EBO-Ebos

[Shareguy]

Craigs have done a deep dive into Ebos

Insert from latest note

In the Bargain Bin. In our morning meeting today, there was much angst about our lack of conviction across many of the NZX50's Top 20 names. Apart from a couple of stocks (principally IFT and FPH) most of the alpha action amongst the NZX50 has been below the Top 20 in the NZX mid-cap space – best exemplified by CIP's "Super Seven" (CHI, TRA, TWR, FSF, SKL, SCL, SAN).
Our research guru's retain Overweight recommendations on GNE, MCY, FPH, IFT, FRW, SUM, SPK. However, recent price action, macro challenges and/or stock-specific issues have made several of these names challenging to 'pound the table' on.
Fortunately, this morning Stephen Ridgewell has revisited and refreshed his Overweight thesis on EBOS – clearly in the 'Bargain Bin' as the Title suggests after a c50% fall from its highs less than a year ago and back at levels last seen in early 2019. In the note Ridgwell has emphasised that FY27 will be another year of transition before a return to EPS momentum (+20%) in FY28.
At its April investor day, EBO guided for FY27 NPAT to be broadly flat on FY26, largely due to the drag from opening three new distribution centres (i.e. higher debt, interest, lease & depreciation expense) as well as the costs of winning market share off Sigma/API (better terms for pharmacies resulting in lower margins).  Further, EBO's guidance for flat earnings assumes fuel costs do not remain elevated - with no signs that the Strait of Hormuz will re-open any time soon, global fuel reserves running down, and credible estimates it will take up to 9 months for the global oil supply chain to return to pre-war volumes even if peace were to break out tomorrow, Ridgewell now assumes that EBO will incur additional fuel costs at a similar rate over FY27 as it has incurred since March. This drives a $15m downgrade of FY27 uEBITDA to $639m and 5% uNPAT decline to $239m.
The good news is that with the DC transformation now complete EBO's FY28 NPAT will rebound strongly driven by 1) high single digit growth in MedTech / Animal Care / Contract Logistics which now account for c.60% of uEBITDA 2) normalisation of fuel costs (c$25m/4% of EBITDA) and 3) stabilisation of Interest, D&A & lease costs.
In the note Ridgewell has done a further deep dive on his EBOS Sum-Of-The-Parts (SOTP) valuation – the 7th chart below illustrates an extremely conservative view on its 3 core segments – even on this basis the shares are deeply undervalued in his view, trading on 7.2x EV/EBITDA, a deep discount to a very conservative peer multiple valuation of 9.3x, which implies a fair value for EBO of $28.22 per share (+38% from here).
Near-term catalysts are limited but investors are being paid to wait with EBO's impressive yield and 15-year track record of raising dividends (14% p.a.), see final 2 charts below. EBO is a high conviction Overweight with 40% upside on an 18-month view.

[Basil]

Craigs still not covering HLG ?

[Shareguy]

Craigs still not covering HLG ?

No but they should be....

[Basil]

No but they should be....

Agree 100%.
Maybe you could send Ridgewell an email and ask him if he could buy an Australasian growth company with a 10 year EPS CAGR of 14% on an FY27 PE of only 11 whether he thinks that's dirt cheap ? Also mention it has no debt and is a simple to understand company with a trading history going back over 100 years

Don't mention the name. Maybe that would pique his interest ? If he even applied half the intellectual horsepower he does to run analysis on OCA to HLG he'd find the best value Australasian growth company right under his nose.

Getting back to EBO..I remain in the doubting Thomas camp but good luck to holders.

[winner (n)]

Must be close to breaking through the 50MA

Top of NZX LEADERBOARD this morning

[Shareguy]

Soft FY26 result expected. Just how soft will be key and of course more importantly forecast.

Craigs expects uEBITDA at the low end of its A$610-620m guidance range (CIPe A$613m) when it reports on Wednesday, with headwinds from weak volumes in Community Pharmacy wholesale (PBS volume -10% YoY in 2H26) and higher fuel costs, partly offset by an uptick in growth in the Institutional Healthcare business (including steady growth in Medtech and a slight re-acceleration in Hospital medicine growt

[Shareguy]

A "relief result". I think this is going to be looked at as a positive result by the market.

Craigs highlight that EBO is now an attractive yield stock. EBO has an impressive track record of increasing or holding its dividend over the past 15 years, including the past two years when earnings have tracked lower, one of the best track records on the NZX of both paying and growing dividends per share.

Also key conclusion from our sum of the parts analysis is that, at its current valuation, EBO is vulnerable to being taken over either from private equity and broken up or acquired by industry peers who want geographic expansion. We also note that, following the sell down of Sybos Holdings last year, EBO's shareholding register is wide open.

EBOS also trading at a deep discount to the market. In addition, EBO's fwd PE is unusually low relative to the benchmark NZ50 (a 46% discount),
and more specifically the discount to FRW and MFT.

Time will tell I guess but hopefully it's upwards from here.

[Crackity]

Must be close to breaking through the 50MA

Top of NZX LEADERBOARD this morning

Chart looks pretty good

But it's only squiggles

However I am a holder

Hmmmm