SOL released its 1H22 result, which highlighted the continuation of strong contributions from some of its core investment holdings (e.g. NHC, BKW, Round Oak). In our view, it was a solid result overall, with favourable conditions for some of SOL’s more cyclical assets helping to generate a Net Cash from Investments outcome of ~A$183m (+114% on pcp). Post the MLT acquisition completion, SOL’s portfolio NAV ended the period at ~A$9.04bn. Underlying group NPAT was ~$344m, +281% on pcp (Stat NPAT of -A$643m included a A$954 non-cash goodwill impairment generated from the acquisition). We alter our FY22F/FY23F/FY24F underlying NPAT estimates by ~-30% to +10% factoring in the 1H22 result and further improvements to our near-term yield assumptions post the recent results of core portfolio holdings. Our DDM/SOTP -derived price target is lowered to A$30.60 based on the above changes and the inclusion of updated forecasts to key holdings covered by Morgans. With > 10% TSR upside to our price target, we upgrade to an Add recommendation (from Hold).
Equity Analysis /
Australia