Best calls to action – Wednesday, 30 August 2023
About the author:
- Author name:
- By Andrew Tang
- Job title:
- Analyst - Equity Strategy
- Date posted:
- 30 August 2023, 6:00 AM
- Sectors Covered:
- Equity Strategy and Quant
Mineral Resources. (ASX:MIN) - Beats where it counts
MIN delivered a mixed P&L performance (underlying beat but it came with impairments), but impressed with its cash flow and dividend performance.
We had expected MIN to flex its final dividend given our confidence in the company's balance sheet, but it trounced consensus DPS estimates. FY24 is an important execution year in lithium and iron ore, but it will unlock years of bumper earnings beyond it.
Believing MIN has suitable control over its projects and cash flow, we maintain our Add rating looking through FY24 to the material growth beyond.
Read our full reports and latest price targets on ASX:MIN here.
Tyro Payments (ASX:TYR) - Rounding out a year of significant progress
TYR's FY23 NPAT of A$6m (FY22 -A$30m) was above consensus of A$2m. The mid-point of FY24 EBITDA guidance (A$55m) was 14% above consensus. Overall, we saw this as a good result, without any large weaknesses.
The key positive being TYR becoming both NPAT and free cashflow positive. We lift our TYR FY24F/FY25F EPS by 12%-19% reflecting mainly increased assumptions around operating leverage. Our price target increases to (login to view).
We believe TYR now has good operating momentum and we remain encouraged by management's heightened focus on driving improved profitability.
Read our full reports and latest price targets on ASX:TYR here.
Tourism holdings (ASX:THL) - Everything is on track
THL had a strong FY23 result which beat our forecast (pre-acquisition accounting). The business continues to recover nicely from the COVID induced tourism downturn and benefit from historically high rental yields and merger synergies.
While it is too early to provide FY24 earnings guidance, overall, its trading update and outlook comments were generally positive.
THL is trading on a recovery year (FY25) PE of only 9.3x, which is attractively priced for a global, market leader. We maintain an Add rating.
Read our full reports and latest price targets on ASX:THL here.
Superloop (ASX:SLC) - High quality result with positive 2H FCF & NPATA
SLC's result was a beat on guidance from earlier in the year and saw the company generate positive free cash flow and NPATA in the 2H23. It was a high quality result with Underlying EBITDA up 82% YoY on a reported basis and up 46% YoY on an organic basis.
Cashflow conversion was strong at 116% conversion. Annualising 2H23 EBITDA sees SLC start FY24 year with $50m of EBITDA and leaves plenty of upside vs consensus. Success in sales and marketing has been value creative and is likely to step up a little in FY24.
We leave our forecasts largely unchanged and we retain our Add Recommendation.
Read our full reports and latest price targets on ASX:SLC here.
DGL Group (ASX:DGL) - Earnings to grow as management navigates the cycle
DGL's FY23 result (EBITDA: $64.1m) was within the guidance range, whilst reflecting a slight decline on the pcp - arguably a reflection of the unprecedented earnings achieved during FY22, which management flagged as delivering c.$15m of extra-profit (in FY22).
Going forward the 2HFY23 contribution (EBITDA: $34.5m) is likely a reasonable baseline for FY24 earnings, with our expectation that the company can grow these earnings at c.10-15% pa over the medium term. At our forecast for $70m of EBITDA in FY24F, the stock is trading on an EV/EBIT of 7.7x or a PER of 8.5x.
We continue to support the DGL investment thesis which centres on the aggregation of sub-scale chemical formulation businesses (and ancillary services), to deliver an end-to-end solution for the manufacturing and recycling of specialty chemicals.
Whilst acknowledging that management missteps leave investors approaching the company with trepidation, we believe at the current share price there is sufficient margin of safety. We upgrade to a ADD rating, increasing our target price slightly to (login to view).
Read our full reports and latest price targets on ASX:DGL 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.