Best calls to action – Monday, 30 August

About the author:

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

Eagers Automotive - Order book + cost out = strong visibility

A record result by some margin for APE (1H21 NPBT A$218.6m) with the strength more about internal cost efficiencies than cyclical market tailwinds. APE provided detailed disclosure which provides increased confidence around the sustainability of currently elevated margins, EA123 profitability/growth potential and 16 months of forward order book growth.

We think APE effectively has good line of sight on the next 12 months of demand and earnings. Further consolidation remains firmly on the agenda. We make another round of upgrades on increased confidence structurally higher margins are here to stay. Add maintained.  

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

Nextdc - Future is Cloudy with plenty of options yet to play out

NXT's FY21 result was slightly better than guidance and our forecasts. FY22 revenue and EBITDA guidance is in line with market expectations. For both years growth was/is expected to be 20-30% pa. It was a good year and a good outlook.

Both MWs billing and MWs contracted jumped ~5MW in 2H21 to 50MW and 75MW respectively, ahead of our forecast.

Business as usual and 10MW contracted but not yet billing underpins EBITDA growth for the next two years. The 30-40% pa growth in Cloud Service Provider revenue (to June 21) reinforces our view that demand is high, and options should get exercised, soon. We make minor EBITDA upgrades. Add retained.      

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

Peter Warren - Conservative but forward order book remains strong

Like most auto groups, PWR experienced a strong FY21, significantly exceeding prospectus NPBT forecasts by 68%. Bolt-on acquisitions (4) have commenced since IPO, however we think the company also remains focused on a larger prize. PWR has A$43m of net cash providing ample flexibility in this regard.

With PWR's exposure limited to NSW and QLD, lockdowns in the former have impacted trading into 1H22. The company has therefore reiterated its prospectus 1H22 forecast which represents 43% contraction vs 2H21. PWR's outlook commentary was in stark contrast to peer, Eagers Automotive.

We acknowledge APE's overweight exposure to QLD/WA vs NSW for PWR. We also expect conservatism is playing a part in the group's first 12 months post IPO. Add rating maintained.      

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

Costa Group Holdings - Offshore growth kicking into gear

CGC's headline results were pre-released. Produce segment was weaker than we expected, however the International business materially exceeded expectations. FY21 guidance was reiterated and a far stronger 2H21 Produce result will be required to deliver it. However, CGC will be supported by the on-year citrus crop and solid growth in the main berry season is expected. While risks remain, we see clearer drivers of a materially improved FY22 result. We also remain attracted to CGC's structural growth opportunity in China, market leadership position and more undemanding valuation. Upgrade to Add rating.  

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

Adbri Limited - Making clear progress on strategic initiatives

ABC's 1H21 result was slightly below expectations, with margins impacted by some small lime volume losses and price resets. While COVID restrictions have weighed on 2H trading, the earnings impact was lower than that reported by peers.

Clear progress on its strategic initiatives is being made, with positive initial results in infrastructure and a focus on unlocking its land value the key highlights for. With greater confidence in ABC's expected FY22/23 earnings recovery, we upgrade to an Add rating.

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

Waypoint REIT - Capital management on the horizon

WPR's 1H21 result was in line with expectations with the near term focus on capital management initiatives following asset sales (5% of portfolio by value). CY21 guidance has been reiterated and comprises distributable EPS of 15.72c (+3.75% on the pcp).

Distributions will move to quarterly from September. The portfolio is valued at $2.9bn across 427 properties with a WACR of 5.4%; occupancy of 99.9% and a WALE of 10.5 years. Pro-forma gearing sits at 28.7% and NTA is $2.75. We retain an Add rating.   

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

Aust Finance Grp - AFG Securities remains the key attraction

AFG has reported FY21 statutory NPAT of $51.304m, which is 0.6% better than our expectation. A final dividend of 7.4cps fully franked has been declared. We remain positive on the loan growth outlook for the AFG Securities (AFGS) business, which is AFG's highest margin business segment. Retain Add recommendation. 

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

Bega Cheese - A year of challenge, opportunity, and transformation

BGA reported a solid FY21 result which beat expectations. While further earnings growth is targeted in FY22 given a full year of the Lion Dairy & Drinks (LD&D) acquisition, some challenges remain around competition for milk, record high farmgate milk prices and COVID lockdowns are impacting the higher margin convenience and food service channels.

We maintain an Add rating.    

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

Jumbo Interactive - Not leaving its growth outlook to chance

While JIN's FY21 result was in line with our forecasts and consensus, the stock was sold off heavily, which we attribute to some specific reasons below. JIN has expanded its Managed Services business into the Canadian charity lottery market through the bolt-on acquisition of Stride.

Further bolt-on M&A in the UK is possible and the US commercial iLottery market remains a further opportunity. We remain attracted to JIN's long runway of potential growth, structural industry tailwinds and net cash balance sheet position. Add rating maintained.   

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

Silk Logistics - A solid start to listed life

We are cognisant that SLH's operating environment has heightened uncertainties and the business faces volume risk across its business. However, after mildly beating its FY21 prospectus forecast we think it may beat its prospectus FY22 EBITDA and NPAT forecast by 8% and 18% respectively. ADD

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

Kina Securities Ltd - Another good result

KSL's 1H21 NPAT (PGK40m) was 14% above our expectations (PGK35m) and up 36% on pcp.  The result can be summarised as slightly lower revenue than we expected, more than offset by better operating expense and bad debt outcomes. We lift our KSL FY21F EPS by 6% on lower cost/bad debts, but slightly reduce FY22F EPS (-3%) on changes to Westpac Asia Pacific (WAP) acquisition assumptions. 

KSL management have executed well over time, with the business delivering ~25% NPAT growth respectively over the last 2 years. We also think completion of the WAP acquisition has the potential to turbo charge growth into FY22 (although we acknowledge this deal will overhang KSL's share price until completed). With KSL trading on ~4x FY22F earnings we see it as too cheap. ADD maintained

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

Genex Power - Impairments on solar but hydro is still the key driver

FY21 underlying EBITDA of $1.8m missed our expectations by $3.2m. There were significant one offs from debt forgiveness (+$7.9m) and a non-cash impairment of Jemalong's carrying value (-$16.5m). We maintain our ADD rating.

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

Generation Dev Group - A strong result with upside to come

GDG's FY21 underlying NPAT (~A$3.4m) was ahead of consensus (A$3.2m) and up ~20% on pcp. It was a strong year overall for GDG, with record sales of A$404m (+22% on FY20), Life business FUM growth of 38% to ~A$1.8bn, an improving life business revenue margin and improved jaws (1.0x vs 0.9x in FY20). We upgrade our FY22F/FY23F EPS by 13%-15% on an increase to both revenue and leverage assumptions.

We continue to believe GDG remains well positioned to execute a compound earnings growth story in the medium term. ADD maintained. We upgrade our FY22F/FY23F EPS by 13%-15% on an increase to both revenue and leverage assumptions. 

Read our full reports and latest price targets on ASX:GDG 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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