Best calls to action – Monday, 20 February
About the author:
- Author name:
- By Andrew Tang
- Job title:
- Analyst - Equity Strategy
- Date posted:
- 20 February 2023, 6:00 AM
- Sectors Covered:
- Equity Strategy and Quant
QBE Insurance Group (ASX:QBE) - Good momentum heading into FY23
QBE's FY22 result NPAT (US$770m) was an 18% beat versus consensus, with the 2H22 dividend (A30cps) 11% above consensus. Overall, in our view, this was a very strong FY22 performance versus market expectations.
Heading into FY23, the key tailwinds are premium rate increases and higher investment income which remain supportive of earnings growth, as highlighted by QBE expecting a mid-teens ROE versus 10.5% in FY22.
We upgrade FY23F/FY24F/25F EPS by 1%-8% mainly on improved top-line growth assumptions. Our PT is lifted to (login to view). We see QBE as having strong operating momentum and it remains relatively inexpensive (~10x FY23 PE). ADD maintained.
Read our full reports and latest price targets on ASX:QBE here.
Pwr Holdings Limited (ASX:PWR) - Investing for the future
PWH's 1H23 result overall was below our expectations. While revenue was broadly in line (+1% vs MorgansF), EBITDA growth of 2% to $14.5m was 10% below our forecast due to higher costs.
Earnings were also impacted by timing delays with some revenue from Motorsports pushed from 1H23 to 2H23 due to some Formula One teams hitting their cost caps. If we add back the timing delay related to Motorsports revenue, we estimate 1H23 EBITDA would have only been slightly below (-2%) our $16.1m forecast.
Management remains positive on the outlook with extensive organic growth opportunities in the pipeline across Aerospace & Defence, OEM, Aftermarket and Motorsports.
We adjust FY23-25F EBITDA by between -3% and 0%. Despite the reduction in earnings forecasts, our target price increases to (login to view) following a roll forward of our model to FY24 forecasts. With a 12-month forecast TSR of 16%, we maintain our Add rating.
Read our full reports and latest price targets on ASX:PWH here.
HealthCo REIT (ASX:HCW) - Portfolio growing with metrics stable
1H23 result highlights included solid operational performance of the existing portfolio; completion of the George Private Hospital; a new accretive acquisition of a life sciences asset; stable net valuation movements (NTA $2.00); as well as a 4% upgrade to FY23 FFO guidance.
FY23 FFO guidance now sits at 7.1c (was 6.8c). DPS guidance unchanged at 7.5c. Positively, we note that the 2H distribution is expected to be cash covered.
Looking ahead, the focus remains on the active development pipeline (Springfield and Proxima) and the uncommitted developments which will include strategic partners. We also expect acquisitions to remain on the agenda. We retain an Add rating; price target (login to view).
Read our full reports and latest price targets on ASX:HCW here.
Peoplein Limited (ASX:PPE) - Reaffirming FY23 guidance and delivering growth
PPE reported HY23 normalised EBITDA of $32.5m, 5.2% above our forecast of $30.9m, up 50% on the pcp. Normalised NPATA of $20.8m, was 6.8% above our forecast, up % on the pcp. Whilst sales exceeded our expectations, this was primarily driven by the contributions from recently acquired lower margin businesses.
We have increased our FY23 and FY24 normalised EBITDA forecasts by 5.4% and 6.3% respectively, principally on the back of the strong HY23 result and the likelihood PPE can deliver at the top end of their FY23 guidance range (Normalised EBITDA: $62-66m).
We retain an Add rating and increase our target price to (login to view). On our estimates, PPE trades on an attractive 8.8x FY23 P/E with a fully franked dividend yield of c.4.7%.
Read our full reports and latest price targets on ASX:PPE here.
Objective Corp (ASX:OCL) - Mixed 1H23 result: earnings should improve from here
OCL delivered a mixed 1H23 result as the company works through its transition away from PRTU licensing, and returns Opex to a normalised post COVID level.
OCL's SaaS transition is likely to weigh on near-term revenue recognition for the remainder of FY23, however we see the company's cost-base reset as having largely played out in 1H23, which should set a baseline for margin improvement on a look forward basis, with ARR growth of +12% to drive this into FY24.
Following this result we now have greater read-through on revenue and margins following OCL's largely qualitative AGM trading update.
Whilst we downgrade our EPS forecast by between -1.0%-6.2% in FY23-FY25F, we now have improved visibility and comfort around OCL's earnings run-rate and therefore upgrade our rating to Add from Hold, with a revised target price of (login to view).
Read our full reports and latest price targets on ASX:OCL here.
GQG Partners (ASX:GQG) - Investing to capitalise on performance
GQG reported FY22 in line with expectations: management fees +7.5% on pcp to US$426.1m; operating profit +3.3% to US$332.1m. FY22 net inflows of US$8bn were strong, however decelerated through the year (2H US$1.7bn).
CY23 has commenced strongly with A$2.2bn of net inflow to-date. Investment performance remains strong over medium-longer term periods which should see FUM resilience and potentially accelerated flows. Investment in operations led to margin compression, however new products/ relationships should assist flows (several sub-advisory relationships commenced).
Although longer dated, we continue to believe GQG has the operating infrastructure to add further investment teams under the brand. We view GQG's <12x FY23 PE as attractive versus its quality of earnings; current flows momentum; and growth optionality. Add maintained.
Read our full reports and latest price targets on ASX:GQG here.
Inghams Group (ASX:ING) - On the path to recovery
In light of all the headwinds it faced during the period, ING's 1H23 result was materially better than feared and beat our forecast. Importantly, earnings are expected to improve in the 2H23 vs 1H23.
We have upgraded our forecasts. We think earnings should normalise through FY24/FY25 driven by price rises and operational improvements. With ING now through the worst of it and a strategy in place to deliver an earnings recovery, we upgrade to an Add rating.
We think ING looks undervalued trading on an FY24 PE of 11.4x. It also offers an attractive dividend yield (FY24 4.7% ff).
Read our full reports and latest price targets on ASX:ING 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.