Best calls to action – Friday, 20 August

About the author:

Andrew Tang
Author name:
By Andrew Tang
Job title:
Analyst - Equity Strategy
Date posted:
20 August 2021, 6:00 AM
Sectors Covered:
Equity Strategy and Quant

Treasury Wine Estate - A result worth toasting

Given the number of external headwinds TWE faced in FY21, we think its result was commendable, with many areas across the business beating expectations. Despite some issues still to overcome, the outlook is positive for TWE.

Over the long-term, the company is targeting sustainable top-line growth, high single-digit earnings growth pa, materially higher margins and ROCE.

Following the result we have greater confidence in TWE's Penfolds reallocation strategy and the outlook for Americas. Reduced COGS will become a tailwind from FY23. The new divisions allow the market to properly value the Penfolds brand and in our view, proves that the SOTP is worth more than the whole. We maintain an Add rating.

Read our full reports and latest price targets on ASX:TWE here.

OZ Minerals - Drifting into the buy zone

The larger dividend was the only real surprise among 1H21 financials. Approval of the Prominent Hill shaft/expansion (PHOX) similarly didn't surprise, but project economics do underwhelm at face value.

We expect the market to recognise upside in Resources/ Reserves (mine life) to be unlocked over time. We upgrade to an Add, particularly as the cooling of macro sentiment or a subdued response to the PHOX update may crystallise an opportunity at lower prices.   

Read our full reports and latest price targets on ASX:OZL here.

Senex Energy Limited - Hedging drag but FCF/dividends grow

A good and clean FY21 result from SXY, demonstrating consistent growth and making progress on the next phase of growth. Underlying EBITDA was comfortably within guidance and close to consensus at $54.5m, while FCF impressed at $21m in a year of ramp up.

Guidance for FY22 was mixed, below our estimate on EBITDA, while FCF was above (driving dividends), capex slightly above and production inline.

Oil hedges have trimmed FY22 EBITDA upside, but equally SXY's FCF profile and dividend have strengthened. We maintain our ADD rating on SXY, which remains a key sector pick.  

Read our full reports and latest price targets on ASX:SXY here.

Airtasker Limited - So far proving up to the task 

With ART having pre-released key line items such as GMV ($153.1m, +35% on pcp, +39% in Q4) and provided the Q4 (and FY21) cashflow statement, marginal financial information included a slightly higher takerate and Adj EBITDA beat.

ART has reiterated guidance provided in May at the time of the Zaarly acquisition for GMV >$200m and Revenue >$35m.

This affirmation of guidance, despite lockdowns along the eastern seaboard, provides evidence of domestic marketplace momentum, comfort in the adaptability of the marketplace, and ability to bounceback upon easing of restrictions. We maintain the Add rating. 

Read our full reports and latest price targets on ASX:ART here.

Homeco Daily Needs - Delivering and developing

HDN's FY21 result was ahead of original PDS expectations with portfolio metrics solid and a development pipeline in place to deliver further growth. FY22 FFO guidance of 8.3cps is reiterated with DPS guidance 8cps which equates to a distribution yield of +5% paid quarterly.

The portfolio is valued at $1.6bn across 28 assets with a WALE of 7.6 years; WACR 5.6%; and occupancy at ~99%. Cash collection remains strong at 99%. We retain an Add rating. 

Read our full reports and latest price targets on ASX:HDN here.

Newcrest Mining - Full year dividends surge on new payout policy

With EPS at US$1.425 (+71% yoy) and a revised divided policy targeting 30-60% of free cash flow, NCM declared a final dividend of US$0.40 per share for a full year payout of US$0.55 (+129% yoy). EPS was boosted by higher gold prices in the first half of the year, and surging copper prices in recent periods.

NCM is guiding to 1.8-2Moz of gold and 125-130kt of copper production in FY22, with mid-point AISC of US$960/oz, and circa US$1bn in major project capital.

We revise our price target and maintain an Add rating. Change in target price is driven by tweaks to our FX and copper price assumptions, along with FY22 guidance.

Read our full reports and latest price targets on ASX:NCM here.

Origin Energy - Value in search of a catalyst

ORG's FY21 underlying net profit was stronger than expected (+28% on Morgans forecast and +18% on consensus). The company provided additional guidance on total EBITDA which fell short of expectations but cash flows are looking solid.

We still continue to see significant value upside and retain our ADD rating. 

Read our full reports and latest price targets on ASX:ORG here.

Redbubble Limited - Not yet through the trouble, but backing the bubble 

RBL's FY21 result came in slightly below forecasts (-0.8% Marketplace rev, -1% GP and -2% EBITDA). Given quarterly reporting, the quantum of the miss in the 4Q was a degree higher (-5% at MP Rev and GP lines, -40% EBITDA on small no.)

The magnitude of near term downgrades we have put through our forecasts, the 39% intraday movement in the stock, and a likely near term retreat as short covering abides, has still not dissuaded us from moving to an Add rating.

Whilst the worse may be yet to come, we are taking a longer term view, being believers in the earnings and growth potential of the RBL platform.

Read our full reports and latest price targets on ASX:RBL here.

IPH Limited - Singapore share slings 

FY21 underlying EBITDA of A$124.3m was down 1%, however slightly ahead of expectations. IPH absorbed a ~A$18m currency headwind within the result. On a LFL basis, EBITDA was +10% on the pcp, driven by margin improvement in both regions (LFL: ANZ revenue down 3%; Asia revenue +3%).

IPH's balance sheet strength (gearing at 0.4x EBITDA) allows for debt funded acquisitions which remain core to the strategy. Offshore expansion appears inevitable and should add to the medium-term growth profile.

We retain an Add recommendation. Whilst upside to our valuation is fairly thin, we consider the core earnings base as defensive and acquisitive growth as adding to the 'network effect' IPH is building. Earnings sensitivity to currency remains high and USD direction can dictate share price movements on a short-term basis.

Read our full reports and latest price targets on ASX:IPH here.

Beacon Lighting Grp - FY21 result: A light in the darkness. Upgrade to ADD

We have upgraded our rating to ADD (from HOLD) after Beacon Lighting's FY21 result demonstrated the significant potential of its push into the Trade market. Beacon Lighting's earnings multiples are undemanding at a forward PE of 14x and EV/EBITDA of 7x.

Beacon Lighting's FY21 NPAT was up 69% (and above guidance) on the basis of 13.3% LFL sales growth and 300 bp of gross margin expansion. We think earnings will normalise in FY22 (though not, we believe, by as much as consensus assumes) but then will resume a positive growth profile in FY23.

We see meaningful upside risk to earnings over the next few years. With this note, coverage of Beacon Lighting transfers to Alexander Mees.  

Read our full reports and latest price targets on ASX:BLX here.

Perpetual Limited - Well positioned for growth

PPT's FY21 underlying NPAT (A$124m) was 4% above consensus, with revenue (A$641m) more broadly in-line with market expectations.  We would summarise PPT's FY21 result as broadly solid reflecting a first full six month contribution from Perpetual Asset Management International (1H21 NPAT A$30m), and sound performances in Perpetual Corporate Trust (PCT) and Perpetual Private (NPAT +8%-9% on pcp).

We lower our FY22F/FY23F EPS forecasts by 1%-2% on higher costs, offset to some degree by higher revenue estimates.

We think successful execution of PPT's growth strategy could drive significant upside and we see PPT's current valuation as relatively undemanding (~16x FY22F PE). ADD.

Read our full reports and latest price targets on ASX:PPT here.

Find out more

You can find further detailed analysis of company results this reporting season by browsing our reporting season tag, and view a full list of upcoming results on our Reporting Season Calendar.

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Disclaimer: Analyst may own shares. 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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