Best calls to action – Thursday, 23 February

About the author:

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

Santos Ltd (ASX:STO) - Flexibility on pace of spend key

A busy full year result for STO, posting record profits and cash flow, upsized shareholder returns and developments across several key assets. On balance a steady 2H22 result, falling just short of consensus expectations. Strong final dividend of USD 15.1cents (vs Morgans USD 14.3cents).

Still working through secondary approvals at Barossa. Pikka development remains on schedule and budget. Maintain ADD rating with updated (login to view) Target Price.

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

Lovisa Holdings Ltd (ASX:LOV) - 1H23 earnings: Pedal to the metal

LOV reported NPAT of $50.5m (pre-AASB 16), 1% higher than our forecast. Sales growth was 45%, driven by store rollout and +12.5% LFL sales growth. LOV opened a net of 86 new stores in 1H23, more than in all of FY22.

We have increased our post-AASB 16 EBIT estimates by 2% in FY23 and 4% in FY24. We reiterate our Add rating and increase our target price from (login to view).

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

Karoon Energy Ltd (ASX:KAR) - Result leaves valuation in its dust

Overall a steady result from KAR, reporting lower headline earnings vs expectations while cash earnings were closer. KAR maintaining FY23 unit cost and production guidance highlights the bulk of earnings are skewed to 2H23.

Even the lower-than-expected 1H23 result with EBITDAX of US$176m puts KAR on an EBITDAX multiple of just ~2.0x, a sector low. Bauna wells continues to post a steady performance, now declining at typical rates.

Neon could compete seriously for capital in KAR's next phase of growth. We maintain our ADD rating on KAR, with an updated TP of (login to view).

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

Ebos Group Ltd (ASX:EBO) - LifeHealthcare helps drive strong result

EBO posted a record 1H23 result, with double digit GOR and EBITDA growth through acquisitions and organically, navigating an operationally challenging environment with supply chain issues and cost pressures.

EBO continues to be a leader and hold strong market positions in both healthcare and animal care operating segments. We have upgraded our EPS forecast by ~1% in FY24/25.

As a result, our valuation has increased to (login to view). Add maintained.

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

Superloop (ASX:SLC) - Impressive organic growth and margin expansion

SLC's 1H23 result was slightly above our expectations at the EBITDA line and below at the NPAT due to higher depreciation and amortisation. Momentum in the business is strong with SLC delivering 28% YoY organic revenue growth and EBITDA lifting more due to positive leverage.

Underlying EBITDA was up 89% YoY and operating cashflow conversion was impressive at 103%. FY23 guidance was reiterated and, as expected, implies Underlying EBITDA nearly doubles from 1H22 to 2H23. Optically that looks tough but SLC is very well placed.

Add recommendation retained, Target Price increased to (login to view).

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

Hotel Property (ASX:HPI) - Remains a pure play

FY23 DPS guidance of 18.4cps has been maintained with the 1H result which equates to an implied distribution yield of +5%. The portfolio is valued at $1.25bn; WALE +10 years; and hotel occupancy 100%.

Revaluations undertaken during the period saw cap rates expand 12bps. NTA moves to $4.06. HPI's focus remains on portfolio quality via the refurbishment program (well progressed) as well as potential asset divestments.

Management also continues to work closely with its key tenant QVC regarding investment opportunities. We retain an Add rating with a revised price target of (login to view).

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

Johns Lyng Group (ASX:JLG) - A new high bar for CAT contribution

JLG reported a remarkably strong 1H23 result driven largely by unprecedented levels of work from CAT related weather events over the past 12-18 months. EBITDA of $59.4m, 15% above our forecast of $51.7m, was up 63% vs pcp.

Underlying NPAT of $25.9m, was 10% above our forecast, and up 82% vs pcp. FY23 guidance was upgraded by ~5.5% on a headline basis. Excluding the earnings drag from JLG's CC division this was upgraded by ~12.9% on a lfl basis.

Our EBITDA forecast is upgraded by +8.1% and +2.9% in FY23-24 and downgraded by -2.2% in FY25, broadly reflective of the CAT beat and the removal of JLG's CC division from our forecasts as it winds down the loss making division.

We maintain our positive view on JLG, and continue to see it well placed to benefit from ongoing elevated claims activity, further market share gains across its 4 key growth pillars in Aus/US/NZ, and ongoing market consolidation via M&A.

We retain our Add rating, with a revised price target of (login to view).

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

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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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