Research notes

PXA’s 1H24 Group NPATA (A$15m) was down -36% on the pcp, and slightly below consensus (A$17m). This result had been heavily pre-announced and headline figures were largely as expected with FY24 guidance re-affirmed (albeit PXA Exchange margins are tracking slightly above the top end of the range). The key stock catalyst here remains the launch of the 24- hour UK refinance product in the middle of 2024, which management says remains on track. We make nominal changes to our PXA FY24F/FY25F EBITDA forecasts (+1%-2%) but our NPATA forecasts fall by -22%/-4% on higher non-operating items, e.g. specified items and D&A, etc. Our valuation rises to A$12.19 on higher future operating earnings and a valuation roll-forward. HOLD maintained.

EBIT was 4% lower than forecast and down 11% on a pro forma basis. AX1 said it does not believe consumer demand has changed “fundamentally”, but there is a “little bit of softness” at present. AX1 has performed best where its brands are “hot” (such as HOKA). Against elevated comps, LFLs were resilient at (0.6)% in the first half and have started 2H24 at a similar pace. The comps get less demanding as the half goes on and we expect positive LFLs in 2H24 as a whole. This resilience is a function of the portfolio effect and strong market position. We have lowered our EBIT estimates by 2% in FY24 and FY25 due to higher D&A and retain an Add rating and $2.30 target price.

1H was mixed, with an inline double-digit earnings decline, but on softer revenue and underlying profit. OPM expanded in Industrial on manufacturing efficiencies and carryover pricing, but was more than offset by contracting margins in Healthcare on continued inventory destocking and slowing of production to address inflated inventories. While a 2H recovery appears reasonable, as a proportion of earnings is driven by cost-outs/efficiencies, we remain cautious on the end of this multi-year “market dislocation” especially as gains are reliant on exogenous factors (eg supportive macros and limited customer destocking), while APIP unfolds over time. While FY24-26 estimates move lower, we roll forward valuation multiples with our DCF/SOTP PT increasing to A$22.53. Hold.

Whilst the result was largely pre-released, the underlying 1HFY24 EBIT of $20.0m reflects a significant improvement on the $4.4m achieved in the pcp. The construction materials division was the primary driver, where EBIT increased 95% on the pcp as improved prices, volumes and cost control saw EBIT margins increase to 11.8% (1H23: 7.4%). The result really points to the cyclical nature of the industry and WGN’s leverage to an improving cycle. The positive operating environment, combined with continued M&A across the industry (ABC, BLD, CSR all receiving bids) all bode well for WGN. On this basis we have changed our recommendation to an ADD rating (previously Speculative Buy) reflecting lower earnings and valuation risk, whilst leaving our target price unchanged at $1.15/sh.

MPL’s 1H24 underlying NPAT (A$263m) was +16% on the pcp, and -1% below company-compiled consensus (A$266m).  We saw this as a bit of a mixed result overall. Whilst the Health Insurance (HI) claims environment remains favourable, revised FY24 HI policyholder guidance and management expense growth guidance both disappointed. We make relatively nominal changes to our MPL FY24F/FY25F EPS of -1%/+2% reflecting lower claims forecasts, reduced policyholder growth expectations and higher HI operating expenses. Our PT is set at A$3.73 (previously A$3.76). The current operating environment still appears relatively favourable for MPL, but we see the stock as fair value trading on ~19x FY24F PE. HOLD maintained

PLS reported a soft 1H24 earnings result against consensus expectations, but given there was no significant news and the stock is highly shorted, the miss did not move the stock price greatly. 1H24 underlying EBITDA of A$415m was -8% vs Visible Alpha consensus, while underlying NPAT of A$273m was -15% vs consensus. P680 and P1000 projects are on schedule and budget. FY24 capex guidance reduce to manages costs. Maintain our Add rating with a $4.50ps Target Price. Besides the miss a quiet result for PLS. We expect the stock to re-rate in a broader lithium recovery.

We expect c.1% consensus EBITDA downgrades given first-time FY24 EBITDA guidance that at the mid-point indicates 9-10% growth over FY23. No change to DPS guidance. We layer in higher costs and capex beyond FY24. HOLD retained. 12 month target price $7./sh. At current prices, we estimate a 12 month TSR of c.-3% (incl. 6.9% cash yield) and a five year IRR of c.6% pa.

Expanding vertical integration remains a key ambition, with MIN focused on increasing the proportion of controllables in its business. A solid 1H24 underlying result, although with part of the strength driven by higher-than-expected revenue across iron ore and mining services. Management revealed plans to grow Onslow to 50mtpa, and a view it might achieve as much as 12x EBITDA on the partial sell down of its haul road. We maintain an Add rating with an updated A$71ps Target Price (was A$72).

QAL has seen FUM growth of 41% (yoy), with Fee Earning FUM increasing 25% (yoy), leaving c.$2.1bn of dry powder to underpin future earnings growth. The 1H24 result saw funds management revenue increase 25% (yoy), while principal income increased 31% (yoy) off strong underwriting volumes, to deliver underlying Group NPAT of $12.6m, up 24% on the pcp, 4.6% above our expectations and 3.0% above VA consensus. QAL continues to deliver organic earnings growth of c.25% pa (based on FY24 guidance), the growth centered on a nascent residential property cycle upswing driven by unmet housing demand, along with stabilising construction prices and apartment price growth restoring development feasibilities. It is on this basis that we reiterate our ADD recommendation with a $3.10/sh price target.

QAN reported a better than feared 1H24 result with underlying NPBT in line with consensus but down 12.8% on the pcp. Despite this, EPS only fell 3.2% reflecting the A$1bn of shares QAN has bought back since 1H23. Jetstar’s performance was the highlight of the result. Another A$400m share buyback was announced. QAN’s outlook commentary implies consensus needs to downgrade FY24 forecasts. Importantly, travel demand remains strong. With QAN trading on 5.8x FY24F P/E, we continue to think the stock is oversold. However its is lacking catalysts in the near-term with progress on its margin targets in FY25 likely the key for share price outperformance from here, in our view.