Research notes

EBO has posted its 1H26 result which was broadly in line with expectations. Importantly FY26 EBITDA guidance (up 7.5%) has been reconfirmed. EBO is coming to the end of the heavy investment phase upgrading its DC network and operational efficiencies will start to be seen across the business. Other 1H26 highlights include: strong LFL sales across the TWC network up 8.8% driven in part by greater GLP-1 uptake and shift to higher value medicines; stable market share (29%) in pharmacy wholesaling; and solid performance in animal care. We have reduced our forecasts in FY27/28 reflecting higher D&A and interest charges. Our target price has fallen to $28.07 ($34.82). We maintain a BUY recommendation.

The hematite business delivered a 5% EBITDA beat; the problem is what happens to the cash after that. A strong hematite result, but 43% of group capex is directed to activities generating zero current earnings, compressing FCF conversion to 48% and ROCE to 19%. NPAT miss reflects rising capital intensity, with a sharp rise in D&A. Dividend solid at A$0.62/share. Post recent pullback we upgrade to HOLD.

We update our SLC normalised NPATA due to a formulaic error which resulted in non-cash-tax being added to rather than subtracted from our normalised NPATA/EPS. Our NPATA is an output only and this formulaic update does not change any of our fundamental forecasts including reported EPS, our Target Price or our recommendation. SLC reported a ~$5m P&L tax expense in 1H26 and we forecast a ~$3m P&L tax expense in 2H26. In 1H26 SLC changed from booking tax gains/rebates to paying tax expenses through its P&L. SLC has substantial tax losses, so from a cashflow perspective is not paying meaningful tax. SLC is unlikely to pay cash tax for the next few years. Our normalised/cash EPS is proxy for cash earnings and therefore adjusted for cash tax.

A strong CY25 result, coming in ahead of consensus on both NPAT and dividend. Yet another half where WDS outperforms on opex and net debt balance. We see a clear case for value upside remaining in WDS, from a recovering oil price, solid project delivery and FCF harvest as projects come on (CY27-29). We retain our BUY rating, with an upgraded A$30.50 (was A$29.80).

An unsurprisingly solid underlying earnings result. The surprise that excited the share price was the material increase in DPS guidance. Target price lifts 25 cps to $5.35/sh as a result of forecast changes and valuation roll-forward. We move to a HOLD on share price strength. Potential TSR at current prices is c.4% (including 5.2% cash yield over CY26F).

1H26 was modestly below our expectations. Strong performances in Civil (EBIT +92% YoY) and Electrical (+29% YoY) were encouraging, though these gains were more than offset by softer earnings in the seemingly lumpy Mechanical segment (-24% YoY). Positively, cash generation was a highlight, with net debt of just $68m reported at period end. Management reaffirmed FY26 guidance of $117m EBIT and $72.5m NPAT, which implies an acceleration of organic growth from +11% in the first half to +15% in 2H, despite a more demanding comp ahead. Encouragingly, management expressed confidence in achieving this, supported by the rollout of new MSAs with core clients (amongst other things). We have made modest reductions of 1-2% to our EBITDA forecasts in each year, translating into 3–5% NPAT downgrades. Our target price is revised to $5.25 (from $5.40).

The result was a slight beat to our forecasts at most key metrics. Positively, late awards of projects and first works in Technology mitigated the anticipated skew to deliver a record first half PBT of $10.0m. The target for $20.0m PBT was reiterated (MorgansF $21m PBT), though we would view this as conservative given Technology is still expected to deliver a 2H skew. Our forecast changes are de minimis, but we increase our target price to 90cps on a multiple re-rate and given balance sheet optionality (net cash $13m). We estimate that VYS could add another ~$10m of EBIT without any dilution, using a combination of its acquisition facility, cash and deferred scrip. We value the core business at 75cps and VAM at 15cps using a ~$4/kL price (which may turn out to be conservative). In our view, an update on the Water Corp’s process for acquiring 10GL of water for Port Hedland is the next key catalyst.

SKS delivered a solid 1H26 result, delivering NPAT of $8.8m (up 51.7% on the pcp), a ~22% beat vs MorgansF $7.2m. Whilst 1H26 saw the group phase between large Data centre jobs, PBT margins were ahead of our expansions. 1H26 Net cash generation of $19.3m, was ahead of MorgF, supporting an interim dividend of 3.5cps (MorgF 1.5cps). FY26 guidance for Revenue of $340m / PBT of $34m was reaffirmed, which remains supported by robust work in hand into 2H26 and FY27. We upgrade our FY26-28F EPS forecasts by +19%/+15%/+14% based on SKS’ recent FY26 revenue & improved margin guidance. Our blended DCF/P/E-based price target lifts to $5.10/sh (from $4.25). This sees SKS now trading with a TSR of ~15%, we therefore move to an ACCUMULATE rating.

MGH delivered a strong set of results for 1H26, reflecting solid EPS growth of 16% (pcp), in line with the CAGR since listing (1H21-1H26) of 15.7%. Importantly, the CC&H division, the bulk of what will remain post the sale of Construction Materials (CM), delivered a ROCE of 20%, double that achieved in 1H25. The sale of CM will see MGH with $1.3bn of cash, or net cash of $700m, with interest income alone ensuring EPS remains relatively flat as the business deploys the capital. With guidance for the business (excl CM) at $120m-$140m and an EV post-transaction of c.$800m, MGH is trading on c.5-6x EV/EBITDA – an undemanding multiple if management can redeploy capital at its target 20% ROCE. On this basis, we maintain our Buy rating and $5.20/sh price target.

ARB's 1H26 result was pre-released (sales -1%; PBT -16%) and we saw limited incremental information today that justified the sharp share price fall. Exports remain the highlight, as the US delivered +26% growth with ARB product sales through the ORW/4WP network up +100% LFL, the UK returned to growth (+5%), and management expressed confidence EMEA headwinds are behind them with the orderbook tracking well ahead of pcp. Within Aftermarket, network expansion, the new e-commerce platform, new product cycles and the Ford partnership provide levers to help offset a slower start to industry volumes. FY26 reflects a base year for ARB and we remain positive on a resumption of sustainable growth in FY27. We view ~18x FY27F PE as undemanding relative to ARB’s market leadership, strong balance sheet and ongoing US execution. BUY.