Best calls to action – Wednesday, 24 August

About the author:

Andrew Tang
Author name:
By Andrew Tang
Job title:
Analyst - Equity Strategy
Date posted:
24 August 2022, 6:30 AM
Sectors Covered:
Equity Strategy and Quant

ALS Ltd (ASX:ALQ) - AGM updates: Firing on all cylinders

1H23 NPAT guidance issued at ALS' AGM was well above expectations. Similarly, 2027 Financial targets within ALS' refreshed 5-year plan were well ahead of consensus/Morgans expectations.

We adjust our short and long-term forecasts to recognize these updates. Our blended valuation adjusts to (login to view). Maintain Add.

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

Breville Group Ltd (ASX:BRG) - FY22 Earnings: A deliberate choice

BRG achieved 15% growth in EBIT in FY22, in line with its guidance and our forecast. Sales rose 19% and each region achieved constant currency revenue growth in the range of 15-20%. But this wasn't what caught the attention of the market.

What did get the headlines was the doubling of BRG's year-end inventory balance to $446m (MorgansF: $318m) as a 'deliberate choice to mitigate against supply chain disruption and ensure there are enough coffee machines and pizza ovens to meet the demand the company anticipates in 1H23.

We haven't changed our earnings estimates significantly. We continue to expect BRG to deliver high single-digit sales growth in FY23, outperforming the market, and to do so while holding gross margins.

Our EBIT estimates for FY23 and FY24 increase by a little under 1% to $170m and $187m respectively. We retain an ADD rating with a (login to view) target price.

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

HUB24 Ltd (ASX:HUB) - Having to invest further to be top of the class

HUB's underlying EBITDA of A$70.4m (+95% on pcp) was ~3% above expectations, but driven by acquisition (timing) contribution. Platform EBITDA was in line. HUB's FY24 FUA target was lowered to A$80-89bn (previously A$83-92bn), >60% in two years.

Management expressed confidence in >A$11bn net inflows pa, with 1H23 commencing solidly (run-rating ~A$2.6bn for 1Q23). Adding Class (CL1) and now multiple integration/strategic projects will see material 'below the line' costs continue.

We hold some caution on ongoing acceleration of operational and investment costs to deliver on HUB's 'platform of the future' (pushing out the evidence operating leverage can be achieved).

We have a slightly more cautious view on HUB's ability to deliver scale benefits without accelerated investment but continue to be attracted to HUB's market position and long-term opportunity in the Platform segment - Add maintained.

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

Step One (ASX:STO) - FY22 Earnings: The first step on the road to recovery?

FY22 was a tumultuous year for STP. Its first year as a listed company saw a number of challenges and a number of new strategic initiatives, all to the backdrop of significant share price volatility.

In the end, STP beat its downgraded EBITDA guidance range, providing some reassurance that the business has regained control of its marketing expenditure and is now positioned to deliver steady positive growth across multiple markets.

After all, that's what we always thought STP was capable of achieving. Pro forma (PF) EBITDA was $9.0m, above the guidance range of $7.0-8.5m set back in May. This was 26% above our estimate, which was towards the bottom of the range.

The difference to our forecast lay in marketing costs, which were better controlled than we had expected. We have increased our estimate for FY23F EBITDA by 29% to $10.2m. We retain an ADD rating, with an increased target price of (login to view).

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

SomnoMed Limited (ASX:SOM) - Firing up for launch

SOM reported its FY22 result with no major surprises, but importantly retains sufficient runway to see out the development and marketing of its new major asset.

The Rest Assure (RA) program (technology-enabled devices) remains on track with the goal for launch in FY23 (pending regulatory approvals) and compilation of further clinical efficacy data needed to drive prescriptions and reimbursement.

We remain positive on this company as we see it positioned for corporate activity in the coming years. Current valuations remain too cheap for this business as a going-concern, and likely materially so as an attractive takeover target.

Our target price reduces marginally to (login to view) on model roll-forward, and we maintain an Add recommendation.

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