Best calls to action – Friday, 26 February
About the author:
- Author name:
- By Andrew Tang
- Job title:
- Analyst - Equity Strategy
- Date posted:
- 26 February 2021, 10:00 AM
- Sectors Covered:
- Equity Strategy and Quant
Atlas Arteria - Solid result in a COVID-19 world
The key risk heading into the FY20 result (traffic and toll revenue) for Atlas Arteria (ASX:ALX) was pre-released, so it was pleasing to see EBITDA margins close to expectations.
Traffic remains materially below pre-COVID-19 levels, and the macro (AUDEUR, bond yields) is also a headwind for DPS and valuation.
We think the recent sharp share price decline has adequately captured the above factors. Add retained, with our 12 month price target revised.
Read our full report and latest price target on ASX:ALX here.
Zip Co Ltd. - US traction encouraging
Zip Co Ltd. (ASX:Z1P) reported 1H21 NPAT loss of ~A$453m was impacted by a number of one-off items, e.g. a net revaluation of Quadpay (-A$306m) and performance shares issued due to hurdles being met (~-A$64m).
However, even excluding these items, the underlying loss was closer to ~A$114m, well above our estimates on higher expenses (-A$30m).
While Z1P's investment to drive growth is higher than we expected, we think momentum across the business remains very strong, particularly the traction the company is gaining in the US.
We lower FY21F/FY22F EPS by >50% on current year one-offs and allowing for higher investment in all forecast years. We change our valuation from a DCF to a blended DCF/Price-to-sales (PS) methodology, with a revised price target.
Z1P continues to trade at a significant PS discount to APT, and we continue to see upside if it can execute on its strategy of becoming a global payments player.
Read our full report and latest price target on ASX:Z1P here.
Nextdc Ltd. - The cloud is just gathering steam
Nextdc's (ASX:NXT) 1H21 result was slightly ahead of our forecasts as was upgraded FY21 guidance. We upgrade our FY21 EBITDA forecasts by ~3% and our PT by increases following these changes.
We retain our Add recommendation. The key share price catalyst relates to the potential for CSP's to exercise some, or all, of their collective 57MW's of options which would fast track DC utilisation, and earnings.
Read our full report and latest price target on ASX:NXT here.
Sydney Airport Holdings - Preparing for take-off
Sydney Airport Holding's (ASX:SYD) FY20 result was broadly as expected, with limited cash burn and ample liquidity to be topped up by a Danish tax refund and Sydney Gateway proceeds.
Looking out next 12 months we are optimistic that pax will be in a sustained recovery phase. Add retained with a new price target.
Estimated 5-year investment IRR at current prices of c.9% pa, driven mostly by potential share price growth given we don't expect distributions until 2H22/1H23.
Read our full report and latest price target on ASX:SYD here.
TPG Telecom Ltd. - Starting to get traction
TPG Telecom Ltd. (ASX:TPG) released its FY20 result and pro-forma numbers were broadly in-line with expectations. They surprised, relative to our expectations, with a 7.5c dividend.
We assumed TPG wouldn't pay a dividend until gearing was within the Board's comfort range but the Board was unperturbed by debt and declared a dividend.
Our price target reduces on slightly lower earnings forecasts and we retain our Add recommendation.
Read our full report and latest price target on ASX:TPG here.
Universal Store Holdings - The trend's your friend
A strong sales rebound, GM expansion and material opex leverage saw Universal Store Holdings (ASX:UNI) report 1H21 EBIT +69%.
The group's sales trajectory accelerated further into early 2H21 with LFL sales +28% to-date. GMs are also holding firm.
We estimate UNI exited 1H21 in a cA$17m net cash position (adj. for JobKeeper repayment and inventory rebuild). This allowed for a 5c div vs MorgsE nil.
We make c10% upgrades to our EPS forecasts (still see risk to the upside), while our DCF/PE valuation lifts. Trading on 14.8x FY22 and 4.2% yield and offering a strong multi-year growth profile, Add rating maintained.
Read our full report and latest price target on ASX:UNI here.
Aventus Group - Quality delivering results
Aventus Group (ASX:AVN) reported a solid 1H21 result with portfolio metrics remaining stable and rent collection at 98% for the half.
FY21 guidance has been upgraded with FFO to now be +4% on the pcp vs +2% previously. This implies FFO of at least 19cps and DPS of at least 17.1cps which equates to a c6% distribution yield
Catalysts include asset re-ratings and accretive acquisitions. We retain an Add rating with a revised price target.
Read our full report and latest price target on ASX:AVN here.
Karoon Energy Ltd. - Strong start to life as a producer
A good start to Karoon Energy Ltd's (ASX:KAR) life as an oil producer, with management delivering. Unit production costs in 1H21 came in at just US$22.1/bbl, against a realised price of US$47.31/bbl.
Margins will balloon in 2H with spot Brent now above US$67/bbl. Maiden FY21 guidance of 3.0-3.4mmbbl falls in line with our unchanged forecast of 3.2mmbl.
Corporate structure continues evolution in-line with transition to being a producer. We maintain our Add rating, with Karoon one of our most preferred sector picks.
Read our full report and latest price target on ASX:KAR here.
Novonix Ltd. - Big investment - big contracts coming?
Novonix Ltd. (ASX:NVX) is seeking to raise $146m in new equity to fund faster ramp of graphite production, R&D and to pursue other growth opportunities.
$95m will be spent to accelerate production capacity to 10ktpa within two years. We think the push for accelerated production strongly suggests ready customer demand.
NVX delivered a loss after tax in 1H21 of $10.8m with 12cps of NTA. We increase our target price and upgrade our rating to speculative buy.
Read our full report and latest price target on ASX:NVX here.
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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.