Reporting Season Road Map: 13 February 2020
About the author:
- Author name:
- By Andrew Tang
- Job title:
- Analyst - Equity Strategy
- Date posted:
- 13 February 2020, 5:26 PM
- Sectors Covered:
- Equity Strategy and Quant
Following our assessment of results and market announcements, here are our four top picks for today (Thursday 13 February 2020):
Amcor PLC – Strong cost-out performance
While AMC's 1H20 result overall was slightly weaker than we expected, FY20 outlook guidance was marginally stronger. The key positive was improved FY20 underlying EPS growth guidance of 7-10% (vs 5-10% previously). The key negative was the performance of Rigid Plastics with EBIT (constant currency) down 12%. We make minor adjustments to earnings forecasts with FY20F underlying EPS of 63.0cps implying 8% constant currency growth.
We upgrade our recommendation to an Add (from Hold). Morgans clients can login to view our share price target and detailed research note.
Bapcor Limited (BAP) – Improving 2H conditions
BAP's 1H20 result was largely in line with expectations - a tough period for the key Trade business. The key driver of the softer Trade result (90bp of margin compression) is expected to reverse in the 2H with prices increases passed through and an aggressive promotional campaign now complete. FY20 guidance for mid-single digit NPAT growth was maintained. Where we previously saw some downside risk to consensus forecasts, the 2H margin recovery trajectory arguably now presents upside risk, in our view. BAP's growth has certainly slowed from its lofty heights. However we think 2H20 will remind the market of the solid growth that is still achievable. We think the stock can hold a c20x multiple against this backdrop.
We retain our Add rating. Morgans clients can login to view our share price target and detailed research note.
Megaport Limited (MP1) – Razor focused on-ramping
MP1's 1H20 result was in-line with our forecasts, and their recently released quarterly. Continued strong growth in North America (NAM) and expansion into Japan (which is a top 5 global Cloud consumer) were the highlights of the half. Following a more detailed review of our forecasts we have reduced our revenue forecasts which reduces our FY20 EBITDA forecast by ~5%. Offsetting this, our DCF based valuation rises, largely reflecting a lower share count. MP1 raised ~$60m in late CY19. We had forecast a further capital raise but due to a higher share price fewer shares were issued than we had forecast. We retain our Add recommendation and note key catalysts for MP1 relate to the possibility of ASX200 index inclusion shortly. Operationally, investors will be focused on MP1's capacity to accelerate sales growth. Achievement of this and/or potential ASX 200 index inclusion would also be positively received, in our view.
We retain our Add rating. Morgans clients can login to view our share price target and detailed research note.
Idp Education Ltd (IEL) – Best in class growth
A very strong result, with IEL beating across all forecast lines. Revenue growth of +25% converted to EBITDA +44% and NPATA +% yoy (pre-AASB16). Key takeaways: student placement accelerating (volume +30%); IELTS volume growth returns to >10%; GM expansion (+180bp to 58.3%); and opex leverage (CODB -135bps). Digital platform exceeding expectations (students applied +41%). A very strong result with clear top-line, operational and earnings momentum. Our EPS forecasts increase by ~11% over FY20-22.
We retain our Add rating. Morgans clients can login to view our share price target and detailed research note.
More information
Morgans clients can access our further analysis in our latest reports on Amcor PLC, Bapcor Limited, Megaport Limited and Idp Education. Alternatively, please contact your nearest Morgans office for access.
Disclaimer: Analysts 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.