Research notes

The bad news about Domino’s Pizza Enterprises’ (DMP) 1H24 performance was disclosed last month when the company warns that a decline in sales in Asia had driven materially lower profits. The result today saw PBT come in within the January guidance range. As expected, it was Asia that weighed most heavily on group EBIT. Europe increased its contribution, though much of this related to the elimination of losses from Denmark. France remains a problem. ANZ outperformed at the top line but margins unexpectedly reduced. DMP has a strategy to rebuild positive volume trends based on getting the value equation right – good product at an attractive price. There’s a lot to do and it will take time, but we believe it’s on the right road. For now, we retain a Hold rating with a reduced target price of $45.00 (was $50.00).

1H result sees metrics relatively stable with the focus on new acquisitions and developments. Portfolio valued at $4.6bn with the weighted average cap rate stable at 5.90%. Occupancy was slightly lower (-0.7%) however rate/sqm was +1.3% vs Jun-23. Newer centres saw good occupancy growth of +6% to 55.4% which is positive. FY24 guidance reiterated. Underlying EPS to be a minimum of 11.3c (vs 11.5c in the pcp). Underlying profit >$154m. Distribution payout ratio will be 90-100%. We retain a Hold rating with a revised price target of $2.31.

VNT incrementally beat both guidance and consensus expectations for CY23, seeing NPATA grow 12.5% (yoy). Combined with forward guidance for another 7-10% NPATA growth in CY24, along with cash conversion of 80-95% and conservative gearing (ND/EBITDA) of 1.2x, VNT continues to see its PE multiple (CY24 PER 14.2x) converge toward that of the wider market (ASX 300 c.16.7x). We believe VNT can continue to grow earnings across its active sectors, building on its $18bn of work in hand across a suite of predominately Government contracts (75% of CY23 revenue from Government). It is on this basis that we reiterate our Add rating and increase our target price from $3.35/sh to $4.05/sh, a function increased earnings expectations and updated peer/index multiples.

EBO reported a solid 1H24 result, with underlying NPAT up 7.6% on the pcp. Cost out initiatives, higher margin diversified earnings and M&A will largely bridge the gap in earnings from the loss of Chemist Warehouse contract from FY25. We have adjusted our depreciation and interest expense reflecting higher cap spend and as a result our TP has been revised down to $39.20. Add maintained.

The CY23 dividend fell short of expectations on 2H free cash outflows. CY24 guidance looks supportive (6% higher production, 10% lower mining costs) but we think it is viewed with skepticism. Recent drivers of sales deferrals/losses and lower realisations continue to concern. CRN’s appeal for leverage to upside risks in met coal pricing looks challenged by tepid steel markets and execution under-delivery. CRN looks far too cheap, but we think the market will wait for tangible production/ cost and physical market improvement before narrowing this discount.

AHC has announced a conditional binding term sheet to acquire QLD-based Amentco which is a certified reseller and servicer of AHC products. Amentco's services include the sale and maintenance of nurse call systems, real-time locating systems, security, CCTV, and access control. Proposed deal metrics are in line with another recent acquisition of another Australian based reseller completed in 2023. AHC shares are trading 10% higher following the announcement.

A largely in-line 1H24 result, and strong set of underlying numbers, leaving the market to focus on outlook commentary on BHP’s copper and nickel businesses. Observing inflation of 6.3% during the period, BHP only saw a ~2% increase in its unit costs on average. Strong iron ore earnings remain a key support, we maintain a Hold rating.

MLG’s 1H result strongly beat expectations with rebounding margins the highlight. The near term outlook looks strong on growing volume demand, upward rates momentum, signs of labour relief and further scope for portfolio optimisation. Hence we think MLG’s inferences about temporarily flat revenue and margins in the 2H leaves scope for upside surprise at the FY. We upgrade forecasts materials, lift our blended/SOTP valuation to $1.05ps (from $0.98) and rate MLG a Speculative Buy.

1H results were mixed, as elevated costs impacted margins and the bottom line, while revenue and underlying results were broadly in line. The base business (ex-Covid-19 testing) continues to perform well, with growth across all key geographies, while Radiology also showed strong, but Clinical Services remains soft on lower Covid-19-related services. Uniquely, right-sizing for rapidly declining Covid-19 testing revenues (-90%) has combined with recent acquisition costs, pressuring margins and profitability. However, management remains confident in a turnaround, outlining numerous near/medium term drivers supporting underlying profitability and reflected in guidance, which we view as achievable. FY24-26 estimates move lower, with our target price decreasing to A$34.05. Add.

In line with expectations, the 1H was messy and down on the proforma pcp due to the merger and acquisition accounting. The 1H is northern hemisphere skewed but it had a weak USA result due to a challenged vehicle sales performance. The 2H24 will benefit from a strong ANZ high season (THL’s biggest market) given high rental yields and a larger fleet. Synergies are also more 2H weighted. Due to higher debt and interest, THL’s has revised its FY24 NPAT guidance to ~NZ$75m from >NZ$77.1m previously. It reconfirmed its NZ$100m NPAT target in FY26. We have revised our FY24/25 forecasts and left FY26 unchanged. While THL’s valuation metrics look undemanding (FY25 PE of 8.7x) for a global, market leader, it is lacking share price catalysts in the near term. Add retained.