Best calls to action – Thursday, 31 August 2023

About the author:

Andrew Tang
Author name:
By Andrew Tang
Job title:
Analyst - Equity Strategy
Date posted:
31 August 2023, 6:00 AM
Sectors Covered:
Equity Strategy and Quant

Flight Centre Travel (ASX:FLT) - New Leisure business model is delivering

FLT's FY23 result was in line with its recent upgrade. The 2H Leisure result was the highlight. The material improvement in its 2H23 NPBT margin demonstrates its more efficient and profitable new business model.

The final dividend was a nice surprise reflecting the recovery underway and FLT's stronger balance sheet. Outlook comments were positive but expect earnings guidance at the AGM in November.

Given we forecast a strong recovery over coming years, we have made only minor changes to our forecasts. However we note that there is substantial upside to consensus estimates if FLT achieves its 2% margin target in FY25.

With confidence that the travel recovery has much further to go and the benefits of FLT's transformed business model emerging, we think the company is well placed over coming years. We maintain an Add recommendation.

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

The Star Ent Grp (ASX:SGR) - FY23 result: Resurrection of a fallen star

SGR's FY23 was broadly inline with our expectations, with EBITDA of $317m modestly above the guidance range of $280-310m. Our EBITDA estimates increase by 6% to $374m in FY24, and by 2% to $384m in FY25 due to lower operating cost assumptions.

With a favourable NSW duty rate outcome and increased earnings forecasts we upgrade SGR to an ADD. Our target price is unchanged at (login to view). With this note we transfer analyst coverage to Leo Partridge.

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

Motorcycle Hldg (ASX:MTO) - Mojo momentum

MTO delivered A$23m NPAT (flat pcp), exceeding our expectations and delivering a 6% beat on consensus NPAT (+15% on MorgansF). Acquisitive led growth (Mojo Group FY23 A$8.5m NPAT; ~50% of 2H NPAT) offset a softer core business (LFL EBITDA down 37% on pcp), with MTO delivering on cost control efforts (opex -0.7% hoh).

Importantly, MTO pointed to improved trade conditions in the underlying business in 4Q23, which have continued into 1H24. While we assume some further deterioration in the ex-Mojo business in FY24, we expect the rate of this to slow.

Additionally, the combined business will benefit from a full 12-month Mojo contribution. MTO continues to screen too cheap on ~6.5x FY24F PE and a ~9.5% yield. Add.

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

Generation Dev Group (ASX:GDG) - A consistent grower

GDG's FY23 Underlying NPAT (A$7.2m, +35% on the pcp) was +6% above MorgansE (A$6.8m) and +10% above consensus (A$6.5m, Bloomberg).

Broadly the result can be summarised as the Investment Bond (IB) business beating expectations on a better cost performance than expected, which offset slightly softer numbers than we forecast in Lonsec and the Annuity business.

We lower our GDG FY24F/FY25F Underlying NPAT by 2%-7% reflecting mainly higher forecast Annuity business losses near term. Our price target rises to (login to view), with our earnings changes offset by a valuation roll-forward.

We continue to believe GDG is well positioned to execute a compound earnings growth story over time. ADD maintained.

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

HMC Capital Limited (ASX:HMC) - Dry powder...ready for deployment

AUM stands at $8.1bn with significant growth driven by the launch of several unlisted funds over the past 12-18 months. Committed AUM is on track to hit ~$10bn in the short term with fund raising activity progressing well.

HMC's share price has delivered returns of +20% YTD on the back of successfully executing on several strategic initiatives. We expect further positive catalysts will revolve around deal-flow.

Our revised price target is (login to view). Add retained.

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

Kina Securities (ASX:KSL) - Good cost control in a difficult revenue environment

In our view, at a high level, the result can best be described as a disappointing group revenue outcome, offset by strong cost control and continued sound credit quality. We alter our KSL FY23F/FY24F EPS by -1%/+1% reflecting lower expense assumptions, which have offset softer revenue forecasts to a degree.

Our KSL PT is largely unchanged at A$1.09 (from A$1.08). KSL continues to deliver solid underlying profit growth, and trading on ~6x FY23F earnings and a >10% dividend yield, we see the stock as too cheap. ADD maintained.

We alter our KSL FY23F/FY24F EPS by -1%/+1% reflecting lower expense assumptions, which have offset softer revenue forecasts to a degree. Our KSL PT is largely unchanged at (login to view).

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

Ai-Media (ASX:AIM) - Printing rapid growth in free cash flow and profitability

After aggressively pursuing technology, FY23 was the year where management executed well and proved to shareholders this transition was in their best interests.

Revenue grew marginally YoY, while Gross Profit lifted 12% YoY with Technology Gross Profit up 30% YoY and more than offsetting the decline in Services Gross Profit (-4% YoY). OPEX was up 6% and EBITDA was up an impressive 200% YoY.

The business returned to growth in FY23 with Ops Cashflow lifting 76% YoY and Free Cash Flow lifting an impressive +381% YoY to $1.9m (in line with our estimate). Importantly the transition looks done and AIM looks well placed to grow profitably in FY24.

Add recommendation and (login to view) Target Price retained.

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

If you would like access or more information, please contact your adviser or nearest Morgans office.

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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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