NST announced it has implemented pre-emptive measures in light of the Covid-19 virus. These measures have been enacted to protect NST’s workforce, suppliers and local communities. NST believes its precautionary measures, and the likelihood of upcoming government restrictions will have an impact on production. As a result of the restrictions, NST predicts March Q production to be 10-15% lower and has withdrawn FY20 guidance. It has also deferred its interim dividend to October 2020 and deferred 2HFY20 hedges to 2021. The conservation of cash and deferrals gives us cause for concern, potentially compensating for underlying operational issues. On this premise, it could be a pre-cursor to a capital raise to add balance sheet strength. In our view, NST could withstand 3-6 months of partial shutdowns given its large stockpile inventory at all domestic Australian sites. We maintain our BUY recommendation and revise our target price to $13.50ps (prior $14.40ps), with further analysis post NST’s conference call due later today.

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