Earnings Bonanza

25 August 2023

NZ and Aussie earnings continue

Strong result at NZX Limited. EBITDA of $20.6m (+16.8%) and very strong growth in Smartshares – +56.9% YoY. 3.0cps fully imputed interim divvy and looking like FY23 EBITDA is moving on up to $38-39mn. Stay tuned for our initation of coverage of NZX Limited, long story short, we see value at $1.17. We think the funds management division is materially undervalued ($10.8bn of AUM) and is not recognised in the stock price. Valuing fund management @ 2% of AUM = $216mn; valuing rest of the biz at 6x EBITDA = $252mn. Suggests about $90mn of upside on a sum of the parts basis.

We wonder if the co would be better spinning off the fund management division into a new co (or selling it) to recognise the inherent value. A question for management to seriously consider.

Qantas shares were up, with the airline reporting a record $2.5 billion underlying profit before tax, benefiting from strong demand and pricing dynamics to operate at above-normal margins.

Back in 2019, the group delivered an operating margin of 8.3%, and an operating margin in its powerhouse domestic business of 12.1%.But the combination of higher fares and lower costs saw the group margin hit 13.5% in2023, with the domestic margin leaping to 18.2%. Price gouging much?

Likewise Air NZ delivered a strong set of numbers profit before tax of $585m, a touch above guidance. The airline also paying a special dividend of 6 cents per share. Customer demand remained strong in the first half of the 2024 financial year ,but because of the economic uncertainty, Air NZ was not providing full-year guidance. Remain Neutral – not a fan of airliners.

Auckland International Airport reported strong post covid recovery, passenger numbers at 68% of pre-covid levels for the year, while operating earnings (EBITDA) for 2024 is expected to be about ~92% of pre-covid levels. High-cost inflation and high capital expenditure still a major headwind with the likelihood of another capital raise over the medium-term. We change from Sell to Neutral rated and would be buyers closer to $7.00

Costa Group shares slumped -11% after a profit warning issued by Australia’s biggest horticultural company cast more doubt over whether New York-based PE firm Paine Schwartz Partners would push ahead with its $3.50 takeover offer.

Genesis Energy’s result missed, despite strong revenue generation it was offset by higher operating costs and capital expenditure. They held the dividend flat from last year and looking ahead a flat dividend means Genesis currently trades at ~9% gross dividend which isn’t bad in our opinion so we remain BUY rated, it is our preferred gentailer.


US

It’s being reported in the British papers that Qatar has won the race for Manchester United — reportedly setting the figure at £6bn. This has been a long process and we’re not excited until the “fat lady sings”. The Glazers have dragged on the process for a very, very long time and we wouldn’t be surprised to see them drag it on for longer. Suggests a purchase price upwards of +$35 per share.

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