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Morning Wrap Morning Wrap Today ’s Newsflow Equity Research 01 Mar 2021 08:36 GMT Upcoming Events Select headline to navigate to article Bank of Ireland FY20 First Glance - Better on revenue and Company Events impairments 01-Mar Bank of Ireland; FY20 Results Bunzl; FY20 Results Bunzl - More optimistic tone in FY20 outlook Greencoat Renewables; FY20 Results 02-Mar Dalata Hotel Group; FY Results Greencoat Renewables FY20 In-line Flutter Entertainment; FY20 results Supermarket Income REIT; HY Results UK Housebuilders 95% LTV mortgage scheme to be Travis Perkins; FY20 results 04-Mar Entain; FY20 Results announced in the Budget Irish Economic View AIB Manufacturing PMI points to continued optimism among industry UK Economic View A “Spend & Pay Later” Budget OneSavings Bank Announces acquisition of £55m mortgage portfolio Economic Events Ireland 01-Mar Retail Sales Jan21 03-Mar ILO Unemployment Rate Feb21 05-Mar Foreign Direct Investment Q4 08-Mar GDP Q4 Industrial Production Jan21 United Kingdom 01-Mar BoE Mortgage Approvals Jan21 CIPS Manufacturing PMI Feb21 03-Mar CIPS Services PMI Feb21 04-Mar CIPS Constuction PMI Feb21 United States Europe This document is intended for the sole use of Goodbody Investment Banking and its affiliates Goodbody Capital Markets Equity Research +353 1 6419221 Equity Sales +353 1 6670222 Bloomberg GDSE<GO> Goodbody Stockbrokers UC, trading as “Goodbody”, is regulated by the Central Bank of Ireland. In the UK, Goodbody is authorised and subject to limited regulation by the Financial Conduct Authority. Goodbody is a member of Euronext Dublin and the London Stock Exchange. Goodbody is a member of the FEXCO group of companies. For the attention of US clients of Goodbody Securities Inc, this third-party research report has been produced by our affiliate, Goodbody Stockbrokers Goodbody Morning Wrap Bank of Ireland FY20 First Glance - Better on revenue and impairments BOI published FY20 results with a pre-exceptional pretax loss of €374m versus our €643m Recommendation: Buy loss estimate. Income was 4% better (NII 2% better, Non-interest 17%). The loan book Closing Price: €3.38 looks stable in H2 and the Q4 exit NIM was flat on Q3. Costs were 2% higher than us, but in line with consensus. Impairments of €1.13bn were well below our €1.32bn forecast (NPEs Eamonn Hughes +353-1-641 9442 flat in H2). CET1 of 13.4% was in line (13.3% f/cast). BOI guides FY21 revenue in line with [email protected] 2020 levels (lower NII, higher non-interest income); Costs <€1.65bn in 2021 and a new FY23 target of €1.5bn; Impairments to be materially lower than FY20 (doesn’t feel to be “normalised” just yet). The FY21 CET1 ratio to be in line with FY20 plus distributions to recommence on “a prudent and progressive basis”, which we interpret as FY results. New medium targets for FY21-24 are due later this year. These are a good set of numbers with a 12% beat at the pre-provision level (though some valuation items). Looking at guidance, it feels to us that FY21 consensus pre-provision profit has a c.5% upside (we already c.3% ahead of consensus), or 8-9% at the pre-tax level. Its early in the year and in extended lockdowns, but momentum is good, benefits from UB’s phased exit will likely accrue, so the risk bias to us remains positive. Home… This document is intended for the sole use of Goodbody Investment Banking and its affiliates Page 2 01 Mar. 21 Goodbody Morning Wrap Bunzl - More optimistic tone in FY20 outlook Having guided in the pre-close statement in December, YoY revenue growth of c.8% (+9% Recommendation: Buy on a constant currency basis) and Group operating margin above the historic norm (c.7%) Closing Price: £22.37 due to the mix of products sold, Bunzl delivered on that it its FY20 release this morning reported revenue of £10.1bn, adj. EBITA of £778m and adj. EPS of 164.9p. That compares to Gerry Hennigan +353-1-641 9274 our estimates of £10.0bn in sales, EBITA of £762m and adj. EPS of 155.5p, all of which are [email protected] in line with consensus. Regionally, as was the case at interims, revenue from Continental Europe (+15.6% YoY) and the RoW (+21.6% YoY) outperformed, a function of greater exposure to those sectors (Safety, Cleaning & Hygiene & Healthcare) that benefited from COVID-related demand. Headline results aside, points of note, in our view, relate to: (i) the ongoing disparity between those sectors that benefit from COVID related demand, from those that don’t; (ii) the announcement of three further acquisitions since the beginning of the year; and (iv) the outlook commentary for the year ahead. In the outlook commentary, a note a more positive tone, as opposed to caution in prior statements on the year ahead reflected in “we anticipate that the recovery in sales of other products, as restrictions ease, will broadly offset the decline of smaller Covid-19 related orders, with recent acquisitions making an increasing contribution to the Group's performance. Looking ahead, we also expect future growth to be supported by enhanced hygiene trends and our differentiated offering of sustainable and responsible solutions.” As such, despite the lingering impact of the pandemic, and slow rate of vaccination (ex-UK) points, we believe there is an upside bias to consensus FY21 EBITA estimates of £682m (GBS £685m). On dealflow, three further complementary acquisitions were announced today; amid commentary of an “active pipeline”. In January, the Company acquired Deliver Net, a healthcare distributor to care home groups in the UK, with 2020 revenue of £20m. In February, Bunzl completed the acquisition of Disposable Discounter, an online distributor of foodservice disposable products, which generated £18m of revenue in 2020, as well as the acquisition of Pinnacle, a leading distributor of cleaning & hygiene in Canada, which generated £11m of revenue in 2020. Net Debt (ex. Leases) stood at 1,255m or £1,753m (including leases), relative to an expectation in our model £1,844m (incl. leases, Net Debt / EBITDA of 1.5x). A total dividend for the year of 55.1p was been proposed vs out expectation of 52.6p. With results marginally ahead of market expectations, as outlined in our preview note last week, we anticipate a focus in the schedule conference call (+44-203- This document is intended for the sole use of Goodbody Investment Banking and its affiliates 936-2999) at 9.30am to be on: (i) the stated prospects for both COVID and non- COVID related demand for the months ahead; and (ii) the development pipeline. Home… Page 3 01 Mar. 21 Goodbody Morning Wrap Greencoat Renewables FY20 In-line Greencoat Renewables, as expected, reported a NAV per share to 101c, a fall of c.3c from Recommendation: Hold the 103.1c recorded at the end of the prior year. As expected, grid curtailment, a feature Closing Price: €1.17 over the past two years continues to constrain annual output, a development, which, in our view, may well persist as more renewables come on stream to meet stated Government Gerry Hennigan +353-1-641 9274 environmental objectives. That backdrop is reflected in a target migration to derive 70% of [email protected] electricity supply in RoI from renewables by 2030, which would entail an effective doubling of electricity generated from onshore wind from c.4MW in 2019 to c.8MW by 2030. NAV aside, confirmation in the statement this morning is provided on portfolio additions - 37.8MW from the addition of Cloghan in County Offaly, 25.2MW from Taghart in County Cavan, 89.6MW from Cordal in County Kerry and GRP’s first venture into Scandinavia via an agreement to procure the Kokkoneva wind farm (43.2MW) in Finland. In line with expectations, the Debt to GAV ratio stood at 36% at the end of the period, well within the stated ceiling of 60%. Having raised €125m gross in the Placing in December, further deal flow both onshore Ireland and on the Continent is likely. Quarterly dividend payments, in line with an annual 6.1c target, have been announced. With future dividend payments underpinned by price protection under the c.9 years REFIT policy, serving to insulate the group from wholesale electricity price fluctuation and decline, an obvious attraction remains near-term confidence over the 5% dividend yield. We would add that a desire for regional diversity and the certainty provided by fixed-price PPA agreements, as in the case of the 10-year fixed-price Corporate PPA with Gasum, Finland’s state-owned gas utility, are, in our view, likely to feature more prominently. Evidence of M&A pipeline potential is reflected in commentary on the attractions of the Irish market, but also that “Europe represents a substantial opportunity for the Group”. In addition, the Group also publish its third annual ESG report. With limited incremental news in the release from Greencoat this morning bar potential expansion regionally, we retain our PT of €1.19 based on a 10% premium to our projected NAV (includes annual dividend payment) and our Hold recommendation. here Home… This document is intended for the sole use of Goodbody Investment Banking and its affiliates Page 4 01 Mar. 21 Goodbody Morning Wrap UK Housebuilders 95% LTV mortgage scheme to be announced in the Budget Press reports over the weekend indicated that a new 95% LTV mortgage guarantee scheme Shane Carberry will be announced as part of the UK budget on Wednesday. Following the onset of the COVID +353-1-6419118 pandemic, lenders pulled away from offering higher LTV mortgage products.
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