Reporting Season Road Map: 22 August 2019

About the author:

Andrew Tang
Author name:
By Andrew Tang
Job title:
Analyst - Equity Strategy
Date posted:
22 August 2019, 11:57 AM
Sectors Covered:
Equity Strategy and Quant

Megaport (MP1) – USA leading the way

MP1's FY19 result was largely as expected due to the release of their Q4 in July. Highlights were:

  1. impressive growth in North America (NAM);
  2. ongoing value add to the end customer (revenue per port & cohort analysis show this is happening with old and new customers alike); and
  3. Megaport Cloud Router (MCR) value add is greater still with MCR customers using almost twice as many Megaports as non-MCR customers.

Overall this was a strong result which showed MCR and NAM success and sets the path for continued growth in FY20 and beyond. We retain our Add rating.

Morgans clients can login to view our share price target and detailed research note.

Aventus Group (AVN) – Ticking the boxes

AVN's FY19 result was in line with guidance with portfolio metrics solid. FY20 guidance comprises FFO growth of 3-4% and DPS of 17.1c (+3% on the pcp).

We retain our Add rating and highlight the stock continues to offer an attractive 6.6% yield paid quarterly which will appeal to income investors.

Morgans clients can login to view our share price target and detailed research note.

Central Petroleum (CTP) – Still priced for limited growth

A new 2C resource of 270 PJ (100% JV) at CTP's Project Range. Despite the re-rating on the news of the Project Range resource, CTP is still trading at just A$0.35/GJ, a steep discount to other east coast gas producers.

We also see CTP as only trading in line with the unrisked valuation we attribute to Project Range (A$135m or A$0.19ps). Further growth potential from Palm Valley, Dingo, Dukkas, Ooramina and exploration. Ahead of development, we value Project Range on a risk-adjusted in situ resource multiple.

Increasing 75% to A$67.5m (or A$0.09ps) on the larger resource. We maintain our Add rating on CTP, with an upgraded target price.

Morgans clients can login to view our share price target and detailed research note.

SomnoMed (SOM) – Muddy result, clearer outlook

As well flagged, a messy FY19 result with substantial costs to close out the RSS business and a new set of restated accounts.

Backing out RSS, we get a clearer picture of the business going forward which is a profitable company with strong operating leverage.

With clearer skies ahead, the optics of the business becomes increasingly positive with a strong core business with multiple cost levers to drive profit growth over the coming years.

We have made minor changes to our assumptions and upgrade our target price. We maintain our Add recommendation.

Morgans clients can login to view our share price target and detailed research note.

Mainstream Group (MAI) – Following the American Dream

MAI's FY19 result was in-line with guidance for revenue and EBITDA to be at the lower end of target ranges (~A$50m and ~A$7.5m respectively).

The key result takeaway was MAI will double down on its offshore growth strategy in FY20, particularly in the US.

This will see FY20 EBITDA impacted by higher investment spend (A$2m) as MAI prioritises FUA growth over near-term operating leverage.

We lower FY20F/FY21F underlying Cash EPS by 27%/16% respectively. Our PT falls, however, we maintain our ADD recommendation. Trading on ~9x FY20F EV/EBITDA (MorgansE), we see MAI as too cheap for its long-term growth profile.

Morgans clients can login to view our share price target and detailed research note.

More information

Morgans clients can access further analysis in our latest reports on Megaport, Aventus Group, Central Petroleum, SomnoMed and Mainstream Group. 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.

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