For those interested. Broker recommendations and commentary below.
No. Of Recommendations4
BROKER DATE RATING RECOMMENDATION TARGET PRICE % TO REACH TARGET Macquarie 22/08/2023 3 Neutral $6.85 11.02%
Shaw and Partners 22/08/2023 3 Hold $7.70 24.80%
Morgans 22/08/2023 1 Upgrade to Add from Hold $8.10 31.28%
Ord Minnett 22/08/2023 2 Accumulate $9.20 49.11%
Macquarie COMMENTARY: Iress has provided its fourth material earnings downgrade in a year, Macquarie observes, because of cost pressures and a weaker revenue environment.First half underlying earnings were materially below expectations and EBITDA guidance has been lowered to $119m, from $144-149m.The broker points out attention will be on the FY24 exit rate. Management expects underlying earnings growth of 5-10% as residual gross cost savings of $28m are realised.Macquarie reduces the target to $6.85 from $10.10, because of underlying cost pressures, reduced pricing power and the balance sheet position. Neutral retained. FORECASTMacquarie forecasts a full year FY23 dividend of 0.00 cents and EPS of 13.80 cents.Macquarie forecasts a full year FY24 dividend of 23.00 cents and EPS of 27.60 cents.
Shaw and Partners COMMENTARY: Iress's June-half result missed Shaw and Partners forecasts due to slowing revenue growth and higher than forecast costs. Management guided to a broadly flat December-half. No interim dividend was declared.Shaw and Partners observes the main transformation benefits are unlikely to materialise until FY25, and in the meantime, costs will continue to weigh.Management advised that a deal has been struck for the sale of its managed funds administration (MFA) business for $52m as part of the company's rationalisation and the broker expects settlement in October is most likely.Hold rating retained. Target price falls to $7.70 from $9.90. FORECASTShaw and Partners forecasts a full year FY23 dividend of 13.10 cents and EPS of 26.50 cents.Shaw and Partners forecasts a full year FY24 dividend of 29.40 cents and EPS of 29.40 cents.
Morgans COMMENTARY: First half revenue for Iress was slightly ahead of Morgans forecast but earnings (EBITDA) were an around -8% miss on meaningful cost growth. Given the gearing level, the non dividend payment was not unexpected.Management anticipates a flat 2H earnings result and 5-10% growth in FY24 and believes the company will exit FY24 with a 20-30% run-rate.The analyst anticipates gearing levels will improve via not paying a dividend, cost-out measures and the announced sale of the managed funds administration (MFA) business for $52m.Morgans makes material downgrades to its earnings forecasts and lowers its target to $8.10 from $10.30. The rating is upgraded to Add from Hold on confidence in degearing the balance sheet and in a greater focus on core products. FORECASTMorgans forecasts a full year FY23 dividend of 0.00 cents and EPS of minus -59.00 cents.Morgans forecasts a full year FY24 dividend of 14.00 cents and EPS of 27.00 cents.
Ord Minnett COMMENTARY: Ord Minnett was disappointed with the first half results from Iress. Underlying EBITDA was -17% below the prior half and the broker's forecasts.This is not expected to be a permanent earnings decline for the core Australian business with the broker noting new management is still in the early stages of restructuring and cyclical challenges have dampened revenue across the wealth management sector.Robust growth in the superannuation business is expected to outpace mature growth in trading and wealth operations and Ord Minnett retains an Accumulate rating, lowering the target to $9.20 from $10.00. FORECASTOrd Minnett forecasts a full year FY23 dividend of 30.50 cents and EPS of 23.00 cents.Ord Minnett forecasts a full year FY24 dividend of 32.90 cents and EPS of 27.20 cents.
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