Corporate Results Monitor

FNArena's All-Year Round Australian Corporate Results Monitor.

Currently monitoring March-July 2020.

Figures shown as at 05 July 2020

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Previous Corporate Results Updates

Company Result Upgrades Downgrades Buy/Hold/Sell Prev Target New Target Brokers Commentary
ALQ - ALS Limited IN LINE 0 0 3/3/0 7.16 7.68 6

ALS Ltd reported in line with guidance and most broker forecasts. The company noted virus-related weakness making its mark in April-May, and has issued no FY21 guidance. Brokers remain optimistic, suggesting the trough in earnings may not be as bad as feared and a rebound is expected later in the new financial year. The balance sheet is solid and bolt-on acquisitions will continue to be sought, given the potential for attractive consolidation opportunities. The business is considered "essential", and Morgans sees an opportunity to add virus monitoring and testing to the life sciences business.

AMC - Amcor BEAT 0 1 4/2/0 16.44 16.17 6

Amcor beat most forecasts for the March quarter and has increased FY guidance yet again. The pandemic has highlighted the benefits of the company's geographic diversification plus the realisation of Bemis merger synergies continues to underpin FY20 growth forecasts. Operations have been kept running and supply chains open to produce packaged food and healthcare products. Amcor's packaging business appears to have benefited from US pantry stocking, including beverages, offsetting constraints from Chinese lockdowns in the period. The June quarter is expected to be more normal and ample opportunity is on offer to grow ahead of peers.

ANZ - ANZ Banking Group MISS 0 0 4/2/1 19.65 19.48 7

The deferral of ANZ Bank's dividend was expected but brokers are concerned a lack of capital raising leaves the bank vulnerable given the greatest exposure to institutional banking amongst peers. Impairments were greater than forecast given those taken for Asian associates, leading to a miss on profit. The market will not be happy if ANZ Bank's capital ultimately falls short of regulatory requirement and dividends are impacted further. Despite barely a positive word, valuation still has four brokers retaining Buy ratings.

ALL - Aristocrat Leisure MISS 0 0 7/0/0 29.11 28.60 7

While digital gambling has been a beneficiary of lockdowns, the loss of casino revenues and additional costs and provisions were too much of a drag on Aristocrat Leisure's first half result. A recovery should nonetheless be swift once casinos fully reopen, albeit that might yet take six months and the company has thus refrained from offering guidance. M&A would accelerate an earnings recovery and the company is well placed in terms of liquidity. Brokers have trimmed earnings forecasts but retain seven from seven Buys on valuation.

API - Aus Pharmaceutical Ind IN LINE 2 0 1/1/1 1.33 1.12 3

Australian Pharmaceutical Industries' first half result scored a beat, a meet and a miss from three covering brokers, which is not a great surprise in these uncertain times. FY guidance has been withdrawn and the dividend suspended. The company saw a surge of panic buying in March which eased in April. Brokers expect a more significant slowdown from here, dependent on the duration of lockdowns, but two have found enough value to upgrade, one to Hold and one to Buy.

AST - Ausnet Services MISS 1 1 0/4/2 1.79 1.78 6

AusNet Services posted a solid full year result featuring strong costs controls and the dividend was as expected. But that's where the good news ends. Guidance to a lower than expected FY21 distribution belies the company's commitment to dividend growth, and reflects customer support measures, additional virus control costs and an upcoming reduction in regulatory income. This has left brokers to forecast just what level of new capital AusNet will have to raise. Citi (Sell) suspects investors are unlikely to be given the luxury of both distribution and capital expenditure growth. Ord Minnett downgrades to Sell.

BOQ - Bank Of Queensland IN LINE 0 0 1/4/0 6.11 5.79 7

Bank of Queensland's result met most but did beat some broker forecasts on lower bad debts, but to call this a "beat" would be misleading. The bank has deferred its dividend as per APRA guidance and it is unclear whether this will ever be paid. Provisions will rise against bad debts and so far brokers see management's bad debt guidance as ambitious. The extent and depth of virus impact is the swing factor and being unknown at present keeps brokers on Hold at the current share price, other than Citi (Buy).

BKW - Brickworks IN LINE 0 0 0/2/0 18.68 15.12 2

Brickworks had pre-announced its result. Property outperformed once again thanks to revaluation profits, while Building Products Australia continues to be impacted by weak activity, intense competition, plant shutdowns and higher gas costs. WH Soul Pattinson also saw a -36% decline (cross-shareholding). North American building materials stood out, however the outlook remains highly uncertain and the company has withdrawn any previous outlook statements.

CIA - Champion Iron IN LINE 0 0 1/0/0 2.80 2.90 1

Champion Iron reported FY20 earnings in line with expectation, with profit impacted by tax. The Bloom Lake 2 expansion has been suspended and the timeline delayed, Macquarie notes, with no new timeframe provided. The balance sheet is healthy and upgrade momentum is significant, with FY21-22 earnings offering 103% and 307% upside were the broker to input current spot prices.

CIM - Cimic Group IN LINE 0 0 2/2/0 32.41 30.18 4

Cimic Group's March quarter result equally beat, met and missed forecasts. Operations have only been modestly affected by the pandemic as Australian construction and mining projects continue to be viewed as essential services, although the real impact will be felt in the June quarter. To that end, the company refrained from reiterating FY guidance due to uncertainty, but nor was guidance withdrawn. Liquidity is solid and given Cimic is the dominant civil construction company in Australia's infrastructure market, brokers highlight significant leverage to a relatively resilient industry.

CLV - Clover Corp MISS 1 0 2/0/0 3.11 2.43 2

Clover Corp's result missed expectations on lower A&NZ and Asian sales growth. However, infant formula brands are guiding to a strong performance in China during the quarantine period, and combined with EU regulations which are instigating sales, a solid second half is anticipated. UBS upgrades to Buy, pointing to defensive qualities, changes in European regulations and exposure to structural growth markets underpinning the stock.

CKF - Collins Foods BEAT 0 0 2/0/0 8.56 10.44 2

A beat from Collins Foods was all about KFC Australia, which has benefited greatly from home delivery during the lockdowns, while Taco Bell has been slow and KFC Europe saw declining sales. Management has decided to ease its Taco Bell rollout (which is only in its infancy, so timing was somewhat unfortunate). Morgans suspects management will concentrate its focus on the higher earning KFC Australia, which would be sensible. UBS agrees KFC brand power is the key domestically.

CSR - CSR BEAT 2 0 2/4/0 3.58 4.09 6

CSR's result beat all comers, due particularly to the aluminium division. Building materials proved resilient, but management expects the virus impact will be felt in FY21. Given uncertain timing, no guidance was offered, and despite a strong cash position the company has conservatively suspended its dividend. The housing cycle was already in decline beforehand, so it remains to be seen what the additional virus hit might be. Brokers nevertheless see the risks as more evenly balanced at the share price (ahead of the 10% pop on the day), hence two upgrades to Hold.

ECX - Eclipx Group BEAT 0 0 2/2/0 1.44 1.17 4

EclipX Group is delivering on its strategy despite the challenging backdrop, brokers conclude in the wake of a positive result, indicating cost optimisation is ahead of schedule. A steady performance of the core business and annuity earnings provided stability in the first half. A main concern has been liquidity, but here brokers see nothing to worry about. Novated lease performance in recent weeks is ahead of expectation and used car prices are also holding up, albeit on reduced volumes. Two Hold ratings reflect caution amidst economic uncertainty.

ELD - Elders BEAT 0 1 0/1/0 7.10 10.20 1

Elders' first half results were stronger than Morgans expected. Trading in February and March was particularly strong, following improved seasonal conditions. The company has indicated it is comfortable with consensus forecasts for FY20 earnings. The second half should benefit from improved winter cropping conditions and strong livestock prices. However, after a strong appreciation in the share price, Morgans sees the stock as fairly valued and downgrades to Hold.

FPH - Fisher & Paykel Healthcare BEAT 0 0 1/0/3 0.00 0.00 4

Fisher & Paykel Healthcare's result beat already optimistic forecasts, with the company clearly a virus beneficiary given its product suite. However, three Sell ratings from four suggest brokers are not so optimistic from here. Clearly sales will not maintain such a growth rate, but the company may enjoy a boost in health market recognition. Either way, three brokers consider valuation to be too pricey at current levels even if the virus lingers longer than feared. Macquarie, however, points to the company using its good fortune to boost manufacturing capacity, and to upside risk if indeed the pandemic does drag on, hence a lonely Buy.

FSF - Fonterra BEAT 0 0 0/2/1 0.00 0.00 3

Fonterra reported ahead of forecasts. Guidance retained but with caveats of drought and virus impact. No interim dividend but the company hopes to pay a final. UBS (Hold) is more confident in the company's ability to produce earnings at the top end of its forecast range, despite a modest demand risk stemming from the virus, although recovery may be more sedate. Macquarie retains Sell given uncertainty.

GNC - Graincorp BEAT 0 0 3/1/0 5.28 4.56 4

Graincorp's first half profit was ahead of forecasts. No interim dividend was declared as expected. All divisions are performing ahead of forecasts, suggesting trading issues are now behind the company. The improved result was driven by higher grade throughput, a new rail contract and better oil seed crush margins. No guidance was provided for FY20. Oil seed crush margins are expected to remain favourable in the second half, and recent rain across large parts of eastern Australia support widespread planting of the FY21 crop. Most Australian barley is grown in WA, to which Graincorp is little exposed.

IPL - Incitec Pivot IN LINE 1 0 4/3/0 2.96 2.48 7

Incitec Pivot's first half result was roughly in line with expectation, depending on which metrics are cited. The result was nevertheless overshadowed by a $675m capital raising. The company has not seen any real impact from the virus, but uncertainty is likely to impact demand and commodity prices. The raising removes balance sheet risk and provides for possible bolt-on acquisitions. The explosives business is resilient but fertiliser prices remain weak, and forever exposed to cropping conditions in Australia and the US.

IAP - Investec Australia Property Fund BEAT 1 0 2/0/0 1.48 1.45 2

Investec Australia Property beat forecasts and guidance with its FY20 result. No further guidance was provided due to uncertainty. The REIT boasts a solid balance sheet, stable income and attractive valuation in the current market, with a yield in excess of 8.8% and a forecast total shareholder return in excess of 70% on Macquarie's forecasts. Ord Minnett (upgrade to Buy) agrees the business should withstand the uncertainty associated with the pandemic as it has low gearing and there should be high tenant retention.

JHX - James Hardie IN LINE 0 0 6/0/0 28.47 29.54 6

James Hardie reported in line with recent guidance. The company has seen a solid recovery in demand from an early April trough. Trading momentum across all regions is better than expected thus far in FY21. Europe was nevertheless a key miss of forecasts. Sales have benefited from the carry-over of new housing momentum and DIY in interiors, but with social distancing restrictions now easing, the strength in DIY work may not be repeated. James Hardie is well positioned, and a focus on efficiency, market share growth and innovation at this time is impressive, reflected in six from six Buys.

JHG - Janus Henderson Group BEAT 0 0 3/0/1 32.57 29.44 4

Janus Henderson's March quarter revenues beat expectations. Funds flows suffered in the month of March but recovered in April. Increasing assets under management are a clear positive although increased costs are dragging. Three of four brokers see valuation as undemanding and primed for a recovery. Credit Suisse is unconvinced.

MQG - Macquarie Group BEAT 0 1 3/2/0 117.65 114.80 5

While Macquarie Group's result came in below expectation, largely due to higher than forecast impairments, brokers are looking through the near term to note the group is not only well positioned to ride out the storm, but also to seize on growth opportunities presented. Earnings will nonetheless come under pressure in the meantime. The asset management division surprised with growth in the second half. Credit Suisse downgrades to Hold on the share price recovery to date, but others still see an attractive longer term valuation.

MTS - Metcash MISS 0 0 3/2/0 2.99 3.17 5

Metcash runs on an April-end financial year, so brokers were as much focused on an FY21 update from the company as FY20 earnings. FY20 disappointed slightly, but largely because of increased virus-related costs off-setting hoarding in supermarkets. Otherwise, FY21 has started well, ahead of broker assumptions, with all of supermarkets, liquor and hardware enjoying solid growth, the latter likely to be supported by government housing stimulus. A lack of discount wars between the Big Two provides for a more rational food market and while longer term structural headwinds remain a challenge, near term brokers are positive.

NAB - National Australia Bank MISS 1 0 5/1/0 19.33 18.56 7

National Australia Bank's result was below forecasts due to greater than expected losses in stock and bond market trading. The provision taken for bad debts was mostly less than feared, which could be either good, or bad if it proves too light. The capital raising shores up the balance sheet and NAB has cut its dividend, not deferred it as has been the case with peers. While the uncertainty of ultimate bad debts suggests risk, yield underpins Buy ratings, with an upgrade from Morgans.

NHC - New Hope Corp IN LINE 0 1 3/1/0 1.99 1.75 4

Three brokers -- one beat, one meet, one miss for New Hope Corp. The company has guided towards a weaker second half as a result of mine scheduling at Bengalla amid lower realised price expectations, albeit Bengalla costs have been reduced. The short-term outlook is difficult to predict but brokers retain Buy ratings on a knocked down share price, which Morgans notes suggests investors can buy hard assets outside Bengalla and growth options for free. Patience required nonetheless.

NWS - News Corp BEAT 0 0 3/0/1 22.41 22.37 4

News Corp's March quarter was not as bad as feared, with the REA Group stake providing support as always. Virus impact was minimal and the June quarter is expected to be a different, and uncertain, story. The virus is driving a business review and cost-out plans. Brokers see digital expansion as a positive and ad revenues as set to recover over time. Clearly, three brokers see valuation as attractive. The naysayer is Morgan Stanley (Sell) who is focused on the plight of Foxtel, noting News Corp has no plan to provide additional funding. One silver lining might be a reduction in the cost of sports rights.

NUF - Nufarm IN LINE 0 0 3/3/0 5.89 5.51 6

Nufarm's result was weak but well-flagged in regularly updated guidance. The only profit came from the South American business, now divested, but that divestment has fixed the balance sheet. A second half skew is the norm and seasonal conditions have begun to improve not just locally but across all regions. However, it's out of the drought fire and into the virus frying pan, with lockdowns impacting on product movement and costs. The pending commercialisation of omega-3 remains the primary catalyst. No guidance provided.

ORI - Orica MISS 0 0 3/4/0 19.09 18.16 7

While Orica's first half numbers were in line with or even not as bad as broker forecasts, volumes surprised all to the downside, and the worst is yet to come. Earnings forecast downgrades have followed. The dividend has been cut to the low end of the payout ratio, but may be recovered down the track. The balance sheet is strong and the industry structure supportive, plus Orica has a dominant position in explosives. Virus impact may yet prove to be short-lived.

PDL - Pendal Group BEAT 0 1 3/4/0 5.90 6.37 7

Pendal Group's first half result beat expectations on lower employee expenses and a rebound in funds performance leading to better than expected management fees. However, a weaker result is anticipated in the second half, although the medium-term outlook, backed by cost control, a strong balance sheet and market leverage, is considered more positive. Morgan Stanley (Buy) highlights global diversity and increasing investment in ESG, with the virus expected to encourage further growth in ethical investment. Morgans pulls back to Hold on valuation.

PMV - Premier Investments BEAT 0 0 3/2/0 17.52 13.97 5

Premier Investments' result was strong but is now ancient history given the company has since closed its stores. This has led only to one broker downgrading to Hold from Buy in the interim, nonetheless. Otherwise brokers had suggested forecasts for the second half were uncertain but highlighted the strength of the company's balance sheet, placing it in a comfortable position to ride out the storm. Post store closures, new average target is $13.70.

PPH - Pushpay Holdings BEAT 1 1 2/1/1 2.72 4.45 4

Pushpay Holdings' result surprised all bar Ord Minnett to the upside. The company has benefited from lockdowns on churches in the US driving digital donations, and the virus itself likely encouraging more donations. But the question for brokers is will it last once restrictions are lifted? Some easing is expected but digital penetration is assumed to grow by Macquarie (Buy) and Credit Suisse (upgrade to Buy). UBS (downgrade to Hold) is uncertain and Ord Minnett (Sell) sees the virus as pulling forward earnings.

REA - REA Group BEAT 0 2 3/3/0 94.12 98.39 6

On a net basis, it appears REA Group's March quarter was not quite as bad as feared, but the true impact will be felt in the June quarter. That said, volumes appear to have troughed in April and the lifting of restrictions will provide a boost, supported by the company's cost-out plans. Three Hold-raters, following two downgrades, believe the current price sufficiently values the potential for a rebound in listings. Buy-raters see increased pricing power and an ongoing structural growth story.

RMD - Resmed BEAT 0 1 1/4/2 24.17 24.15 7

A surge in ventilator sales and margins had ResMed comfortably beating earnings forecasts in the March quarter. However, a double-digit fall in sleep apnoea diagnosis rates due to lockdowns will weigh heavily on the June quarter. A split of ratings, with a cluster on Hold, underscores the difficulty in forecasting earnings given dependence on the depth and duration of the virus and the lockdowns. Headwinds will ease as restrictions are lifted, but most brokers remain cautious for now.

SHV - Select Harvests MISS 0 0 1/0/0 9.00 8.15 1

Select Harvests' first half result was below UBS estimates, although with one-off costs likely to reverse in the second half, the broker's forecasts are unchanged. Pricing commentary was the main negative, with pandemic-related market access issues, primarily in India, driving the spot price down to $7-7.5/kg versus Select Harvests' FY20 average price of $8.20/kg. Still, demand-side impacts are expected to be largely temporary and pricing is expected to stabilise once the US harvest commences.

SIG - Sigma Healthcare IN LINE 1 0 0/2/1 0.54 0.62 3

Sigma Healthcare's underlying result was in line. Management refrained from providing guidance in the current climate, but Citi (Hold) suggests this is not necessarily a negative. While it is likely there will be an increased demand for pharmaceuticals in the first half, the timing and size of this is considered too uncertain. The balance sheet is stretched but the company is pursuing sale and lease back arrangements of its distribution centres, although the virus might disrupt this process. Credit Suisse upgrades to Hold.

SM1 - Synlait Milk MISS 0 0 1/2/0 6.95 4.90 3

Synlait Milk's earnings were slightly below forecast but FY guidance has been reiterated. So far there has been minimal virus impact. Discussions with a2 Milk regarding participating in infant formula manufacturing are at an early stage. UBS (Buy) believes Synlait is in the box seat for any JV arrangement. Morgans and Credit Suisse retain Hold given balance sheet concerns in the current environment following investment in new capacity and acquisitions.

TNE - Technologyone MISS 0 0 0/2/1 8.14 8.65 3

TechnologyOne's result fell short of expectations, suggesting resilience but not immunity in the face of the virus, albeit strong compared to peers. Lower SaaS recurring revenue is targeted for FY20, making the step up to $500m by FY24 look increasingly aspirational. Tight cost controls will be required to deliver on estimates. M&A would help growth in the UK, and potentially in other markets, but the company's medium term targets imply significant upside to forecasts. Valuation is an issue, prompting one downgrade to Sell.

UMG - United Malt Group MISS 0 0 1/1/0 5.03 4.39 3

United Malt Group ((UMG)) saw sales increase 9% in the first half but earnings were down -2.1% from a year ago. This disappointed Morgans (Hold), given the result was weak a year ago and FY20 has benefited from a lower A$. UBS (Buy) was surprised by elevated costs and the extent of volume declines through April, but remains positive regarding the underlying business because of the strong market position and long-term customer contracts. The company has announced a dilutive capital raising which Macquarie (restricted) is involved in.

VUK - Virgin Money Uk MISS 0 0 1/1/0 1.85 1.80 2

Virgin Money UK's profit result fell short, no dividend was declared and Morgans suggests no final dividend will be paid either. While the balance sheet is sound, uncertainty lies with the level of loan impairments ahead, particularly in the unsecured portfolio. Margins will be under pressure from a lack of loan growth over the next twelve months. Valuation keeps Morgans on Hold and Macquarie on Buy.

WBC - Westpac Banking BEAT 2 0 4/2/0 18.66 20.34 7

Westpac's earnings result beat most forecasts. The market had already adjusted to the pre-announced impairments for bad debts, which was more than brokers feared but by the same token potentially more realistic than peers, suggesting a lower risk of further top-ups. The dividend has only been deferred due to the APRA directive, the bank suggested. Brokers fear planned restructuring will weigh on capital and possibly dividends when they resume. On the balance of everything, brokers are split.

XRO - Xero IN LINE 0 1 2/2/2 73.67 73.92 6

Xero’s FY20 result was mostly in line with expectations, although the company provided limited information about the potential impact of the virus. However, FY20 subscriber additions were slowing only towards March-end, indicating FY20 was only minimally impacted. The main challenge is to drive subscriber business in Australasia to join the broader platform and this is likely to be difficult in the current circumstances. The business is seen as in the early stages of growth in an industry with structural tailwinds. An even split of ratings highlights near term uncertainty.

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