Weekly Reports | 10:00 AM
This week's In Brief highlights Acrow's accelerating earnings growth, the potential upside for Myer from David Jones' administration, and Pharmx Technologies' ambitions to unlock greater value from its pharmacy network.
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Third consecutive upgrade for Acrow's FY27 earnings guidance
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David Jones in administration opens opportunities for Myer
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PharmX Technologies targets growth through Marketplace monetisation
By Danielle Ecuyer
This week’s quote comes from PGIM's 2027 Global Market Outlook:
"The bottom line is that, in a new era of global inflation, central banks will likely view these developments as flashing amber for inflation expectations, particularly given the significant combined weight of food and energy in a typical household consumption basket."
Three in a row for Acrow
Ahead of its AGM, management at Acrow has upgraded FY27 guidance, with underlying earnings (EBITDA) raised by around 5%, equating to 43% y/y growth, against forecast organic growth of circa 27%.
The update was also a first for investors, with management serving up guidance for EBIT, underlying NPAT and EPS.
EPS guidance for FY27 stands at 10.5c–12.3c compared to Shaw and Partner's forecast of 10.8c.
Capex guidance remained unchanged at -$30m and net debt/EBITDA is anticipated to slip to around 1.3x by the end of FY27.
Shaw points out the lift in guidance reflects ongoing organic growth over 1Q27 across both the Industrial Access and Construction Services divisions, as well as a full quarter’s contribution from SuperDeck and one month’s contribution from AusGroup Industrial Services (AGIS), following completion of the acquisition on September 1.
The latest upgrade makes for three consecutive positive trading updates from the company. Shaw suggests demand for Acrow products and services is in a “growth mode”.
Formwork activity in Queensland has picked up, and recovery momentum continues. Industrial maintenance and shutdown activity also remains robust across the company’s eastern seaboard exposure and Western Australian operations.
The scope of works has been expanded on both the Snowy 2.0 scaffold contract and the Perdaman contract, the broker highlights.
EPS forecasts are upgraded by 8% for FY27, 6.7% for FY28 and 5.6% for FY29.
The target price is lifted to $1.45 from $1.35, with no change in the Buy rating. The share price continues to trade well below the target price.
David Jones' travails a possible boon for Myer?
After months of speculation about the survival chances of department store operator David Jones, culminating in the business being placed into voluntary administration this week, Canaccord Genuity highlights the unfortunate timing ahead of the critical Black Friday sales period, creating further uncertainty around main competitor Myer Holdings ((MYR)).
Against a backdrop of heightened promotional activity in recent weeks from both David Jones and Myer, the analyst highlights early Black Friday activity has been apparent, which is likely to create more headwinds for Myer’s current trading.
Myer’s management pointed out in September it had enjoyed some wins in terms of attracting new brands. With the rationalisation of David Jones stores, as well as concession stock being pulled from some locations, Myer is potentially well positioned to gain more brands and increase its range.
This is seen as one potential positive. With around 40% of Myer stores located in centres that also include David Jones stores, it is now likely Myer will face less competition in multiple “catchment” areas.
The Myer loyalty program also has scope to become stronger with a larger brand offering and a less intense competitive backdrop.
Another net positive is that a downsized David Jones footprint, all things being equal, should mitigate some of the competitive pressures.
As noted by Canaccord, the two majors have competed aggressively over the decades as the only two multi-category department store operators, and a reduction in competition should ease gross margin pressures on Myer.
While acknowledging the challenging consumer backdrop, the analyst encourages investors to look through the cycle and the uncertainty around David Jones, with the situation likely to offer better opportunities for Myer, as well as improved negotiating leverage with suppliers and landlords as additional potential outcomes.
The stock is Buy rated with an unchanged 53c target price.
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