AMP Limited | AMP.AX 

AMP’s first half results were above analyst expectations. Following a poor prior period, AMP’s earnings trajectory is improving and approaching its cost of capital. Encouragingly, AMP has initiated a cost out program to reduce costs by ~15% over two years and continues to return excess capital via sizeable buy-backs. 

Despite carrying significant excess capital, AMP trades on 12x consensus earnings. The shares trade at a discount to tangible book value and a large discount to its break-up value. Over the past few years management has executed several asset sales and shrunk the business. Further asset sales could unlock significant value for shareholders. 

Carsales.com | CAR.AX

Carsales produced a stellar result with all of the key regions performing strongly, demonstrated by pro-forma growth in revenues of 18% and in EBITDA of 19%. The Australian business achieved strong revenue growth across all segments, extending Carsales leadership position in the domestic market.

The US business saw the successful implementation of the Lead Amplifier dealer product and dynamic pricing initiatives for private sellers, both of which underpinned revenue growth. Webmotors, the now 70% owned automotive marketplace in Brazil, saw an acceleration in market penetration, with revenue and earnings growth of nearly 30%. Management pointed to a very positive outlook for the year ahead, driven by continued strong execution in Australia and North America as well as the roll out of dynamic pricing in Brazil.  

CSL Ltd | CSL.AX

CSL is on track for a period of sustained double-digit earnings growth. The key driver is the recovery in plasma supplies combined with the groups focus on lifting immunoglobulin yields. The management team guided to continuing strong demand for the group’s key plasma products and increased operational efficiencies and rising margins with the switch to a new plasma collection technology and the launch of new high value therapies – Hemgenix and Garadacimab. Finally, CSL’ s “Yield Maximisation Strategy” will in time provide it with a clear competitive advantage allowing to manage any pressure from competing therapies.

NextDC Ltd | NXT.AX

NextDC reported its full year 2023 result with revenue of $362.4m (+25%) and underlying EBITDA of $193.7m (+15%), in line with guidance and expectations. 2023 was a record year for contract wins, which saw contract utilisation up 46% to 122MW (145MW including contract wins post balance date). Billing utilisation for 2023 was 77.7MW (+7%). Contracted vs billing is the largest gap in the company's history and set to expand with the company guiding to 2024 likely being their largest contracting year yet. This highlights the latent earnings growth in the company’s contracted order book. NextDC provided 2024 guidance for revenue in the range of $400-415m and underlying EBITDA $190m-200m. We continue to like this name as it is the only Australian pure play to the explosive growth in data usage around the world.

Ramsay Health Care Ltd | RHC.AX

Earnings recovery was somewhat evident in Ramsay’s full year result with margins set to recover as bottle-necks clear. Health systems around the world are largely back to normal after working through differing levels of backlog. Whilst Ramsay’s near-term earnings have been disappointing, as it has struggled with cost inflation, reduced productivity and lagging prices, there have been clear signs of improvement in recent months.

Earnings from the market leading domestic operations are set to lift in 2024 and we see greater upside if Ramsay can negotiate better rates from the health funds. Conditions in the UK have also clearly improved after the tariff outcome and with improve staffing availability. Finally, the sale of the Asian operations should alleviate concerns over the balance sheet.

Transurban Group | TCL.AX

Transurban reported a record result as traffic recovered post the COVID impact with average daily traffic up in all markets and exceeding 2.4m trips per day.  A 45% increase in free cashflow supported the 40% increase in the distribution to 58 cpu. Transurban also announced that Michelle Jablko would replace the charismatic Scott Charlton as CEO and we believe this affected the Board’s decision to issue conservative FY24 distribution guidance of 62 cpu which was below consensus expectations.  We believe given the traffic growth outlook and the inflation linked tolls that we will see upgrades to the FY24 guidance over the year. 

TCL’s balance sheet is very well managed with 96% debt book hedged, weighted maturity of 7 years and cost of AUD debt at 4.1%.   The existing growth outlook for next 5 years is exciting with EBITDA forecast to increase by 48%, cash earnings 43% and the dividend by 40%.  This is before the potential acquisition of Eastlink in Melbourne and the widening of Gateway/Logan in Brisbane which is needed for the Olympics in 2032.  Longer-term the combination of strong population growth and stretched government balance sheets is likely to lead to another wave of opportunities like M5W, M4 and M2.