Best calls to action – Thursday, 25 August
About the author:
- Author name:
- By Andrew Tang
- Job title:
- Analyst - Equity Strategy
- Date posted:
- 25 August 2022, 6:30 AM
- Sectors Covered:
- Equity Strategy and Quant
Coles Group (ASX:COL) - Changing with the times
COL's FY22 result was slightly above expectations.
Key positive(s): Supermarkets and Liquor earnings were better than expected; Market share improved in 4Q22 as local shopping unwound; Smarter Selling initiatives are on track to reach cumulative benefits of $1bn by the end of FY23.
Key negative(s): Capex for Witron and Ocado transformation projects have increased vs previous guidance; Group EBIT margin fell 20bp to 4.7% due to cost inflation and investments. Management said Supermarkets sales will cycle the lockdowns in 1H22 and price inflation in 2H22, while Liquor will also cycle lockdowns in 1H22.
FY23-25F underlying EBIT changes by between -2% and 1%. Our target price falls to (login to view) and we maintain an Add rating.
Read our full reports and latest price targets on ASX:COL here.
The Lottery Corp (ASX:TLC) - FY22 Earnings: No Scrubs
TLC's maiden result as a separately listed company saw it deliver a solid performance. On a comparable basis, revenue grew 9% and EBITDA grew 12% to $694m, slightly above our forecast of $691m. Lotteries were the powerhouse, growing EBITDA by 15%.
Keno EBITDA was down 4%, but this was better than expected in light of the venue closures in NSW during the first half. In our opinion, there is much to look forward to. In FY23, we expect TLC to continue to innovate its portfolio of games to 'align with player motivation'.
We expect it also to invest in enhancing the customer experience and drive increased digital penetration. It will also continue to push its retail network into new channels. We have increased our EBITDA estimates by 1% in FY23 and by 6% in FY24. We retain an ADD rating and (login to view) target price.
Read our full reports and latest price targets on ASX:TLC here.
Domino's Pizza (ASX:DMP) - FY22 Earnings: It gets better from here
The transition out of COVID tailwinds and into an environment of inflationary pressure and reduced consumer confidence made FY22 a challenging year for FY22. EBIT fell by 10.5% as both Asia and Europe reported reduced margins and same store sales growth.
We believe it will get better from here. We forecast 12.9% EBIT growth in FY23, followed by 19.5% growth in FY24. Higher prices, operating efficiencies and menu enhancements are already allowing DMP to offset cost inflation in ANZ and Asia.
It's been slower in Europe, but it appears progress is being made. With the prospect of some relief in commodity price inflation and reduced losses in Denmark, we expect margins to rise in FY23. We have lowered our forecast EBITDA for FY23 and FY24 by 4% and 3% respectively.
We retain an ADD rating. Our target price is (login to view).
Read our full reports and latest price targets on ASX:DMP here.
TABCORP Holdings Ltd (ASX:TAH) - FY22 Earnings: A line in the sand
In its first full year result since the spin-off of TLC, TAH reported earnings in line with expectations. Pro forma EBITDA was down 22% but within 2% of our forecast. TAH described its performance in FY22, a year heavily disrupted by COVID effects, as a 'line in the sand'.
TAH's digital revenue market share is 24.9%. With the new app on the way and enhanced marketing to accompany its launch, there is a path to see this metric improve.
We upgrade from Hold to ADD. We believe there is an opportunity for TAH to build its earnings base over the medium-term as it invests in the enhancement of its digital strategy and achieves sustainable cost efficiencies.
At a dividend yield of 3% and an EV/EBITDA of 5x, we do not think this opportunity is reflected in the share price. Our target price increases from (login to view).
Read our full reports and latest price targets on ASX:TAH here.
Acrow Formwork (ASX:ACF) - Plenty more to come
ACF's FY22 result was above our expectations and management's latest guidance provided in April. All divisions delivered revenue growth - Formwork +30%, Industrial Services +110%, Commercial Scaffold +2%.
With a robust pipeline of opportunities, management is targeting another strong year in FY23 with revenue up ~15% and EBITDA up ~20%.
We upgrade FY23F EBITDA by 12% and underlying NPAT by 14%. Our target price increases to (login to view) and we maintain our Add rating.
Trading on 6.4x FY22F PE and 5.9% yield we continue to see the valuation as attractive with ACF offering leverage to increased infrastructure activity over the longer term.
Read our full reports and latest price targets on ASX:ACF 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.