Daily Brief Equity Bottom-Up: AMP – Strong Numbers Released and more

• AMP released 1H23 numbers with 24-26% underlying NPAT growth in 2 key divisions
• AUD610m of returned capital in past 12 months will see AUD140m added by October
• AMP Bank is unlike peers, which is deposit-funded, small, focused on mortgages

On 7 August, Pan African Resources (PAF) announced FY23 production of 175,209oz, which was within 0.1% of its guidance of 175,000oz on 26 May. It also indicated all-in sustaining costs (AISC) of US$1,325–1,350/oz (at ZAR17.77/US$), reiterated output guidance of 178–190koz for FY24 and reported net senior debt of US$18.9m as at end-June (cf US$49.9m as at end-H123). In response to the announcement, we have reduced our FY23 normalised HEPS forecast for PAF by 8.3%, from 3.82c/share to 3.50c/share to reflect dollar costs, which were stickier at higher levels than we had hoped. However, our forecast remains above the market consensus. Moreover, our life-of-mine valuation of the company remains almost completely unchanged at 34.24c/share (see Exhibit 7 for full explanation), notwithstanding recent rand strength.

Dentsu experienced difficult trading conditions in its first half, with US client hesitancy, poor Chinese macro conditions and a one-off hit from a problematic project in the DACH region, compounded by demanding comparatives. These ease in H223, and trading should also benefit from one-off events like the Rugby World Cup, as well as the contribution from Tag, consolidated from 1 July. FY23 guidance is now for organic net revenue growth of 0% to -2% (was 1–2%) and a 17.0% operating margin (was 17.5%). With the inclusion of Tag, operational cost savings and lower interest following debt restructuring, guidance for EPS is unchanged. We have updated our forecasts to reflect this, with a knock-on into FY24. The valuation remains well below peers and long-term average metrics.

• MaxLinear’s acquisition of Silicon Motion has been abandoned, with both sides threatening arbitration. 
• It is difficult to understand why the acquisition would have resulted in the synergies projected by management.  The businesses are very different.
• Assuming the companies go different ways, expect for SiMo to perform as it has in the past.

Tomingley delivered Q423 gold production of 15,822oz, meeting its quarterly forecasts at an AISC of A$2,174/oz. These results concluded a strong year, with full year production of 70,253oz at an AISC of A$1,602/oz beating original FY23 guidance of 55,000–60,000oz production (at an AISC of A$1,650–1,900/oz), and meeting April 2023 production guidance of 65,000–73,000oz (at an AISC of A$1,550–1,750/oz). Full year gold sales totalled 70,498oz, generating revenue of A$190.5m at an average price of A$2,703/oz. FY24 guidance has been set for Tomingley at 60,000–65,000oz production at an AISC of A$1,750–2,100/oz as Alkane anticipates increased costs in wages, and electricity, fuel and reagent prices. Following Alkane’s updates since our last note in April, we have increased our FY23 EPS estimate by 26.8% to 7.38c (cf 5.82c previously).

• Global Health (Medanta) (MEDANTA IN) delivered robust revenue growth and profitability in Q1FY24. Revenue grew 27% YoY and 9% sequentially to INR7.9B. EBITDA margins expanded 250 bps YoY to 25.1%.
• All the key operating metrics including inpatient and outpatient volume, ARPOB, and ALOS improved. However, occupancy declined to 58.1% in Q1FY24 from 60% in Q1FY23 on increased bed capacity.   
• Medanta and DLF will develop a 400 bed multi-specialty hospital in Delhi. Ongoing expansion projects are on track to increase the bed capacity to 3,500–4,000 in FY25 from 2,725.

Immix reported Q223 results, which were largely as expected. Operational highlights included rolling positive newsflow for CAR-T therapy NXC-201 and interim results for IMX-110 in colorectal cancer patients. With the ramp-up in clinical activity, mainly the NEXICART-1 trial, as well as the two ongoing Phase Ib/IIa trials for IMX-110, management reported R&D expenses of $2.2m, notably higher than $0.6m in the previous year. At end June 2023, cash was $12.7m, supported by a $5m (gross) at-the-market fund-raise in H123. Based on our estimated cash burn, we continue to forecast an operating cash runway into Q224, consistent with management guidance. As we update our FY23 and FY24 expense estimates based on the H123 run rate, roll forward our model and update the net cash figure, our valuation adjusts to $81.1m versus $83.3m previously.

• Indosat (ISAT IJ) 2Q2023 saw the benefit of surging seasonal demand driving data usage coupled with its stronger network post the 3 integration. 
• The company saw a further increase in subscribers in 2Q2023 to over 100m, along with higher ARPUs, which rose by +8.6% YoY in 2Q2023 helping to improve returns.
• Indosat (ISAT IJ) continues to invest in maintaining the quality of its network as well as offering new value-added products to customers, boosting retention and profitability.

• McDonald’s Corporation delivered an all-around beat in the previous quarter.
• The second quarter was yet another example of their continually strong success, driven by their execution and guided by their Accelerating the Arches strategy.
• McDonald’s continued its outstanding success in Q2 by reaching global comparable sales of 11.7% and double-digit comparable sales in each of its sectors.

• Johnson & Johnson managed to exceed analyst expectations in terms of revenue as well as earnings.
• It was a strong quarter for Johnson & Johnson, with market-leading performance and significant advances in their innovative Pharmaceutical and MedTech pipelines.
• The company reported solid sales and earnings growth in the second quarter of 2023, raising expectations for the year.