Best calls to action – Tuesday, 29 August 2023

About the author:

Author name:

By Andrew Tang

Job title:

Analyst - Equity Strategy

Date posted:

29 August 2023, 6:00 AM

Sectors Covered:

Equity Strategy and Quant

Helloworld Travel (ASX:HLO) - There is so much more to come

After three profit upgrades, HLO's FY23 result came in at the top end of guidance. The strength of its EBITDA margin was a highlight. Importantly, the company also produced better than expected cashflow.

Given the company's strong balance sheet, shareholders were rewarded with a larger than expected final dividend. HLO provided FY24 EBITDA guidance (45-63% growth on FY23), with the mid-point 7.2% ahead of consensus.

Guidance could again prove to be conservative. Assuming a full recovery from COVID and reflecting recent acquisitions, we now value HLO at (login to view). We maintain an Add rating.

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

NEXTDC (ASX:NXT) - You don't need AI to see this demand wave

The FY23 result was in line with expectations while FY24 guidance was slightly below due to the substantial costs associated with bringing significant new capacity on line. FY24 / 25 will be scaleup years as NXT begins the next chapter of growth.

After consistently telling investors there were some big contracts deep in negotiations, NXT has contracted 60MW of capacity in the last 6 months. This is more than they sold, cumulatively, in their first 10 years of existence.

Orders of this magnitude take time to physically install so don't materially move the dial on revenue until FY25. They underpin growth for the next 5+ years, and once fully ramped-up, offer earnings stability for the next 10+ years.

Add retained, price target lifted to (login to view).

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

Australian Vintage (ASX:AVG) - Through the worst of it...earnings recovery underway

As expected, AVG delivered a weak FY23 result with underlying EBITS down 63% on the pcp. Margins were materially impacted by inflationary cost pressures. Importantly some of these pressures started to ease in the 2H23, a trend which will likely continue through FY24.

Combined with its A$9m cost out program, we think a decent earnings recovery in FY24 is looking likely. With more confidence in AVG delivering a material earnings recovery in FY24/25, we upgrade to ADD.

AVG is too cheap (FY24F P/E of 9.5x) for a branded wine business that is the global leader in the fast growing No/Low wine category.

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

Dalrymple Bay (ASX:DBI) - On the search for a new skipper

The strong growth in 1H23 was in-line if not slightly ahead of expectations, while the outlook and strategy were unchanged.

The only change we make to FY23-25 forecasts is to adjust projected tax upwards. Target price lifts to (login to view) on long-term value assumptions.

ADD retained, given c.11% potential TSR at current prices (underwritten by c.7.9% cash yield).

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

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.