Best calls to action – Friday, 18 August
About the author:
- Author name:
- By Andrew Tang
- Job title:
- Analyst - Equity Strategy
- Date posted:
- 18 August 2023, 6:00 AM
- Sectors Covered:
- Equity Strategy and Quant
Orora Limited (ASX:ORA) - Plenty more to come
ORA’s FY23 result was above expectations with earnings for both Australasia and North America ahead of our forecasts. Key positives: Group EBIT margin +50bp to 7.5%; Balance sheet remains healthy with ND/EBITDA of 2.0x at the bottom end of management’s 2.0-2.5x target range.
Key negatives: Revenue was softer than anticipated (-5% vs MorgansF and -4% vs Bloomberg consensus); Group ROFE fell 60bp to 21.6%. Management has guided to higher earnings in FY24. We increase FY24-26F EBIT by 5% while underlying NPAT rises by only 1-3% mainly due to higher interest costs.
Our PE-based target price moves to (login to view) and we maintain our Add rating. Trading on 15.5x FY24F PE and 5.0% yield, we think the valuation remains attractive despite the recent strong performance in the share price.
Read our full reports and latest price targets on ASX:ORA here.
GQG Partners (ASX:GQG) - All quiet over the Pacific
GQG reported 1H23 ahead of expectations: management fees +6.3% on pcp to US$230.1m; operating profit +1.3% to US$176.4m; NPAT +2.6% to US$128.6m. 1H23 net inflows of US$6.2bn were strong, however have decelerated through the half (2Q US$1.2bnvs US$5bn 1Q23).
We expect Insto flows will be relatively lumpy, with a meaningful UK outflow in July (offsetting other inflows). Near-term investment performance is mixed (strong outperformance EM; underperformance US and Global); however all strategies have outperformed on a 5-yr and inception basis.
No update was provided on the intention to make a takeover offer for PAC. Whilst we don’t expect any transaction would be a near-term earnings driver; the market is looking for an update on GQG’s diversification and broader strategy.
We view GQG’s ~11x FY23 PE as attractive. Market direction will influence near-term earnings outcomes, however we expect the group can drive growth from existing product initiatives and potential acquisitions.
Read our full reports and latest price targets on ASX:GQG here.
Super Ret Rep Ltd (ASX:SUL) - FY23 earnings: Pretty special
SUL reported positive growth in sales and earnings in FY23, despite cycling elevated comps. Better than expected margins meant NPAT was 9% higher than our estimates. SUL declared a 25c special dividend, and at this stage we think it will declare another one this time next year.
Our NPAT forecasts rise by 1% in both FY24 and FY25. We retain an ADD rating with an increased target price of (login to view).
Read our full reports and latest price targets on ASX:SUL here.
Inghams Group (ASX:ING) - 2H23 recovery provides confidence in the outlook
Pleasingly, despite all the headwinds it faced during the period, ING’s FY23 result was materially better than expected. Importantly, the 2H23 showed that a strong earnings recovery is well underway.
The large final dividend was a strong sign of confidence from the Board in the company’s outlook. The 2H23 run-rate bodes well for strong earnings growth in FY24/25. We have upgraded our forecasts.
With the foundations now clearly in place to deliver an earnings recovery and an undemanding valuation (FY24 PE of 12.2x and EV/EBITDA of 6.9x), we maintain an Add rating. ING also offers an attractive dividend yield (FY24 4.9% ff).
Read our full reports and latest price targets on ASX:ING here.
Homeco Daily Needs (ASX:HDN) - Re-balancing and maintaining resilience
HDN’s FY23 result was in line with guidance with portfolio metrics remaining stable. Asset sales totalling $285m have been focused on Large Format Retail (sold at premium to BV) with proceeds recycled into accretive acquisitions focused on daily needs assets as well as its investment into the Last Mile Logistics fund.
Leasing has been resilient with incentives stable at ~5% and re-leasing spreads slightly higher at +6%. Active de-risking has resulted in only 6% of leases expiring in FY24 with a focus on re-mixing tenant base to more defensive daily needs focus retailers.
The development pipeline is on track with +$120m in projects to launch in FY24. We retain an Add rating with a revised price target of (login to view). HDN offers a 7% distribution yield.
Read our full reports and latest price targets on ASX:HDN here.
Maas Group Holdings (ASX:MGH) - Rebased earnings ready to grow
MGH’s FY23 result dispelled a few concerns around gearing and the business’s capacity to generate free cashflow through a slowing residential real estate cycle. With pro-forma gearing at c.2.5x, an expectation for improved cash conversion through FY24 and a reweighting of earnings back toward the higher multiple materials businesses, MGH looks well placed to grow.
We forecast NPAT to growth 28% in FY24 and 30% in FY25, on the back of improved expectations for building materials and civil construction and hire, which collectively grew 55% (vs pcp), and progressive lower debt.
This growth across the materials businesses offset the impact of slower residential sales, zero build-to-rent product in FY24 and higher interest rates.
At a mid-to-low earnings cycle PE (FY24F) of 11.7x (14.7x excl revals), MGH continues to screen cheap, especially within the context of the growth potential and a residential division that could potentially double EBITDA during a residential sentiment upswing - hence our decision to retain our ADD rating increasing our target price to (login to view).
Read our full reports and latest price targets on ASX:MGH 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.