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Supply Network (SNL) | Truck pick up

 

Supply Network (SNL)

COMPANY REPORT
Truck pick up
 

RESEARCH ANALYST

James Casey
+ 613 9602 9265ustralian
jcasey@baillieu.com.au

 

 

RECOMMENDATIONS

Rating BUY
Risk High
Price Target $5.60
Share price $4.50
   

In a nutshell: Supply Network Limited (SNL) announced the release of its preliminary results for FY20, indicating a 10.2% increase in NPAT to $9.6m. Sales increased by a similar magnitude, up 10.4% to $136.8m. The results are ahead of our 2020 forecasts and impressive given the disruption to trading in 2H20, including the stage four lockdown in NZ.

FY20 result ahead of expectations: SNL provided its FY20 preliminary earnings forecast and dividend for FY20. The company expects to report an underlying NPAT of $9.6m ($10.2m pre-AASB 16), up 10.2% on the pcp and above our forecast of $8.5m. SNL reported a 10.4% increase in sales to $136.8m, ahead of our $134m forecast. The company maintained its targeted double-digit operating growth in FY20. SNL declared a final dividend of 9.0cps, a 5.9% increase on the pcp (2H19 DPS: 8.5cps). SNL’s Australian operations performed resiliently in 2H20 and ahead of management’s expectations. New Zealand operations were more affected by COVID-19, given stage four restrictions. However, NZ volumes are progressively returning to normal levels.

Outlook: Supply Network has consistently delivered growth in recent years, with earnings growth largely in line with sales growth. The recent expansion in NZ, including its new site in Christchurch (NZ) and the more recent opening of its new Eagle Farm branch in late October 2019, will drive near-term growth. Longer term, the company expects two to three new branches to open between now and FY22, as well as investing in inventory to increase distribution capacity.

Earnings changes: Following the preliminary release of the company’s FY20 result, our earnings forecasts have increased by 12.4% in FY21 and 11% in FY22.

Investment view: SNL has an enviable record of growth in recent years. This record remains uninterrupted, despite the challenges presented by COVID-19. Its growth is driven by robust underlying industry growth and expansion of the number of branches in the company’s network. Overall, we maintain our BUY recommendation and have upgraded our price target to $5.60 (from $4.50), largely in line with the uplift in earnings in FY21/FY22. Click here to read full report

 

 

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