Results Road Map: 31 August 2020

About the author:

Andrew Tang
Author name:
By Andrew Tang
Job title:
Analyst - Equity Strategy
Date posted:
31 August 2020, 10:00 AM
Sectors Covered:
Equity Strategy and Quant

Nextdc Limited

As easy as 1, 2, 3

Next DC's (NXT) FY20 result was at the upper end of guidance and FY21 guidance was in line with consensus expectations. The result and outlook demonstrate how uncorrelated digital infrastructure is to economic cycles and showed how high quality NXT business model and earnings streams are.

In FY20 NXT generate over $100m of EBITDA and cash flow.

On our forecasts the current contracted pipeline combined with channel partner sales should see EBITDA exceed $200m in the next four years and potentially $300m in the next five, if options granted to CSP customers are exercised.

We upgrade to an Add recommendation. View target price and full analysis by logging in. (Morgans clients only).

Costa Group Holdings

The winds are shifting

Overall, Costa Group's (CGC) interim result was in line with our forecasts. However, Produce was materially weaker than expected, while the International segment materially exceeded expectations.

With domestic drought related headwinds having eased, water security materially improved and produce prices/demand generally favourable, outlook comments were positive and a strong 2H20 result is expected (cycling a weak pcp).

The outlook for the 2020 citrus crop has improved since the AGM, which implies prior FY20 guidance (while withdrawn) of ~A$144m EBITDA-SL remains achievable. We sit slightly below at A$141.5m.

With the potential for operating leverage to return in FY21, Add rating retained. View target price and full analysis by logging in. (Morgans clients only).

Motorcycle Holdings

Cycling outa FY20 in a much better position

Motorcycle Holdings' (MTO) FY20 EBITDA result came in above the top-end of guidance and was 6% above our forecast. 2H20 represented a very strong period of trading with 18% revenue growth converting to +133% EBITDA growth. MTO has materially strengthened its BS and exits FY20 in an immaterial net debt position, removing a key market concern over the past few years.

While trading conditions are clearly elevated given current government stimulus (and have continued thus far in FY21), we note new bike volumes are still ~33% below their CY16 peak.

Significant structural cost out activity undertaken in recent years provides increased flexibility for any future volatility.

MTO is trading on 7x PE (pre AASB16) and 5.5% yield based on our FY21 forecasts. Add maintained. View target price and full analysis by logging in. (Morgans clients only).

Shine Justice

Continuing to deliver

Shine Justice's (SHJ) FY20 result was solid and came in ahead of our forecasts across most measures and EBITDA exceeded guidance for growth in the order of 10%. The company has guided to a continuation of normalised EBITDA growth and expects growth in FY21 to be in the high single digit range.

This has resulted in us upgrading our EBITDA expectations over the forecast period.

Litigation has traditionally been a defensive industry and the company's strong result in COVID impacted times illustrates this. Following our target price increasing to $1.44/share (from $1.23/share) we reiterate our Add rating. View target price and full analysis by logging in. (Morgans clients only).

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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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