Reporting Season Road Map: 19 August 2019
About the author:
- Author name:
- By Andrew Tang
- Job title:
- Analyst - Equity Strategy
- Date posted:
- 19 August 2019, 2:10 PM
- Sectors Covered:
- Equity Strategy and Quant
Following our assessment of results and market announcements, here are our three top picks for today (Monday 19 August 2019):
Baby Bunting Group (BBN) – Baby what a big surprise...
BBN's FY19 result was c12.6% above our NPAT forecast and +58% on pcp. FY20 guidance is for EBITDA growth of 25-36% and NPAT growth of 30-42% (excl. AASB16 impact). We upgrade our EPS forecasts by 13-15%.
Strong top-line growth will continue over years to come due to footprint growth (c10%) and solid LFLs as the group continues to take share. This growth converts at a much higher EBITDA rate given the GM upside and opex leverage to come.
It's difficult to get anything even close to the quantum and duration of BBN's growth profile in the retail sector (or industrials).
At 17x PE/4.1% yield and a 22% 3-yr EPS growth profile we retain our Add recommendation. Morgans clients can login to view our share price target and detailed research note.
Smartgroup Corporation (SIQ) – Resilient results
SIQ delivered 1H19 NPATA of A$40.5m (+5.3% on the pcp; +2.4% on 2H18); EPS +4.4%; and DPS +5% (a special dividend of 20c was also paid in the period). Top line growth of 1.9% (ex-acquisitions) was slightly better than expected, with demand proving resilient against a weaker consumer backdrop.
No formal outlook statements were provided. We expect organic growth to remain relatively subdued near-term (2H19F EBITDA growth of 3.7% on pcp). Strong cash flow generation and gearing at ~0.3x EBITDA provide solid 'optionality' for inorganic growth or capital management medium-term.
Near-term earnings declines or meaningful outer-year downgrades appear lower risk post SIQ's 1H19 result. SIQ's valuation (14.4x FY19F and 13.6x FY20F) is relatively undemanding (vs 16x med-term average), reflective of the lower organic growth profile.
However, in our view there is upside risk over the next 12-18 months from potential acquisitions or capital management and we upgrade to Add. Morgans clients can login to view our share price target and detailed research note.
Jumbo Interactive (JIN) – Powering along
JIN exceeded guidance and market expectations with an impressive FY19 result. All key metrics are trending higher and the business has substantial cash surplus to operating requirements, some of which we expect to be returned to investors.
We believe the market has misunderstood the way the company calculates average customer spend and this resulted in the sharp price fall post result. The business is very well-placed heading into FY20 and with mid-20% EPS CAGR forecast over the next three years, we retain an Add rating.
Morgans clients can login to view our share price target and detailed research note.
Morgans clients can access further analysis in our latest reports on Baby Bunting, Smartgroup and Jumbo Interactive. 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.