we believe the culture at
biopharmaceutical company focused on the heading towards a transformational 2020 Commercial assessment and results from
FDA is unlikely to change.
development of therapies for the treatment with its first US product approval in sight, two Phase 2A NASH trial run by partner BI is
2. Licensing and M&A activity to remain of eye diseases. Its drug OPT-302 is targeting Phase 3 clinical trial results and potential expected in Dec’19. Decision by BI to move
high with fewer but bigger deals – 2019 wet age-related macular degeneration(wet for further partnering deals. The company’s to Phase 2b trials could add over 10 cents to
was a year of mega-merger deals in the AMD) and Diabetic Macular Edema (DME), focus remains on completing its BLA filing our valuation; b) completion of commercial
US (BMS/Celgene and Abbvie/Allergan) an attractive market with 2 standard of care for remestemcel-L product for SR-aGvHD process for LOXL-2 asset is targeted by end
making it a record M&A year. However, (SOC) anti-VEGF-A drugs generating US$10bn in children in US, with approval and launch CY19 (BPe US$700m deal); c) FDA approval
another trend which emerged was fewer revenue in 2018. Recent results from OPT- expected in 3QCY20. In preparation for decision on Bronchitol for cystic fibrosis
but bigger licensing deals, driven in part 302’s Phase 2b wet AMD trial demonstrated commercial launch MSB is building inventory in 2QCY20, with US$10m milestone from
by smaller companies having stronger strong vision gain with OPT-302 combination with Lonza and a 15 person sales force. partner Chiesi and launch in US in 3QCY20
negotiating power due to their ability to over SOC alone and led to a strong re-rating Other late stage assets are also approaching and d) Commercial assessment and results
access alternative sources of financing of the stock. In the current landscape, there inflexion points. Revascor for advanced heart from Phase 2A diabetic retinopathy trial run
to move their projects forward. While is scarcity of novel combination approaches, failure is on track for full accrual of events by partner BI in 3QCY20. Proforma cash of
the mega merger deals may not repeat existing blockbuster drugs are facing patent in Phase 3 trial by end of CY19, with Top-line ~$29m provides runway through CY20, with
in 2020, we expect the trend of fewer expiry and biosimilar competition and focus results expected in 1HCY20. For Revascor for a further boost expected through Bronchitol
but bigger deals will be evident in 2020, has moved to increasing durability with longer end stage HF, the Phase 3 trial protocol has US milestone and upfront from LOXL-2 deal in
supported by companies having other acting anti-VEGF-A agents. The meaningful been agreed on with InCHOIR and the trial 2020.
fundraising options for promising assets. additional efficacy offered by OPT-302 and its is expected to start in 1QCY20. The low back Buy, speculative, Valuation $0.59/sh).
3. Further maturing of ASX listed biotechs/ potential to be combined with any anti-VEGF-A pain Phase 3 trial in US is on track to report
medical devices - We also expect agent, in our view makes the company a strong in mid-CY20. Royalties from Temcell GvHD
further maturing of companies we candidate for takeover or partnering. A recent product in Japan are continuing to grow which
cover, with more trial readouts, potential placement has strengthened its negotiating bodes well for remestemcel-L’s US launch.
partnerships and commercial launches position (proforma cash of $80m provides MSB has cash runway into 2HCY21 (proforma
throughout the year. For medical device/ cash runway through 1HCY21), providing cash of ~US$99m, US$30m milestone from
ANALYST OUTLOOK FOR 2020. 12EMERGING COMPANIES. Damien Williamson
PointsBet (PBH) (Speculative) acquisition efforts and entry into new Resimac (RMC) of domestic floating rate Residential
Founded in Melbourne in 2015, PBH US states following the completion of its RMC is one of Australia’s leading non- Mortgage Backed Securities (RMBS)
commenced operations as an Australian $122m capital raising launched in October bank mortgage providers, servicing over priced at a margin to the 1 month bank
corporate bookmaker in February 2017. 2019. 50,000 customers with principally funded bill, RMC has also benefitted from the
The May 2018 decision by the US Supreme US online sports wagering is an emerging assets under management of $10.9bn. 25bp RBA rate cuts in June, July and
Court to overturn the Professional and market, where we see increasing strategic Resimac is the pioneer of securitisation October. By comparison, CBA had 69%
Amateur Sports Protection Act (PASPA) value for leading online bookmakers such of Australian residential mortgages with of its FY19 group funding comprising
has provided the opportunity for PBH to as PBH when considering: its first Australian Residential Mortgage- customer deposits, of which 64% of
expand its corporate bookmaking business -- US sport media annual broadcast Backed Security (RMBS) issuance dating deposit funding was at call and / or non-
into the US market, as individual states rights of US$22.4bn (US$69 per back to 1988 under the name Fanmac. To interest bearing, limiting the ability to pass
introduce legislation to permit both online capita): Sports represented 43 of the date, RMC has issued more than $29bn through rate cuts on deposit funding.
wagering and sports betting. top 50 highest rating broadcasts in the across 49 domestic and international RMC’s net interest margin is also a
To apply for a US online sports betting US in 2018. RMBS issues. RMC does not have the beneficiary from the fall in the spread
licence, PBH is required to partner with a -- 5,400 annual matches spanning NFL, overhead of maintaining an extensive between one month bank bills and the
licensed operator in the form of a casino NBA, NHL, MLB: Significant spectator nationwide branch network, rather it has RBA cash rate. This spread is currently
or racetrack. PBH currently partnerships interest from average attendance of relationships with over 85% of Australia’s running at an average of 0.09% for 1H20,
in 10 US states with a combined population >67,000 for NFL, >28,000 for MLB, mortgage brokers, where customer well below the average 0.39% for 1H19.
of 81m. PBH accepted its first customer >17,000 for both NBA and NHL. service and a quick approvals process RMC profitability remains highly sensitive
bet in New Jersey in January 2019 and have been key factors for RMC increasing to movements in the net interest margin,
-- New Jersey online betting accounted
Iowa in August 2019. With online sports originations. where we estimate a 1bp improvement in
for 85.5% of total turnover in Oct 2019:
betting legislated in Indiana, West Virginia, In a post Royal Commission environment the net interest margin increases RMC’s
Up from 84.0% in Sep 2019, with the
Illinois and Colorado (combined population where most mortgage providers are FY20 net profit by $777,000.
potential to approach 90% over US
27m), we see the potential for PBH to be winter. facing an earnings squeeze, RMC’s 1H20
live in these states by June 2020. Net Profit Guidance of $24-27m implies
-- Impetus for legislation in new states
PBH is in the battle for the 3rd largest growth of ~75% on the 1H19 result of
following successful New Jersey
online bookmaker in New Jersey after $14.5m. Included in this guidance is
model
reporting 6.7% share of online sports growth in principally funded Assets Under
-- Consolidation expected with 17 online Management of 7% from $10.2bn at 30
wagering turnover in the September
bookmakers operating in New Jersey: June 2019 to $10.9bn at 31 October 2019.
2019 quarter. At 30 September 2019,
Australia has 6 major bookies: TAB, By contrast APRA data indicates major
the US registered client base of 37,231
Sportsbet, BetEasy, Ladbrokes, bank mortgage lending declined 0.9%
represented 25% of PBH’s 148,902 total
Bet365, PBH. from June 2019 to September 2019, while
clients. After raising $75m in its June
2019 IPO, PBH’s war chest has been -- Potential to negotiate partnerships in non major bank lending increased 3.7%.
further topped up to continue its customer new states on more favourable terms With a majority of its funding consisting
following New Jersey success
ANALYST OUTLOOK FOR 2020. 13RESOURCES: BASE & David Coates
PRECIOUS METALS.
2019 has been a year when the macro investor interest and lifted the gold price. Pantoro (PNR) OZ Minerals (OZL)
issue of trade tensions between Despite the recent correction, the US$ gold PNR has been a disappointment in 2019. Plans OZL is an established, low-cost Australian
price is up ~14% ytd (as at early December to grow gold production to ~80kozpa following copper producer with a strong track record
the US and China have dominated 2019). Although we view sentiment as relatively mill upgrades and new mine developments of production and cost performance. We
(“trumped”, if you will), underlying neutral into year-end and there being potential at Nicolsons failed to be realised, leading to a recently picked it as our preferred copper
market fundamentals. This has not for the current pullback to have a little more poor share price performance over the year. exposure. For 2020 we see the potential for
been without justification: we have to run, we believe gold remains an attractive a positive re-rating on the commencement
exposure into 2020. Real interest rates remain However, we must take a forward looking
seen key demand metrics weaken view on our recommendations and we view of production from Carrapateena, which will
in decline, gold remains cheap relative to ramp-up to ~65ktpa copper and 80kozpa gold.
over the course of 2019 as a result equities and the USD is rangebound, all the current share price as oversold. The
It will become OZL’s second major copper
of poorer sentiment and the actual framing a favourable gold price environment. recent completion of an operational review
mine, along with the Prominent Hill mine
impact of trade restrictions. and outline of a detailed two year, 50kozpa
production plan, we believe is a conservative, which currently produces ~100ktpa copper and
We expect this to remain a factor into 2020. Nickel Mines (NIC) high-confidence base-case designed to 120kozpa gold. We forecast strong earnings
While market balances are anticipated to under-promise and over-deliver. Furthermore, growth and positive free cash flows in 2020
remain tight across our key commodity During 2019 NIC achieved several key with OZL’s CAPEX peak now having passed. It
milestones, laying down an excellent track- PNR has secured a 50% interest in, and
exposures (copper and nickel), there has management control of, the Norseman Gold offers exposure to both copper and gold, both
been a reduction in the magnitude of forecast record of delivery and driving a strong re- of which we favour in 2020 and has a debt free
rating over the course of the year. This saw Project. This offers the opportunity to establish
supply deficits. Supply constraints remain, a second production asset over the course of balance sheet.
with drivers including lower mined grades, the completion of the ramp-up phase at the
Hengjaya and Ranger Nickel Projects at the 2020. It’s been our observation that the market Buy, Target Price $10.69/sh
industrial action across Latin American copper is attributing a significant premium to multi-
producers and the Indonesian nickel ore Indonesia Morowali Industrial Park (IMIP)
in Sulawesi. All four NPI production lines mine producers and PNR, if successful, could
export ban coming into effect in January 2020. benefit materially from this over the course of
Partially offsetting these factors are lower reached full production within 21 months of
construction commencing. Heading into 2020, 2020. PNR’s balance sheet is debt free and will
expectations for demand growth, resulting be unhedged from April 2019.
from restrictions on global trade. The difficulty we expect the reporting of strong financial
with this is it is a politically driven factor and results to follow on from the strong operational Buy, Target Price $0.20/sh
hard to predict, particularly given the players performance and the delivery of further
involved. On balance, we have positive, albeit production growth to to drive NIC’s share price
tempered, price expectations for 2020. We higher. We retain NIC as one of our top picks
recommend retaining base metals exposure on on the basis of it remaining cheap relative to
supportive fundamentals and the upside risk of peers and its pure nickel commodity exposure
positive resolutions to ongoing trade disputes. – one of our preferred base metals.
Throughout 2019 gold has re-established itself Buy, Target Price $1.23/sh
as a portfolio diversifier and benefitted from
declining real interest rates. This has reignited
ANALYST OUTLOOK FOR 2020. 14RESOURCES: ENERGY. Stuart Howe
Key drivers of energy markets the long-term tenor of these GSAs highlight expected to remain subdued, with a US$68/t expansion potential. COI also has prospective
into 2020 will be U.S.-China trade an expectation of tight domestic gas markets outlook for 2020 (similar to current levels). gas projects in the Galilee Basin and in the
over the medium to long term. With respect Our top picks include: Gunnedah Basin.
tensions and the potential for a to global LNG markets, key energy research Buy, Speculative, Valuation $0.28/sh
resolution, European economic groups expect market deficits and stronger Senex Energy (SXY)
activity, and supply constraints pricing from 2022-23. Stronger medium term SXY is ramping up two coal seam gas projects Coronado Global Resources (CRN)
as new projects are subjected to global LNG prices will also support Australian in Queensland’s Surat Basin. The projects CRN is the largest pure-play metallurgical
domestic pricing, as suggested by the ACCC’s will deliver gas into Australia’s east coast coal producer. Its earnings and value are
increasing environmental and social
ongoing netback analysis. gas market and to the GLNG export facility in therefore leveraged to the recovery which
scrutiny. Metallurgical coal and Gladstone. This production growth, together we, and the market, expect in met coal
Metallurgical and thermal coal
Australia’s domestic east coast gas with established oil and gas operations in the prices. Private equity group EMG currently
markets are our preferred energy Benchmark premium metallurgical coal Cooper Basin, will see SXY’s production grow owns 80% of CRN listed equity, with 69% in
prices held until mid-2019, highlighting the from around 1.2mmboe in FY19 to around escrow until February 2020. We expect that
commodity exposures. tight supply-demand fundamentals in this 4.0mmboe by FY22. This gas production a tightly managed sell-down by EMG would
Domestic gas markets market. However, since July, adequate supply growth into Australia’s supply short east increase free float and stock liquidity, and
The ACCC’s ongoing inquiry of Australia’s and weaker demand in Europe has seen coast market and improving global LNG therefore increase index participation and
east coast gas market has seen regular prices retrace from averaging over US$200/t market fundamentals should see substantial broaden the company’s investment appeal.
publication of “netback” gas prices to assist in 1H2019 into the US$130s/t recently. Prices earnings growth for SXY over the short to CRN’s operations are low cost, enabling
market participants in negotiations. This appear to have found a floor at this level. medium term. the company to withstand the current
netback price series takes into account the Seaborne thermal coal markets have been Buy, Target Price $0.48/sh weakness in met col prices. Its mines are
export parity price of gas entering the global adequately supplied from key producing mature, with limited growth capital required,
market from key Gladstone LNG projects. regions (Australia and Indonesia), and with no Comet Ridge (COI) enabling strong free cash flow generation
The price series weakened in 2019 (averaging significant demand growth, prices continued COI is progressing coal seam and and shareholder returns as met coal prices
A$6.83/GJ, compared with A$10.88/GJ in to decline over the year. Swing thermal coal conventional gas projects across three of recover.
2018) on oversupplied global LNG markets. producers (U.S.) have largely exited the Australia’s prospective gas basins. The Buy, Target Price $3.50/sh
The major Gladstone LNG exporters (joint seaborne trade, providing some rebalance company has a 40% interest in the Mahalo JV
ventures with companies including Santos, support. In early 2019, benchmark thermal located in Queensland’s Bowen Basin; joint
Shell, Total, ConocoPhillips, Origin Energy, coal prices were around US$100/t. Since venture partners are Santos and APLNG.
Sinopec, CNOOC, among others) also ensured August 2019, these prices have range-traded The Mahalo JV is expected to reach a final
sufficient gas production was directed to at US$65-70/t. investment decision in June 2020 and is
domestic markets, as they seek to appease Despite the recent weakness in met coal expected to produce 60TJ/day (3.8mmboe
this heightened political issue. prices, market participants generally expect per year) gas initially, with expansion
However, it is generally accepted that gas improvement into 2020. In 2020, Consensus potential. The recently awarded Mahalo North
pricing for long term Gas Sales Agreements Economics’ surveys have met coal prices project (100% COI) could leverage existing
(GSAs) are significantly higher than the 2019 lifting to average US$160/t (18% above infrastructure for early stage gas production
netback level. Strong pricing, together with current levels). Thermal coal prices are of 10TJ/day (0.6mmboe per year), again with
ANALYST OUTLOOK FOR 2020. 15HYBRIDS. Damien Williamson
The ASX listed hybrid market market, supported by over $1bn of NABPE to 5 year major bank hybrids Macquarie Group Capital Notes 3
has had another year of positive redemptions from hybrids issued by IAG narrow from ~2.00% at the start of 2019 (MQGPC)
($550m), NAOS ($26.5m) and Multiplex to currently ~1.00%. NABPE is worthy MQGPC is worthy of consideration for
performance driven by no ($450m). In addition, December has of consideration to cornerstone a low
ALP franking policy / Coalition investors seeking to increase income
29 ASX listed debt / hybrid securities risk fixed income portfolio. levels. At $105.30, the capital price
election win, and the RBA cutting paying a total of $271m of cash coupons Optional Call Date 20 September 2023 premium reduces the 4.00% issue margin
the official cash rate by 0.25% in ($369m grossed up), where the flow of to a trading margin of 2.83%. The cash
funds has the potential to once again Fair Value $102.08
June, July and October. top up required for MQGPC distributions
result in a repeat of the Christmas rally being 40% partially franked results in our
This has resulted in the average trading in hybrids witnessed over this decade.
margin on major bank hybrids firming ANZ Capital Notes 2 (ANZPE) 12 month income forecast of $4.17 cash,
Since 2011, the average trading margin plus $0.72 franking (issue margin 4.00%
from 3.34% at 31 December 2018 to on major bank hybrids has firmed 0.39% ANZ has moved to partial franking of
2.74% on 11 December 2019. In the 6 dividends, reflecting the change to the + 3 month bank bill of 0.89%). If MQGPC
from the high in mid-December to the was 100% franked, cash income would
weeks post the Federal Election which low in early January. geographical earnings mix. With ANZ
included the RBA rate cuts in June and declaring 70% franking on its final decline 18% to $3.42, while franking
July, the hybrid market margins slipped NAB Subordinated Notes 2 (NABPE) ordinary dividend, issue terms of ANZ would increase to $1.47.
to the lowest level since January 2012, As the only remaining ASX listed bank listed hybrids provides for a cash top-up if First Optional Call Date 16 December 2024
with the average trading margin on subordinated debt security, NABPE the distribution is not fully franked. This Fair Value $106.30
major bank hybrids firming 1.01% from offers value on a 1.88% trading margin has resulted in a 9.9% increase to the
3.32% on 17 May to 2.31% on 2 July. The at $101.10. For moving one notch cash income on ANZ hybrids from the
market has subsequently eased with lower down the bank capital structure decline in franking from 100% to 70%.
$2.9bn of issuance since September, from senior debt to subordinated debt, ANZPE currently offers value on a trading
spanning ASX listed debt and hybrid NABPE currently offers an additional margin of 2.77% at $101.97, reflecting
issues from Australian Unity ($322m), margin of 1.19% when compared with an attractive spread of 2.25% above
CBA ($1,650m), Virgin Australia NAB September 2023 wholesale senior ANZ March 2022 wholesale senior debt
($325m), Suncorp (>$300m) and AMP debt (0.69% trading margin), and a (0.52% trading margin). The higher cash
(>$250m). margin uplift of 0.25% when compared component of income has the potential
Post the broker firm new issue with WBC wholesale subordinated debt to result in a modest re-rating of partially
settlement on SUNPH on 13 December (June 2023 call) on a trading margin of franked ANZ hybrids versus other major
and AMPPB on 20 December, we 1.63%. The rally in the hybrid market bank fully franked hybrids.
see the potential for buying strength over 2019 has seen the spread from Optional Call Date 24 March 2022
to emerge for the ASX listed hybrid moving one ranking notch lower from Fair Value $103.13
ANALYST OUTLOOK FOR 2020. 16The following may affect your legal rights: Bell Potter Securities acted as Co-Manager in MQG’s Exploration Risk Warning: in both valuations and share prices, as a result of a
This document is a private communication to clients Capital Notes 4 (MQGPD) offer (February 2019) and The stocks of resource companies without revenue re-rating of the sector both globally and in the USA,
and is not intended for public circulation or for the use received fees for that service. streams from product sales should always be in particular. Investors are advised to be cognisant of
of any third party, without the prior approval of Bell T S Lim holds long positions in IAG, MQG, MQGPC, regarded as speculative in character. Since most these risks before buying such a stock.
Potter Securities Limited. MQGPD and SUN. exploration companies fit this description, the ANALYST CERTIFICATION
This is general investment advice only and does not Bell Potter Securities acted as Sole Underwriter and speculative designation applies to all exploration Each research analyst primarily responsible for the
constitute personal advice to any person. Joint Lead Manager to the $43m Equity Placement of stocks. The fact that the intellectual property base content of this research report, in whole or in part,
Pantoro Limited in May 2019 and received fees for that of an exploration company lies in science and is certifies that with respect to each security or issuer
Because this document has been prepared without generally only accessible to the layman in a limited
consideration of any specific client’s financial service. that the analyst covered in this report: (1) all of the
summary form adds further to the riskiness with views expressed accurately reflect his or her personal
situation, particular needs and investment objectives Bell Potter Securities acted as Lead Manager to the which investments in exploration companies ought
(‘relevant personal circumstances’), a Bell Potter $200m IPO of Nickel Mines in August 2018 and Lead views about those securities or issuers and were
to be regarded. Stocks with ‘Speculative’ designation prepared in an independent manner, including with
Securities Limited investment adviser (or the financial Manager to the $55m Placement of Nickel Mines in are prone to high volatility in share price movements.
services licensee, or the representative of such June 2019 and received fees for that service. respect to Bell Potter, and (2) no part of his or her
Exploration and regulatory risks are inherent in compensation was, is, or will be, directly or indirectly,
licensee, who has provided you with this report by Bell Potter Securities acted as a Co-Manager to the exploration stocks. Exploration companies engage
arrangement with Bell Potter Securities Limited) related to the specific recommendations or views
Entitlement Offer of Plato Income Maximiser Limited in exploration programs that usually have multiple expressed by that research analyst in the research
should be made aware of your relevant personal (PL8) in August 2019 and received fees for that phases to them where positive results at some
circumstances and consulted before any investment report.
service. stages are not indicative of ultimate exploration
decision is made on the basis of this document. success and even after exploration success, there is
Bell Potter Securities acted as a Co-Manager to the
While this document is based on information from IPO of MCP Master Income Trust (MXT) in September often insufficient economic justification to warrant
sources which are considered reliable, Bell Potter 2017, a Co-Manager to the Entitlement Offer in March development of an extractive operation and there is
Securities Limited has not verified independently 2018 and a Co-Manager to the Entitlement Offer in still significant risk that even a development project
the information contained in the document and Bell May 2019 and received fees for the services. with favourable economic parameters and forecast
Potter Securities Limited and its directors, employees outcomes may fail to achieve those outcomes.
and consultants do not represent, warrant or Bell Potter Securities acted as lead manager of UWL’s
Investors are advised to be cognisant of these risks
guarantee, expressly or impliedly, that the information IPO in February 2019 and capital raisings in May and
before buying such a stock.
contained in this document is complete or accurate. August 2019 and received fees for that service.
Biotechnology Risk Warning:
Nor does Bell Potter Securities Limited accept Bell Potter Securities acted as Co Manager on both
any responsibility to inform you of any matter that ANZPE launched in February 2014 and MQGPC The stocks of biotechnology companies without
subsequently comes to its notice, which may affect launched in May 2018. strong revenue streams from product sales or
any of the information contained in this document and ongoing service revenue should always be regarded
Bell Potter acted as lead manager of the BOT’s as speculative in character. Since most biotechnology
Bell Potter assumes no responsibility for updating August 2019 capital raise for $40m and received fees
any advice, views, opinions, or recommendations companies fit this description, the speculative
for that service. designation also applies to the entire sector. The
contained in this document or for correcting any error
or omission which may become apparent after the Bell Potter Securities acted as joint lead manager for fact that the intellectual property base of a typical
document has been issued. Past performance is not a CRN’s listings of CDIS on the Australian Securities biotechnology company lies in science not generally
reliable indicator of future performance. Exchange in October 2018, raising approximately regarded as accessible to the layman adds further to
A$774m, and received fees for that service. the riskiness with which biotechnology investments
Except insofar as liability under any statute cannot ought to be regarded. Stocks with ‘Speculative’
Bell Potter Securities Limited acted as Lead
be excluded, Bell Potter Limited and its directors, designation are prone to high volatility in share price
Manager to the PBH IPO in Jun 2019 and Institutional
employees and consultants do not accept any liability movements. Clinical and regulatory risks are inherent
Placement and Entitlement Offer in Oct 2019 and
(whether arising in contract, in tort or negligence or in biotechnology stocks. Biotechnology developers
received fees for these services.
otherwise) for any error or omission in this document usually seek US FDA approval for their technology
or for any resulting loss or damage (whether direct, Bell Potter Securities acted as lead manager for
MSB’s A$75m capital raise in Oct’19 and received which is a long and arduous three phase process
indirect, consequential or otherwise) suffered by the to prove the safety, effectiveness and appropriate
recipient of this document or any other person. fees for that service.
application or use of the developed drug and even
Disclosures Bell Potter Securities acted as joint lead manager after approval a drug can be the subject of an FDA
for PXS’s A$24m placement in Aug’18 and received investigation of subsequently discovered possible
Bell Potter Securities Limited, its employees,
fees for that service. links between the drug and other diseases not
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of Chapter 7 of the Corporations Law may receive Bell Potter Securities Limited acted as a Joint Lead previously diagnosed. Furthermore, the Australian
commissions, underwriting and management fees Manager in CBR’s Nov’19 IPO and received fees for exchange listed biotechnology sector is subject
from transactions involving securities referred to in that service. to influence by the global biotechnology sector,
this document (which its representatives may directly Steven Anastasiou holds a long position in MND. particularly that in the USA. Consequently, Australian
share) and may from time to time hold interests in the exchange listed biotechnology stocks can experience
securities referred to in this document. sharp movements, both upwards and downwards,
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