Best calls to action – Thursday, 25 February

About the author:

Andrew Tang
Author name:
By Andrew Tang
Job title:
Analyst - Equity Strategy
Date posted:
25 February 2021, 10:30 AM
Sectors Covered:
Equity Strategy and Quant

Eagers Automotive – New leader, same strategy, same tailwinds

Eagers Automotive's (ASX:APE) pre-released NPBT (+108%) saw a strong 2H offset a COVID-19-impacted 1H. The speed of the CEO transition spooked the market.

While we sympathise with this view, we are of the opinion that it's possibly the most well prepared succession investors could hope for (15 years working together) - superior to an external search.

2H20 margin/demand tailwinds have persisted into FY21 with no signs of tight inventory supply easing.

Forecasts unchanged; MorgeE FY21 NPBT +28% yoy. 16.5x FY21F PE; 4.2% yield.

We think recent tailwinds can potentially continue for some time, while the group's various internal growth levers provide further optionality. Add rating maintained.

Read our full report and latest price target on ASX:APE here. 

Nanosonics Ltd - Share price fall provides opportunity

Nanosonics Ltd (ASX:NAN) has fallen by over 20% in the last month which in our view is a buying opportunity and sees us move our recommendation to Add (from Hold).

Although the 1H was below our expectations driven mainly by lower GE Health sales and higher AUD, the momentum in 2Q bodes well for a much stronger 2H.

NAN has a strong commitment to R&D and we expect a range of products/platforms to be delivered over the next 5 years. The next product is still expected to come to market in FY22.

We have delayed material revenue contribution from the next product until FY23 (was FY22), which results in ~35% downgrades across the forecast period.

After rolling forward our model our valuation and target price decreases.

Read our full report and latest price target on ASX:NAN here.

Home Consortium - Gets the health tick

Home Consortium (ASX:HMC) continues to evolve to a capital light model with the strategy on track.

AUM currently sits at A$1.7bn with the medium term target unchanged at +A$5bn.

A key highlight of the 1H was the successful spin-off of HomeCo Daily Needs REIT which now has AUM of A$978m; HMC continues to hold a 26.6% stake.

We expect near term newsflow to focus on the structure of HealthCo (dual track process underway/1H22 close targeted); as well as further asset recycling.

FY21 FFO guidance is to be no less than A$35m/12.9cps which is in line with our expectations. DPS guidance is 12c with a 6c interim dividend (ff) declared.

In our view, HMC continues to offer growth and yield to investors and we are backing management to execute on dealflow which has been successful to date.

We retain an Add rating with a revised price target.

Read our full report and latest price target on ASX:HMC here.

Idp Education Ltd - Recovery tracking ahead of plan

Idp Education's (ASX:IEL) 1H21 result was above expectations. Despite headline metrics down yoy (COVID-19 impacts), strong IELTS volumes/lower opex drove a 20% NPAT beat.

IELTS test volumes exited 1H21 at above pre-COVID-19 run-rates, which is ~6 months ahead of expectations and drives strong uplifts to our forecasts.

While student placement timing remains uncertain, significant pent-up demand provides upside to our forecasts over time as border restrictions ease.

We continue to like IEL as a structural growth story with meaningful leverage to a global reopening.

We believe earnings risk lies to the upside as pent-up demand levels are quantified, with M&A providing a potential further catalyst.

Add maintained with a revised price target.

Read our full report and latest price target on ASX:IEL here.

Helloworld Travel Ltd - Glimmer of light ahead

Given COVID-19 travel restrictions, Helloworld Travel Ltd (ASX:HLO) reported a 1H21 loss.

Importantly, the result beat our forecast on a number of key metrics. We note that its loss is the smallest in the sector due to its very low cost base.

Due to border closures, HLO has pushed out its breakeven/profit target from the 4Q21 to the start of the 1H22. Consequently we have revised our forecasts.

Nearing break-even, plenty of liquidity and an attractive valuation based on more normalised earnings, we maintain an Add rating with a new price target.

Read our full report and latest price target on ASX:HLO here.

Medibank Private Ltd - A pretty clean result

Medibank Private Ltd's (ASX:MPL) 1H21 NPAT (A$227m) appeared in-line with Factset consensus (A$226m).

Overall, we saw this as a relatively solid result, with improved policyholder growth trends in Health Insurance (HI) the key highlight, supported by a relatively stable HI underlying operating margin on pcp.

We lift MPL FY21F/FY22F EPS by 1%-7% on slightly improved HI margin forecasts and incorporating the recent Myhealth acquisition into our numbers.

We think MPL's improved policyholder growth trajectory positions the company well to accelerate HI growth over the medium term, while an increased cost-out plan should help buffer margins.

With >10% TSR upside on a 12-month view, we move MPL to an Add.

Read our full report and latest price target on ASX:MPL here.

Bega Cheese Ltd - Plenty of organic and acquisitive growth to come

Bega Cheese Ltd (ASX:BGA) reported a solid 1H21 result which beat expectations due to self-help measures (cost out), business mix benefits and a new growth project (high margin lactoferrin).

The improvements to its underlying business give us confidence in its ability to improve the returns from its acquisition of Lion Dairy & Drinks (LD&D).

We have made minor upgrades to our forecasts. We believe they will prove to be conservative as BGA should exceed its synergy target from LD&D.

BGA should deliver solid earnings growth over coming years from LD&D, its growth projects and organisation and process review.

We reiterate our Add rating with a new price target.

Read our full report and latest price target on ASX:BGA here.

Moneyme Ltd - Book growth set to continue

Moneyme Ltd (ASX:MME) pre-released its 1H21 revenue of ~A$24m (+12% on pcp) and gross loan book of ~A$168m (+32% on pcp).

It delivered a A$1.3m NPAT which was in line with our estimates.

Overall, we see this as a solid interim result highlighted by: accelerating origination momentum; improving asset quality and a book that is beginning to diversify with newer products gaining traction.

We alter our FY21F/FY22F cash NPAT by ~+28%/-4% on lower loan impairment forecasts and changes in margin assumptions.

We continue to believe MME's new and existing product suite accompanied with its new lower cost funding facility should provide medium term tailwinds for loan growth and profitability.

Our DCF-derived valuation and price target rises. Add maintained.

Read our full report and latest price target on ASX:MME here.

Australian Vintage Ltd - Sustainable gains, with tailwinds still blowing

Australian Vintage Ltd (ASX:AVG) delivered a strong interim result (NPATS +86%) and strong cash generation over the past four years has enabled the Board to now consider capital mgmt.

FY21 guidance was reiterated and we continue to see upside risk to earnings with the group's next update likely post its 2021 vintage in May.

AVG will accelerate brand investment in 2H21, which will support recent UK retail distribution growth. We upgrade our forecasts and maintain an Add rating.

Read our full report and latest price target on ASX:AVG 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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