Insights

Our 'Best Calls to Action' aim to navigate you through the current reporting season by showcasing stocks with strong buying potential. They also offer insights into stocks that might not be ideal for growth right now. These recommendations come from thorough analysis of market trends, financial health, and growth potential, ensuring you access high-value investment opportunities.

Happy to buy today

Regal Partners (ASX:RPL) - Earnings materialise following fund outperformance

RPL’s HY24 result beat both our expectations and those of consensus as management fee revenue and principal investing income continued to grow. The earnings trajectory for recurring management fees should continue to rise, as the business grows FUM to $16.5bn (HY24 Ave. FUM: $11.7bn), while further cost-outs (CY24: $3-4m) will likely increase underlying NPAT.

We maintain our ADD rating.

Dalrymple Bay Infra. (ASX:DBI) - EBITDA growth, interest cost distortions

1H24 EBITDA growth was predictable as expected, but FFO beat on lower net interest costs than expected. Positive surprises were the 8X expansion cash received and previous NECAP spend yet to be added to the asset base.

We maintain our ADD rating.

Tyro Payments (ASX:TYR) - Under-appreciated delivery

While it remains a more difficult top line environment for TYR, this result demonstrated improved profitability through the benefits of TYR’s pricing transformation program, and efficiency improvements. We increase our TYR FY25F/FY26F EPS by +15%-25% on improved EBITDA margin assumptions and lower D&A forecasts

We maintain our ADD rating.

Stanmore Resources (ASX:SMR) - Steel uncertainty builds the next opportunity

The 4.4 US cps dividend was the biggest surprise amongst SMR’s 1H24 result. Re-affirmed production and adjusted cost guidance was also a good look. At this point we think large sector M&A activity looks unlikely for SMR. Surprisingly weak steel markets do pose short-term risks to earnings/ valuation. But we maintain our positive medium-term structural view, and see interim weakness as an opportunity.

We maintain our ADD rating.

Tasmea (ASX:TEA) - Beating forecasts and delivering acquisitions

TEA has announced its third acquisition since its Apr-24 IPO. TEA will acquire Future Engineering Group for $84.5m, with the transaction expected to deliver $15.5m of EBIT and be c.21% EPS accretive. The company has achieved its prospectus forecasts, with EBIT exceeding forecasts by 1.5% and NPAT exceeding forecasts by 10.3%.

We maintain our ADD rating.

Morgans clients receive access to detailed market analysis and insights, provided by our award-winning research team. Begin your journey with Morgans today to view the exclusive coverage.

Our 'Best Calls to Action' aim to navigate you through the current reporting season by showcasing stocks with strong buying potential. They also offer insights into stocks that might not be ideal for growth right now. These recommendations come from thorough analysis of market trends, financial health, and growth potential, ensuring you access high-value investment opportunities.

Happy to buy today

MA Financial Group (ASX:MAF) - Earnings appear to have bottomed

MAF’s 1H24 NPAT (A$18m) was down -27% on the pcp, but it was broadly in line with Bloomberg consensus (A$20m). The 1H24 dividend (A6cps) was above consensus (A5cps). While this was a difficult result, MAF's outlook commentary points to EPS being materially stronger in 2H24 vs 1H24, and earnings appear to have bottomed.

We maintain our ADD rating.

Inghams (ASX:ING) - Woolworths contract spooks the market

Despite volumes being stronger than expected, ING’s FY24 result missed our forecast and consensus, likely due to lower prices in the wholesale channel in the 2H24. FY24 was a record result for ING despite weakness in out-of-home channels due to cost-of-living pressures. FY25 EBITDA guidance was also weaker than consensus estimates, however on a like for like basis (52 vs 53 weeks in FY24) and including a phased reduction in Woolworths (WOW) volumes under a new contract, ING is expecting flat to up to 6% growth.

We maintain our ADD rating.

Clinuvel Pharma. (ASX:CUV) - Potential short term trading opportunity

CUV’s share price has retreated significantly since our last update. So what has happened, and is there an opportunity? CUV provided a progress update on its Ph3 Vitiligo study, highlighting challenges in patient retention and recruitment. Consequently, protocol adjustments have been made, extending the recruitment timeline by approximately six months. A small negative, but adds another mark on the wrong side of the ledger. More pressing concerns include an ineffective/absent buy-back; board and management changes; and poor segmental performance disclosure. Despite all this, we continue to view the underlying asset in EPP as solid and will remain competition free for several more years over which time the cash backing should continue to build and one or more indications realised.

We adjust to ADD rating.

Jumbo Interactive (ASX:JIN) - FY24 earnings: No pain, no gain

JIN’s FY24 result exceeded consensus and our earnings expectations by 2%, driven by an exceptionally strong period in Lottery Retailing, which grew 40% yoy. However, the market was caught off guard by JIN’s guidance for softer margins in FY25, primarily due to a slowdown in Stride.

We maintain our ADD rating.

Wagners (ASX:WGN) - Refocused to grow the core materials business

As largely outlined within the trading update of Jul-24, WGN has delivered FY24 Operating EBIT of $39.7m, up 81% on the pcp, exceeding the upper end of the prior guidance range. The business benefited from strong operating conditions through the final months of 2H24, resulting in a Construction Materials EBIT margin of 16.4%, 330bps higher than 1H24 and 590 bps above the pcp.

We maintain our ADD rating.

VEEM (ASX:VEE) - Multiple growth avenues

VEE’s FY24 result was ahead of expectations and management’s guidance. All divisions generated strong revenue growth (Propulsion +30%, Gyros +146%, Defence +23%, Engineering Products & Services +17%) with margin improvement a key highlight reflecting efficiency benefits and good cost control. We make minor changes to earnings forecasts with FY25-27F EBITDA increasing by between 0-2% while underlying NPAT remains unchanged.

We maintain our ADD rating.

Accent Group (ASX:AX1) - FY24 earnings: Picking up the pace

AX1 achieved positive growth in sales in FY24, despite the challenging retail environment and a poor wholesale performance. Earnings were down yoy due to sales growth tracking below the rate of cost inflation (as well as material non-recurring costs relating to Glue), but this was in line with the guidance given in July. An improving retail and wholesale sales trajectory, moderating cost inflation and the elimination of some of the losses in Glue, will combine to see earnings recover in FY25.

We maintain our ADD rating.

Cedar Woods Prop. (ASX:CWP) - Strong demand for affordable residential land

On 21-Aug, CWP announced FY24 NPAT of $40.5m, up 28% (vs pcp) and above both the guidance range of $36m - $39m and our prior forecast of $37.8m. The key contributor was the sale of the William Land Shopping Centre, with lot revenue and gross profit broadly stable. Looking forward, the signs are positive, with guidance for +10% NPAT growth in FY25, supported by favorable operating conditions in most key states.

We maintain our ADD rating.

Morgans clients receive access to detailed market analysis and insights, provided by our award-winning research team. Begin your journey with Morgans today to view the exclusive coverage.

Our 'Best Calls to Action' aim to navigate you through the current reporting season by showcasing stocks with strong buying potential. They also offer insights into stocks that might not be ideal for growth right now. These recommendations come from thorough analysis of market trends, financial health, and growth potential, ensuring you access high-value investment opportunities.

Happy to buy today

The Lottery Corporation (ASX:TLC) - FY24 earnings: 4.75 million and counting

FY24 earnings met our expectations, with the top line rising 14% yoy following a particularly strong period for the Lotteries segment. Strong Lotteries margins offset a decline in Keno profitability. NPAT exceeded our forecast by 1%, reaching $412m.

We maintain our ADD rating.

Superloop (ASX:SLC) - Buff enough to crack 100m in record time

Despite posting great numbers and impressive growth in FY24 it looks like FY24 was just the warm-up year. FY25 guidance is for underlying EBITDA to grow ~55% to ~$86m (FY25 guidance is unchanged at the mid-point but has upside risk). We see a bull case for SLC to crack $100m, subject to all things going well.

We maintain our ADD rating.

Hotel Property Investments (ASX:HPI) - Solid FY24

The FY24 result was in line with expectations. Proceeds from asset sales are being used to pay down debt as well as recycle into the ongoing capex program with its key tenant which is being rentalised at 7.5%. NTA stable at $4.01 with rental growth offsetting cap rate expansion.

We maintain our ADD rating.

MAAS Group (ASX:MGH) - Growth to continue through FY25

MGH delivered FY24 EBITDA at the upper end of its guidance range, with management expecting continued revenue and profit growth in FY25 – the company will provide further outlook and trading commentary at its AGM. The business continues to demonstrate a transition away from real estate towards a construction materials, namely quarry, lead industrial business – construction materials grew FY25 EBITDA 54% (existing businesses grew 44%).

We maintain our ADD rating.

IMDEX (ASX:IMD) - Darkest before dawn

The result was largely as expected. However, outlook commentary was downbeat as exploration activity has yet to increase despite positive macro trends. This may cause some disappointment, but it’s unsurprising given the lag and, in our view, should not be a deterrent. Our thesis is premised on a prolonged trough in raisings, which can only continue for so long, and the key lead indicators trending in the right direction.

We maintain our ADD rating.

Step One Clothing (ASX:STP) - Supremely comfortable

STP outperformed expectations, with earnings that were around 6% ahead of the guidance provided in June and 50% higher than FY23. All regions saw positive sales momentum. The efficiency of marketing expenditure was considerably better than last year (and even better than we’d expected), underlining STP’s successful pivot to a strategy of ‘profitable growth’.

We maintain our ADD rating.

Ebos Group (ASX:EBO) - Result and outlook in line with expectations

EBO posted its FY24 result which was in line with consensus forecasts. Importantly the FY25 guidance range sits comfortably within both MorgansF and consensus. EBO highlighted the base business (Ex-Chemist Warehouse contract) grew underlying EBITDA ~8% in FY24 and FY25 guidance implies underlying EBITDA growth ex-CW of 5% to 10%.

We maintain our ADD rating.

‍

Trim/Funding Source

Cleanaway Waste Management (ASX:CWY) - Moderating

The EBIT growth progression from FY24 into FY26 is well understood, but the net finance cost and capex guidance and revised 5 year forward earnings growth outlook for impairment testing moderated our bullish stance on the stock. 12 month target price reduced, due to higher debt service, higher lease costs, higher maintenance spend, and lower long term EBITDA generation. With the TP decline and recent share price strength, we downgrade from ADD to HOLD

We adjust to a HOLD rating.

‍

Morgans clients receive access to detailed market analysis and insights, provided by our award-winning research team. Begin your journey with Morgans today to view the exclusive coverage.

Our 'Best Calls to Action' aim to navigate you through the current reporting season by showcasing stocks with strong buying potential. They also offer insights into stocks that might not be ideal for growth right now. These recommendations come from thorough analysis of market trends, financial health, and growth potential, ensuring you access high-value investment opportunities.

Happy to buy today

Reliance Worldwide (ASX:RWC) - Cost out mitigates weaker demand environment

RWC’s FY24 result overall was slightly better than expected. Key positives: FY24 underlying EBITDA margin (ex-Holman) rose 20bp to 22.3% vs management’s guidance for stable margins; Cost savings of US$23m were above management’s target of US$20m with further benefits expected in FY25.

We maintain our ADD rating.

Judo Capital Holdings (ASX:JDO) - Onwards and upwards

JDO met FY24 expectations and laid out the building blocks for 15% PBT growth into FY25. We think this outlook is an important stepping stone from the earnings nadir in 2H24 into the very strong growth we believe JDO can achieve in subsequent years (PBT +70% in FY26F and +42% inFY27F).

We maintain our ADD rating.

Trim/Funding Source

Ansell (ASX:ANN) - Moving in the right direction; but uncertainties remain

FY24 was mixed, with earnings tracking guidance but ahead of expectations, supported by one off items, but with revenue in line and OCF strong. Industrial sales and margins both improved on manufacturing efficiencies and carryover pricing, offsetting declining sales and contracting margins in Healthcare on inventory destocking and slowing of production to address inflated inventories.

We maintain our HOLD rating.

Baby Bunting Group (ASX:BBN) - Baby steps after a rocky year

BBN’s FY24 earnings were in line with recent guidance. Earnings came under real pressure in FY24. BBN expects to return to positive growth in sales and margins in FY25, but with an FY1 PE of 19.5x and with consensus NPAT sitting towards the top of the guidance range.

We adjust to a HOLD rating.

‍

Morgans clients receive access to detailed market analysis and insights, provided by our award-winning research team. Begin your journey with Morgans today to view the exclusive coverage.

Our ‘Best Calls to Action’ are designed to guide you through the current reporting season landscape by highlighting stocks with compelling buying prospects. It also provides insights into those that may not be viable for growth at this time. These selections are based on rigorous analysis of market trends, financial health, and growth potential, ensuring you have access to high-value investment opportunities.

Happy to buy today

Suncorp (ASX:SUN) - Looking to the future as a pure-play General Insurer

SUN's FY24 cash NPAT (A$1,372m) was ~-5% below consensus (A$1,425m), mainly due to a softer General Insurance result than expected. FY25 guidance points to solid earnings momentum continuing into this year, and we see SUN's unveiled FY25-FY27 business strategy as uncomplicated, and focused on driving the insurance business harder (which should be well received).

We maintain our ADD rating.

Trim/Funding Source

Westpac Banking Corp (ASX:WBC) - Q3 NIM improvement

The Q3 trading update indicated WBC is tracking ahead of previous expectations, with NIM higher and costs and impairment charges lower than prior forecasts. Mid-single digit EPS upgrades for FY25-26F. 12 month target price lifts 8% to $26.11 due DCF valuation upgrades.

We maintain our HOLD rating.

IRESS (ASX:IRE) - Stability and flexibility returned to the core

IRE reported 1H24 adjusted EBITDA of A$67m, up 52% on pcp (top-end of recent guidance); and up ~8% HOH (2% HOH revenue growth on stable costs). FY24 Adjusted EBITDA guidance was provided at A$126-132m, post asset sales. Whilst the previous 'exit run-rate' guidance is no longer being provided, we expect the 2H24 drivers should see the upper-end of guidance achievable.

We adjust to a HOLD rating.

Reece (ASX:REH) - Tough housing conditions persist

REH's FY24 result was slightly weaker than our expectations but largely in line with Bloomberg consensus. Key positives: Group EBITDA margin rose 30bp to 11.1% due to good cost control despite softer housing conditions in ANZ in 2H24; ROCE increased 20bp to 15.5%; Balance sheet remains strong with ND/EBITDA falling to 0.6x vs 0.9x in FY23. Key negatives: ANZ earnings were below our forecasts as conditions continued to soften; Management expects the near term to remain challenging in both regions.

We maintain our REDUCE rating.

‍

Morgans clients receive access to detailed market analysis and insights, provided by our award-winning research team. Begin your journey with Morgans today to view the exclusive coverage.

Our ‘Best Calls to Action’ are designed to guide you through the current reporting season landscape by highlighting stocks with compelling buying prospects. It also provides insights into those that may not be viable for growth at this time. These selections are based on rigorous analysis of market trends, financial health, and growth potential, ensuring you have access to high-value investment opportunities.

Happy to buy today

Treasury Wine Estates (ASX:TWE) - Pivot to Luxury is paying off

TWE’s FY24 result held few surprises given the company’s recent trading updates. Pleasingly, its two Luxury portfolios and cashflow all slightly beat guidance. The much smaller and low margin Treasury Premium Brands (TPB) disappointed. Importantly, its targets for both of its Luxury wine businesses over the next few years were reiterated, and if delivered, will underpin double digit earnings growth out to FY27. While not without risk given macro headwinds, TWE’s trading multiples look attractive to us. and we maintain an Add recommendation.

We maintain our ADD rating.

Dexus Industria REIT (ASX:DXI) - Solid occupancy

The FY24 result was in line with upgraded guidance with rental growth helping to offset loss of income from asset sales. Occupancy strong at +99%. FY25 guidance comprises FFO of 17.8c (+2.3% on the pcp) and DPS of 16.4c which equates to an implied distribution yield of 5.8%. The balance sheet remains solid with look-through gearing around 27% ensuring there is capacity to complete the committed development pipeline which will enhance future rental growth. Asset sales are also likely to be considered.

We maintain our ADD rating.

Trim/Funding Source

Telstra Group (ASX:TLS) - Adjusting for growth

The FY24 underlying result came in towards the lower end of expectations. NPS (customer advocacy) and return on capital continue to improve while the heavily lifters remained Mobile (61% of EBITDA and +9% yoy) and InfraCo Fixed (21% of EBITDA and +6% yoy). Growth here more than offset declines elsewhere.

We recommend a REDUCE rating.

‍

Morgans clients receive access to detailed market analysis and insights, provided by our award-winning research team. Begin your journey with Morgans today to view the exclusive coverage.