Reporting Season Road Map: 23 August 2019

About the author:

Andrew Tang
Author name:
By Andrew Tang
Job title:
Analyst - Equity Strategy
Date posted:
23 August 2019, 1:00 PM
Sectors Covered:
Equity Strategy and Quant

IDP Education (IEL) – Well placed for another strong year

IEL's result with in line with our forecasts, delivering strong growth metrics across the board with revenue +23%, EBITDA +29%, and NPATA +24% yoy.

FY20 (MorgansE +22% EBITDA growth) provides the first 'clean' set of numbers that captures IEL's digital investment over the last three years.

We expect this to meaningfully benefit IEL's student placement division over coming years.

IEL's financial metrics are hard to fault (>45% ROE; >100% cash conversion; >20% revenue/EBITDA growth pa).

We upgrade to an Add rating.

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

Lovisa Holdings (LOV) – We're the kids in America

LOV's revenue grew 15% in FY19, while cost investment in new territories (notably the US) saw EBITDA +7% on pcp. LOV's result beat our forecasts by c3-5% across the board.

LFL sales growth in early FY20 has accelerated to sit in the group's target range of 3-5%.

A ~7c reduction in LOV's avg hedge rate poses a decent headwind in FY20 (some price recovery likely), although opex will be lower than our prior forecasts. We upgrade our store rollout and LFL sales growth assumptions, while a lower GM is largely offset by lower costs.

Our EBITDA forecasts increase, but higher D&A sees slight EPS downgrades.

Clearly LOV's short-term multiples are elevated, however they are stunted by the opex required to set up support structures in new, major markets.

When opex leverage ultimately returns, the earnings growth profile will accelerate meaningfully.

We forecast a 20% 3-year growth profile; we maintain our ADD recommendation.

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

Pro Medicus (PME) – Worth the price you pay 

PME released stronger FY19 results that were well ahead of our forecasts and consensus expectations.

Organic growth from existing customers ran ahead of our forecasts, showing a significant pick-up in transaction volumes well ahead of minimum transaction volumes.

Management commentary implies strong growth is expected to continue with no immediate growth constraints, an expanding pipeline, and its largest contract to date now live and set to deliver growth into FY20 and beyond.

We view PME as one of our preferred picks in the healthcare space. We raise our target price and upgrade our recommendation to Add (from Hold).

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

Santos (STO) – Surprises again

A solid 1H from STO, surprising with broad cost cuts across its business.

We upgrade our rating on STO to Add (from Hold), with the large energy company demonstrating it can flex margins across its business and advance key growth projects.

Cash flow breakeven dropped to US$31/boe, from previous target of US$35/boe. 68% increase in Dorado 2C resource to 310 mmboe.

The Quadrant acquisition continues to prove transformational for STO, having boosted group earnings and margins, while lowering STO's oil price sensitivity.

Post changes to our model our valuation has increased.

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 IDP Education, Lovisa Holdings, Pro Medicus and Santos. 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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