Reporting Season Road Map: 20 February 2020

About the author:

Andrew Tang
Author name:
By Andrew Tang
Job title:
Analyst - Equity Strategy
Date posted:
20 February 2020, 10:43 AM
Sectors Covered:
Equity Strategy and Quant

Following our assessment of results and market announcements, here is our one top picks for today (Thursday 20 February 2020):

Sonic Healthcare (SHL) – 1H mixed – In good health

1H underlying results were mixed, convoluted by accounting changes, the Aurora acquisition and FX, but with double-digit top and bottom line gains. Solid organic revenue growth was seen across all divisions, with margin accretion in both Laboratory (10bp), despite well-flagged US fee cuts and reimbursement headwinds in Germany, and Imaging (40bp). FY20 guidance was reiterated (cc EBITDA 6-8%), which we view as achievable, with upside if the first validated PCR test for Covid-19 can be leveraged. We have made negligible changes to underlying FY20-22 EBITDA estimates, and roll forward/increase our valuation multiples more in line with historical averages, with our price target increasing. 

We maintain our Add rating. Morgans clients can login to view our share price target and detailed research note.

Lovisa Holdings Ltd – Corona aside; model very much intact

LOV's result was in line with our expectations - EBITDA +15% despite hefty FX headwinds and investment in offshore markets. LOV's 20% 1H20 top-line growth shows the power of its global store rollout capability. The key growth driver (store rollout) is clearly showing strong momentum and the US remains a 'significant opportunity'. Coronavirus started to impact LOV in early February (foot traffic/sales + stock availability) with LFL sales growth turning negative. While unable to full quantify at this stage, LOV expects 'further impacts' over coming months. While this provides an additional headwind, its impact cannot be capitalised. LOV's valuation reflects the strong global rollout opportunity on offer which we think can ramp up further from here. The market is seemingly fixated on the company's ability to deliver opex leverage whilst growing rapidly offshore - the 1H20 cost performance show's LOV's ability to deliver this, in our view. 

We maintain our Add rating. Morgans clients can login to view our share price target and detailed research note.

Accent Group Ltd – Sneaking in a rollout upgrade

AX1's result was in line with forecasts, reporting sales +10.9% and EBITDA +10.5%. A slightly softer GM was offset by opex leverage. LFL sales growth has accelerated to 3% 2H-to-date (vs +2.4% in 1H) while the FY20 rollout guidance was upgraded to 59 net new stores from 40 previously. The 1H20 GM/CODB dynamic is expected to play out similarly in the 2H. We upgrade our forecasts by 2-4%. With continued earnings momentum and a reasonable valuation (16x FY21 PE and 5.2% yield).

We upgrade our rating to an Add. Morgans clients can login to view our share price target and detailed research note.

More information

Morgans clients can access our further analysis in our latest reports on Sonic Healthcare, Lovisa Holdings Ltd and Accent Group Ltd. 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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