Jarden slaps Overweight rating on aged-care stock, Regis Healthcare
\nJarden has also re-rated its views on ASX online classified stocks
\nThis includes Seek, Domain, REA, and Carsales.com<\/p>\n
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Investment group Jarden<\/strong><\/a> has given Regis Healthcare (ASX:REG)<\/a><\/strong> an OVERWEIGHT<\/strong> rating, with a target price of $3.35<\/strong> (versus current price of $3.12).<\/p>\n The $900m market capped Regis is one of the largest aged-care operators in Australia. The company owns 64 residential aged care homes, six home care services, five day therapy centres, four day respite centres and six retirement villages \u2013 employing around 9,000 people.<\/p>\n Jarden believes the Government announcement in December that it will fund an additional $10\/bed to help fund the 5.75% award wage increase for aged-care staff is a relief for the company amid staff shortages.<\/p>\n \u201cNew funding for staff costs is certainly welcomed, and should theoretically assist cover staff costs already being paid by REG (assuming there are no extra conditions),\u201d noted Jarden.<\/p>\n \u201cWe see this additional funding as representing yet another sign of the Government\u2019s commitment to improving sector profitability.\u201d<\/p>\n However, Jarden warned that the latest Registered Nursing (RN) vacancies data<\/strong> remain persistently high, suggesting ongoing shortages and increased reliance on more expensive agency nurses.<\/p>\n \u201cThis is while REG, along with the rest of the industry, has had to ramp up RN care minutes to the 40 minute target by October 2023, which we understand many operators (including REG) have struggled to achieve.\u201d<\/p>\n Meanwhile, the Aged Care Taskforce<\/strong> is set to publish their final report soon.<\/p>\n Whilst it is not clear if their findings will be made public, or if they will instead be released as part of the Budget next May 2024, Jarden says it is expecting the likely outcomes to at least be net neutral or positive to REG.<\/p>\n Jarden has therefore upgraded its EPS forecasts for Regis in FY24\u2044FY25\/FY26 by +8.8%\/+13.3%\u2044+14.9%, respectively.<\/p>\n Specifically Jarden noted:<\/p>\n \u201cRevenues: An increase to REG\u2019s Government revenues per bed (which account for ~70% of Group revenues) from ~$280 as at 1Q24 to $290, resulting in ~$15m of revenues in FY24 for seven months\u2019 contribution (or $25m on a full-year basis).<\/p>\n \u201cStaff costs: An increase in staff costs to reflect increased use of agency costs to fill RN shortages.\u201d<\/p>\n \u00a0<\/p>\n Meanwhile, Jarden has also updated its ratings and forecasts for the Australian Online Classifieds sector<\/strong> due to a change in its lead analyst.<\/p>\n Here are the four online classified stocks being rated:<\/p>\n \u00a0<\/p>\n Seek (ASX:SEK)<\/a> \u2013 BUY, $29.60 target price (vs $25.23 current price)<\/strong><\/p>\n \u201cThe market is not factoring SEK\u2019s $2bn revenue aspiration in ANZ & Asia by FY28,\u201d said Jarden.<\/p>\n \u201cSeek is a quality business with what we consider favourable structural drivers, strong pricing power, and a skilled management team.<\/p>\n \u201cSeek has highlighted a $2bn revenue opportunity by FY28.<\/p>\n \u201cYield growth in ANZ is the largest contributor, with likely drivers to include new ad constructs, higher depth penetration, new products, underlying price increases and wage growth.<\/p>\n \u201cIn addition, we expect Seek Asia to outperform, albeit off a lower base, over this time period due to favourable structural drivers of volume growth.<\/p>\n \u201cWe caution that achievement of Seek\u2019s aspiration is unlikely to be linear given the natural volatility of job ad listings,\u201d said the note from Jarden.<\/p>\n \u00a0<\/p>\n REA Group (ASX:REA)<\/a> \u2013 UNDERWEIGHT, $155 target price (vs $177.25 current price)<\/strong><\/p>\n \u201cOur base case [for REA] assumes 19% growth in 1H24 revenue to $731.6m, +14% growth in costs to $295.4m, 22% growth in EBITDA to $436.2m, and +27% growth in NPAT to $260.4m,\u201d noted Jarden.<\/p>\n \u201cREA Group is a quality business with what we consider a strong management team, and a track record of consistently growing yield by double digits %.<\/p>\n \u201cWe see REA Group\u2019s aspiration to grow its yield by double digits % as realistic on a 3-5 year view; in FY24, we assume +15% and 10%\/year from FY25-FY28 as our base case.<\/p>\n \u201cThis drives EPS growth of ~18% on a 5-year view. We also see upside if REA Group can execute in India, though the opportunity is at a very early stage.\u201c<\/p>\n \u201cDespite this, we have an Underweight rating on REA Group on valuation grounds. We think REA Group should generally trade at a premium to Domain, however, given the operating leverage in Domain, we see a similar FY24E PE multiple as justifiable.<\/p>\n \u201cKey risks include a soft housing market that may impact both listing volumes, and REA Group\u2019s ability to increase prices.<\/p>\n \u201cPressure on marketing budgets may force some vendors to choose between REA and Domain, where they may have previously advertised on both,\u201d said Jarden.<\/p>\n \u00a0<\/p>\n Domain (ASX:DHG)<\/a> \u2013 OVERWEIGHT, $3.80 target price (vs $3.25 current price)<\/strong><\/p>\n \u201cWe see Domain\u2019s aspiration to grow its controllable yield by ~12% through the cycle as being realistic on a 3-5 year view,\u201d said Jarden.<\/p>\n \u201cIn FY24, we assume +13%, however, we are more conservatively assume 11% in FY25, 10% in FY26 and FY27 and 9% in FY28.<\/p>\n \u201cGiven Domain\u2019s smaller scale to REA, it has significantly more leverage to fluctuations in listing volumes in the short term, but a structurally lower margin as a result.<\/p>\n \u201cWe believe Domain should trade at a discount to REA Group through the cycle, however, given the operating leverage in Domain in the short term, we think a similar multiple on a FY24 basis is justifiable.<\/p>\n \u201cWe value Domain at $3.80, which implies ~30x FY26 earnings, which compares with ~33x for REA.<\/p>\n \u201cWe therefore have an Overweight rating on Domain,\u201d said Jarden.<\/p>\n \u00a0<\/p>\n Carsales.com (ASX:CAR)<\/a> \u2013 UNDERWEIGHT, $27.50 target price (vs $31.50 current price)<\/strong><\/p>\n \u201cTrading at 20.5x FY25 EBITDA, we think the market is now applying an overly optimistic multiple,\u201d explained Jarden.<\/p>\n \u201cWe forecast group revenue of $512m and EBITDA of $274m. This represents growth on a reported basis of +54% for each, respectively, as a result of the impact of acquisitions in North America and Brazil.<\/p>\n \u201cCarsales is a high quality business with a proven track record of leveraging its domestic capabilities via acquisitions in other geographies.<\/p>\n \u201cIn Australia, while this business is relatively mature, we still see scope for its Dealer and Private businesses to grow at a mid-high SD CAGR on a 3-5 year view.<\/p>\n \u201cIn the US, CAR has and will continue to leverage its experience in other markets to successfully grow this business; we factor a 12%\/14% 3-year revenue\/EBITDA CAGR to FY26 as our base case.<\/p>\n \u201cIn addition, we expect CAR to benefit from leveraging favourable structural dynamics with its expertise in Brazil, as well as continued growth in Korea.<\/p>\n \u201cHowever, while we believe that CAR has deserved a re-rating versus 12 months ago, we believe the market has gone from not pricing in execution in the US, to factoring a bullish scenario.<\/p>\n \u201cWe therefore do not see a favourable risk-reward for investors at current levels and, as a result, we have an Underweight rating and $27.50 12-month target price.<\/p>\n \u201cKey risks include competition, given CAR\u2019s dominant market position in most markets in which it operates; and execution risk in the USA and Brazil,\u201d said Jarden.<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n\n \ufeff<\/span><\/span>\u00a0<\/p>\n \u00a0<\/p>\n The views, information, or opinions expressed in the interview in this article are solely those of Jarden, and do not represent the views of Stockhead.<\/em><\/p>\n Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.\u00a0<\/em><\/p>\n <\/span><\/p>\n The post MoneyTalks: Jarden bullish on Regis Healthcare; gives price targets on these 4 ASX online classified stocks<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"Jarden\u2019s view on Aussie online classified stocks<\/h2>\n
Share prices today:<\/h2>\n