Best calls to action – Tuesday, 22 February

About the author:

Andrew Tang
Author name:
By Andrew Tang
Job title:
Analyst - Equity Strategy
Date posted:
22 February 2022, 6:00 AM
Sectors Covered:
Equity Strategy and Quant

Reliance Worldwide - Demand remains positive

RWC's 1H22 result was slightly below expectations.

Key positives: Balance sheet remains healthy despite the recent acquisitions of LCL and EZ-FLO with ND/EBITDA at 2.0x vs management's 1.5-2.5x target; R&R demand in the US remains robust.

Key negatives: Group EBITDA margin fell 180bp to 24.1%; APAC and EMEA performance was lower than expected; Operating cash flow fell 47% due to higher inventory levels to mitigate shipping and other logistical delays.

No earnings guidance was provided due to the ongoing uncertain operating environment. RWC said trading in January was broadly consistent with trends in 1H22 with Americas sales reflecting ongoing strong demand, APAC benefiting from strength in residential construction and remodeling, and EMEA sales flat.

FY22F/FY23F/FY24F underlying EBITDA changes by -1%/0%/0% Our target price decreases to (login to view) and we maintain our Add rating.

Trading on 18.6x FY22F PE and 2.6% yield we continue to see the valuation as attractive for a high-quality company with solid long term growth opportunities.

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

Super Retail - Upgrade to ADD after the market brake checks SUL

Adjusting for the timing of Boxing Day, SUL's 1H22 EBIT was 3% above our forecast. Sales were considerably better than expected, with BCF, Supercheap Auto and rebel all delivering double-digit LFLs on a two-year stack. There are no major changes to our full year EBIT estimates.

We upgrade our rating from HOLD to ADD as today's share price decline has put the stock on an FY23F P/E of 12.3x and EV/EBIT of 10.3x, which we see as too low for the quality of the business. Our target price is (login to view). 

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

Tyro Payments - Top-line growth needs to be balanced with leverage

TYR's 1H22 NPAT loss (-A$18m) was below Factset consensus (-A$11m). While 1H22 revenue (A$142m, +30% on pcp) was +5% above market expectations, TYR's normalised EBITDA (A$2.7m) was comfortably below consensus (~A$5m) and MorgansE (~A$7m). 

Overall, this result disappointed versus expectations primarily due to a softer payments gross profit margin and higher-than-expected operating costs. We downgrade our TYR FY22F/FY23F EPS by >50% mainly on reduced EBITDA margin assumptions. Our PT is set at (login to view). ADD maintained.

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

Cooper Energy Ltd - Enters critical phase

A softer 1H22 result on balance, but COE is now in a critical half as we learn whether Orbost can sustain recent operational gains and talks with APA progress ahead of the May 2022 expiry of the Transition Agreement. Supply chain issues have led to a delay in planned Phase 2B works at Orbost, with its budget now under review.

Despite the delay COE still expects high end of guidance EBITDAX, with Sole's improved operating performance continuing into the second half. We maintain our Add rating, with a revised (login to view) target price.  

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

Helloworld Travl Ltd - Get ready to say "Hello World"

The 1H22 continued to be a challenging period for HLO given COVID-related travel restrictions and materially less government support. However, the result was better than we expected. Tight cost control saw HLO keep losses to a minimum.

2H22 outlook comments were stronger than expected with a breakeven or better outcome in the 4Q22. With domestic and international borders reopened or about to reopen, HLO was upbeat about the pent-up demand for travel.

Backing out its investment in CTD from its EV, HLO is materially undervalued, trading on a recovery year EV/EBITDA multiple of only 4.0x. Add maintained

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

Hotel Property - Investing in the portfolio

HPI's 1H result highlighted that the portfolio and balance sheet remain in a solid position. Following acquisitions, revaluations and a divestment the portfolio is currently valued at +$1.1bn across +60 assets. WALE +10 years; occupancy 100% with a majority of leases linked to CPI.

FY22 DPS guidance remains 20.5c equating to an implied yield of 5.7%. We retain an Add rating with a (login to view) price target.

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

Adairs Limited - Rocking chair: 1H22 result impacted by logistical issues, but it will get better

ADH reported 1H22 earnings in line with last month's pre-announcement. Underlying sales were positive, supported by online. Earnings were impacted by COVID disruption to logistics. This will improve as 2H22 progresses.

We have made no major changes to our earnings estimates. We retain an ADD rating. Our target price moves from (login to view).

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