Research notes

We have long argued that investing material capital in near-term loss-making projects (magnetite and new energy) has not diversified Fortescue, and has instead left group earnings more exposed to the iron ore price. Magnetite adds more iron ore exposure but at a higher cost, while new energy investment, and US$0.9-1.3bn of FY27 decarbonisation spend, are funded from hematite cash flow. >This dynamic is starting to show in the numbers. Fortescue flagged that net debt rose US$1.9bn in 1Q27, equal to the final dividend (US$1.0bn) plus quarterly capex (US$0.9bn), implying negative FCF for the quarter. >We attribute this mainly to weaker hematite cash flow after the central buying group China Mineral Resources Group (CMRG) reportedly halted purchases of two of Fortescue’s products during the quarter, leaving shipments 6% and actual sales 14% below Visible Alpha (VA) consensus in 1Q27. >On updated estimates we lower our rating to TRIM (from HOLD) with an A$15.40 target price (was A$18.70).

MP1 recently raised its FY27 EBITDA guidance by 25%. The compute and network businesses continue to deliver above expectations and MP1 announced three new AI infrastructure contracts with a Total Contract Value of ~A$1bn. >Collectively these set a glide path for annualised EBITDA in excess of $850m. >We upgrade our EPS forecasts materially. Our Target Price lifts to A$27 per share and we retain our BUY recommendation.

We expect a mid-single digit decline in 2H26 earnings (ex notable costs). >Target price reduced to $6.40/sh, as the outlook for ROTE improvement moderates. At current prices, total potential TSR is c.4.6% (including c.6.3% cash yield). Hence, we moderate our BOQ rating from ACCUMULATE to HOLD.

ORI has updated the market on its US AN sourcing, non-core land sale, recent acquisitions, cost out program and FY26 business performance. The important point is that the broader business continues to perform strongly, in line with its expectations. ORI will report its FY26 result on 12 November. >We have trimmed our FY27 NPAT forecast by 3.6% reflecting increased AN sourcing costs in the US, more gradual recovery in Indonesia coal production, plant turnarounds and higher interest costs given the Deer Park sale isn’t going through. >We move to an ACCUMULATE rating with a revised price target of A$26.52.

LGI has acquired 42MW of solar farm assets for A$22m, funded via cash and debt. The acquisition is expected to contribute ~A$1.6m of EBITDA in FY27 (nine-month contribution) and A$2.1-4.0m pa at current pricing, subject to synergy realisation and DACS rollout. As a result, the group's medium-term target has been materially expanded to 125MW (from 80MW), comprising a diversified mix of biogas generation (26MW), solar (42MW) and batteries (57MW). We view the acquisition as logical and well timed amid a softer energy price backdrop. The balance sheet will remain conservative (<2x gearing) and the group continues to execute on its growth ambitions despite ongoing regulatory delays impacting its development pipeline. BUY maintained.

NUZ has announced positive feedback from its FDA Type C meeting confirming HEALEY Regimen I could serve as the sole registrational study for an NDA for NUZ-001 and support a traditional approval pathway. >This is consistent with our existing assumptions, as we already modelled a single Phase 3 pathway to NDA, so the feedback validates rather than adds to our numbers. >A clear positive for sentiment. No change to our risked (rNPV) valuation and target price of A$0.20 target price. SPECULATIVE BUY recommendation retained.

Deterra has announced the acquisition of a 1.75% NSR royalty on ~84% of Ivanhoe Electric’s Santa Cruz copper project for US$74.15m cash. >As part of the deal reduced to 1.68% NSR for first 6 years of production, and 1.57% thereafter, with a current 24-year mine life. >We value the Santa Cruz royalty at risked A$110m, or A$0.21/share, and expect it to add A$17-21mpa to EBITDA by FY30F (~7% earnings accretive). >A formidable inflation hedge with upside leverage to metal prices, we maintain a BUY rating with a A$4.75 Target Price (was A$4.85).

TCL has increased its exposure to the Sydney market via acquisition of additional equity stakes in key tollroads. While we view positively the deployment by TCL of capital into markets and assets that it knows well, we struggle to see the cashflow benefit for investors at the acquisition price paid particularly in the context of the higher rate environment. Target price -50 cps to $12.03/s as a result of the forecast update and adjusting our DCF discount rate higher to part-risk for the rise in risk-free rates. We retain a TRIM rating at current prices, given potential TSR of -3%.

MEK has completed a two-tranche A$42.4m institutional placement to fund the second Mt Holland cash payment (A$10m), Turnberry UG development, exploration and working capital. The raise follows an underwhelming Sep-Q ramp-up, with indicative production of 7.0-7.5koz materially below our forecast and cash outflows higher than expected. We maintain our BUY rating with a revised price target of A$0.17 per share.

With G2E in Las Vegas this week, and ahead of its FY26 result on 12 November, we have made minor revisions to our earnings forecasts. We lower our FY26-27 fee per day and North American outright unit forecasts and our FY26 Product Madness bookings. We also lift our AUD/USD assumption and increase our buy-back assumptions. Our NPATA forecasts fall by c.1% across FY26-27F. EPSA is broadly unchanged in FY26 and up c.1% in FY27, reflecting higher buy-backs. Our 12-month target price decreases to A$69.00 (prev. A$70.00). We maintain our Accumulate recommendation.