Results Road Map: 21 August

About the author:

Andrew Tang
Author name:
By Andrew Tang
Job title:
Analyst - Equity Strategy
Date posted:
21 August 2020, 3:05 PM
Sectors Covered:
Equity Strategy and Quant

Our best calls to action following the latest round of financial results:

Coca-Cola Amatil 

Things are improving but challenges remain

CCL's 1H20 result was materially stronger than we expected due to a stronger volume recovery in June and quicker than expected realisation of cost savings. Cashflow was strong and the highlight of the result.

As a sign of confidence in the company's future, the Board declared a modest dividend. Overall group volumes have improved sequentially since April and were down just 3% in August.

While volume trends in developing countries are improving, the outlook for CCL's emerging economies is challenging. We have made material upgrades to our forecasts.

With CCL now through the worst of it, we upgrade to an Add rating. View target price and full analysis (Morgans clients only).

Santos

Plenty in the pipeline

A good start to a tougher year, with STO posting H1 earnings ahead of our estimates, albeit trailing consensus estimates. Solid H1 FCF generation, which STO will use this to de-leverage after multiple accretive acquisitions in recent years that has left gearing at 34%.

Both Barossa and Dorado are being worked towards "FID ready" while STO waits for the energy market to gain firmer ground before pulling the trigger. STO also revealed a competitive looking CCS project to be FID-ready in late 2020. Cash flow break even now targeted below US$25/boe in 2020.

We maintain an Add rating. View target price and full analysis (Morgans clients only).

Beacon Lighting

Spending in-home to support further 1H21 growth

BLX's result was in line with recent guidance, with elevated 2H growth on the back of strong 4Q sales. These 4Q sales trends have continued into early FY21 as in-home spending remains a focus throughout the volatility of COVID-19.

BLX exited FY20 with A$14m net cash and we expect this will build nicely in coming years. The trends in in-home spending look set to continue over the balance of CY20 while COVID remains a threat and limits spending on travel/entertainment.

We think BLX offers an attractive mix of growth, BS strength, valuation (13.8x FY21F) and yield (4.4%).

Add rating maintained. View target price and full analysis (Morgans clients only).

Pro Medicus

Nothing to dislike here

PME released strong FY20 results which were broadly in-line with our forecasts and consensus expectations. Organic growth from existing customers continues, with relatively minor impacts caused by COVID-19 which include a dip in study volumes from April to May.

Management commentary suggests the dip in volumes are now back to around pre-COVID levels and contract pipelines continue to remain strong.

A large deal signed in June gives us confidence that further delays to new contracts are easing. While we expect new contract wins to recommence shortly, in what scale or frequency is hard to forecast, so we have opted to roll a small number of new contracts in FY21 and FY22 out to FY23.

We maintain our Add recommendation. We continue to believe the recurring and long-term nature of PME's contracts make a compelling investment case. View target price and full analysis (Morgans clients only).

InvoCare

Down but not out

IVC's 1H20 result (Dec Y/E) overall was weaker than we expected with operating EBITDA down 23% to A$.6m. The result was driven by a decline in the number of deaths, government restrictions on the number of funeral attendees and a largely fixed cost base.

As expected, management has not provided any outlook guidance. We decrease FY20F operating EBITDA by 11% to A$116.5m.

Our target price falls however we maintain our Add rating. While the short-term outlook remains uncertain, we believe the long term fundamentals remain sound. View target price and full analysis (Morgans clients only).

Waypoint REIT 

Good visibility

Waypoint's (WPR) 1H20 result was solid with good visibility on earnings and distributions. FY20 guidance was recently upgraded with distributable earnings growth now expected to be 4.00-4.25% (from 3-3.75%). Internalisation of management is expected to be completed by 30 September.

The balance sheet remains well positioned (gearing sits at 30.5%).

We retain an Add rating. WPR remains a key yield pick. View target price and full analysis (Morgans clients only).

The Star Entertainment Group

Grinding it out

SGR's FY20 result was heavily impacted by COVID-19 but management acted decisively to reduce operating expenses and cut back cash burn. Early indications in July were positive for the business (gross gaming revenues running at ~80% of the pcp), however increased restrictions in Sydney have reduced customer activity in August.

On a positive note, Queensland has continued to perform in-line with July during August.

We believe SGR is well positioned for an eventual easing in social distancing restrictions, and expect strong customer demand for its offering to result in earnings bouncing back sharply once this occurs.

With considerable upside potential to our revised share target price, we retain an Add rating on the stock. View our target price and full analysis (Morgans clients only).

Perpetual Limited

Looking to utilise its new offshore footprint

PPT's reported FY20 operating revenue of A$9m (-5% on pcp) and underlying NPAT of ~A$93m (-19% on pcp), were both broadly in line with consensus. A 50cps final fully franked dividend was declared.

In our view, the result could be summarised as continued pressures within Perpetual Investments (e.g. net outflows) somewhat offset by a strong revenue performance by Perpetual Corporate Trust (PCT).

Adviser wins for Perpetual Private (PP) and the two recent acquisitions mark the initial steps for PPT's turnaround growth strategy. We lower FY21F/FY22F EPS by ~6%/-17% on reduced revenue/FUM forecasts and further considering the financial implications of recent acquisitions.

Our price target reduces however we believe PPT offers value at current levels. Add maintained. 

View target price and full analysis (Morgans clients only).

Worth a look

IPH Limited

The network effect

Overall, it was a typically solid result from IPH with EBITDA of $114.5m coming in slightly ahead of consensus at $113.3m and in-line with our forecast.

The company noted some domestic weakness due to office closures in Victoria and lower filings, but we believe this is temporary in nature and expect revenues to bounce back in FY22.

With IPH offering ~13% upside to our revised target price, and offering a defensive yield of 3.9% fully franked, we retain an Add rating on the stock. View target price and full analysis (Morgans clients only).

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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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