G8 Education's result was pre-guided with few surprises. Management reaffirmed the business is in a phase of reinvestment and aims at better operating and capital expenses to improve network quality, an approach Morgan Stanley considers strategically sound.

Believing cost structures in the post-covid world could look very different, the broker lacks conviction on earnings and expects lower sales versus FY19 with lower margins. As a result, Morgan Stanley reduces its FY21 operating income and earnings estimates by -4% and -3%.

Morgan Stanley reaffirms its Equal-weight rating. Target is $1. Industry view: In-line.

Sector: Consumer Services.

Target price is $1.00.Current Price is $1.09. Difference: ($0.09) - (brackets indicate current price is over target). If GEM meets the Morgan Stanley target it will return approximately -9% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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