Following our assessment of recent results and announcements, here are our four top picks for today (Tuesday 14 August):
Cooper Energy (COE) – Buoyed by stronger pricing
A solid FY18 result, with COE earnings coming in ahead of our/consensus forecasts on rising prices and flat unit costs. Underlying NPAT of $9.8m (vs Morgans $7.8m vs consensus $7.6m), with EBITDA margin significantly ahead (54% in 2H'FY18). COE is considering potential ways to maximise value for investors: a) a part sell-down of its Gippsland interests; b) future divestment of Cooper basin interests (post Sole); and/or c) future debt options post Sole start-up. Weighing these options is a useful exercise, particularly if COE discovers parties interested in offering significant value in any of the three areas.
We maintain our Add rating. Share price target accessible by Morgans clients only.
Aventus Retail Fund (AVN) – Proposal to staple
AVN's FY18 result was in line with guidance and the outlook comments were in line with our expectations. FY19 guidance is for FFO of 18.2c (vs 18.1c in FY18). Overshadowing the result was the announcement regarding a proposal to internalise the management of AVN to create a stapled structure.
We retain our Add rating with a revised share price target (accessible by Morgans clients only). Near term the focus will be on the internalisation proposal with an EGM scheduled for 25 September.
People Infrastructure (PPE) – Strategic acquisition of nursing business
PPE has entered into agreements to acquire two nursing businesses in Sydney which will significantly increase the company's scale in this attractive sector. The businesses have been bought on an NTM EV/EBITDA of 3.6x which we view as attractive and the acquisition is to be funded through a combination of cash and debt. After some model revisions we estimate FY19 EBITDA accretion of ~10%.
After incorporating the acquisition into the model our blended target price increases (Morgans clients only) and we retain an Add rating.
Praemium Limited (PPS) – Solid FY18 result
Praemium's FY18 result was better than expected, driven mostly by strong growth on the SMA platform. The UK continues to take longer than expected to reach cash flow break-even. A regulatory crack-down on SIPP fund administrators has cooled Praemium's ardour for SIPP acquisitions. Overall the company remains on track for another year of strong double-digit growth in revenues and earnings.
Our share price target is unchanged (Morgans clients only). We maintain an Add recommendation.
Morgans clients can access our further analysis in our latest reports on Cooper Energy, Aventus Retail Fund, People Infrastructure and Praemium. Alternatively, please contact your nearest Morgans office for access.
Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.