Research notes

We initiate on Conrad Asia Energy (CRD) with a SPECULATIVE BUY rating and A$1.10 target price. >Mako is funded, contracted and carried to first gas in late 2027, and returns US$145-360m of cash to CRD on its 2P alone against an A$126m market cap. >Batam’s data centres need gas Southeast Asia doesn’t have, and Mako’s existing pipeline already runs there. This adds meaningful upside potential to our investment case for CRD. >No equity needed to develop Mako, with its share of capex carried by its partner and repaid out of production.

SUN has hosted its investor day, which we found constructive. It confirmed SUN has moved into the third phase of its transformation, leveraging its capabilities to drive profitable growth, with four key levers identified: Vero Specialty, loss ratio improvement, New Zealand (NZ) and platform/AI. >As part of the update, SUN trimmed FY27 top-line growth guidance to 3% (from 3-5%). Flowing this through, we reduce FY27F/FY28F EPS by 1%. Our target price rises marginally to A$20.13 (previously A$20) with our earnings changes offset by a valuation roll-forward. >SUN’s transition to a pure-play general insurer has been well executed. However, with limited upside to our target price (~4%), we maintain our HOLD rating.

Stealth Group Holdings (SGI) is Australia’s leading independent distributor and retailer of hardware, industrial, safety and consumer products, and the “third force” behind Wesfarmers and Metcash with an estimated ~1.4% market share. >SGI has a positive track record (5-year ~49% EPS CAGR), strong founder alignment (CEO is the second largest shareholder), structural industry tailwinds and a clear path to consolidate a fragmented ~A$120bn market. Disciplined M&A has built material scale, with ample balance sheet capacity (~0.5x ND/EBITDA). >We see a strong near-term growth profile (~3x sales target by FY28; FY27-29 ~78% NPAT CAGR) as SGI integrates its HBT acquisition, with a strong line of sight on FY27-28 (A$100m sales secured; ~A$130m under negotiation). >We initiate coverage with a BUY recommendation and A$1.85ps target price. HBT has transformed SGI into a scalable, vertically integrated model with improved economics, which we believe the market is yet to price (~8x FY28F PE).

WES’s AGM trading update overall was slightly weaker than expected. >While sales growth for the retail divisions in FY27 YTD was largely in line with expectations, the exit run rate was marginally softer. >Management noted that despite a stronger start to the quarter at Bunnings, lower sales across seasonal categories and the commercial segment in recent weeks have weighed on overall sales performance. >We reduce FY27-29F group underlying EBIT by 1% and underlying NPAT by 2%. >Our target price declines to $82.50 (from $85.00) and we maintain our ACCUMULATE rating. While the consumer backdrop is softening amid higher interest rates, weaker housing conditions and declining consumer sentiment, we believe WES’s retail businesses (Bunnings, Kmart Group, Officeworks and Priceline) remain well positioned given their strong value propositions. Combined with ongoing productivity initiatives, this should leave the company well placed to deliver stronger earnings growth when economic conditions improve.

SUL’s AGM trading update was slightly softer than expected, with 1Q27 group LFL of +0.2% (vs cons 1H27F +1.4%) and total sales growth of +2.0% (vs cons +3.3%). >Sales momentum decelerated from mid-August, with implied group LFLs down 1.3% (from +1.5% in weeks 1-7), and we expect further weakening in October. >Positively, SCA/rebel remain resilient, with SCA outperforming peers through 1Q27 and both brands gaining market share, while BCF’s superstore rollout is driving solid total sales growth (+3.5%). >SUL is managing well in a very challenging consumer backdrop, but a slower start to FY27 heading into peak trading, more demanding comps for SCA/rebel to finish CY26 (c.+5%) and ongoing consumer pressures (rates/fuel) are likely to limit near-term upside. HOLD maintained.

A soft 1Q27, with production of 78.0kt missing MorgansF/consensus by 18%/20% as depleted stockpiles cut throughput and recoveries fell to 60%. Revenue beat on a concentrate inventory drawdown. >FY27 guidance now hinges on a step-up from 2Q27 as underground mining and recoveries improve. Softer spot prices and peak capex keep FCF negative through FY27. >Maintain ACCUMULATE with A$0.82ps target price.

JBH’s 1Q27 trading update was slightly softer than expected, with sales down yoy in the core JB Hi-Fi Australia banner, although the trend has not got worse since July. The Good Guys improved modestly from July (albeit against easier comps), JB NZ continued to deliver double digit LFL sales growth and e&s remains soft. >The trading environment remains competitive. JBH also noted a slowdown in sales in October ahead of the key promotional events in 2Q (Black Friday, Christmas and Boxing Day). We expect JBH to trade well through the peak period, although expect some margin pressure, albeit softened by supplier funded discounting. >We have made very modest downgrades to earnings (~1%), our valuation lowers to $80.30 (from $82.00) and we maintain our ACCUMULATE recommendation.

SHAPE delivered a solid trading update continuing the strong earnings momentum this business has delivered over the past few years. We make upgrades to our forecasts, with FY27 NPAT up 4.8% and outer years up ~2%. We retain our BUY rating and increase our price target to $9.06 (was $8.76).

BETR Entertainment delivered a mixed 1Q27 result. Solid turnover growth was offset by customer-friendly sporting and racing outcomes, which weighed on margins. Turnover of $432.3m was up 19.1% on pcp, supported by the World Cup and continued share gains. Gross win rose 3.2% to $53.5m and net win rose 1.0% to $38.4m. Management estimate results cost around 1.8pp of gross win margin, and net win margin fell to 8.9% (pcp 10.5%). Encouragingly, October trading to date has rebounded sharply, with net win up 73% at an 11.5% net win margin. More than half of the Q1 results-related cash impact has already reversed. Looking ahead, management reaffirmed FY27 guidance of $13-19m normalised EBITDA (MorgansF: $14m) and positive operating cash flow, weighted to the second half. >We lower our FY27 EBITDA forecast to $14.0m (previously $15.4m). We maintain our Buy recommendation, with a revised $0.34 target price.

DTL has upgraded PBT guidance twice in the month of October with 1H27 PBT guidance lifted from in excess of >$47m in early October to $52-57m now. >Customer demand is strong, distributor peers continue to upgrade and DTL is executing well. However, a portion of DTL’s upgrade today was from improved visibility on delivery dates. With firm end customer delivery dates now set, DTL has a better feel and now expects its earnings to land in 1H27. >We upgrade our forecasts meaningfully and lift our target price to $15.00.