Research Notes

Stay informed with the most recent market and company research insights.

A man sitting at a table with a glass of orange juice.

Research Notes

CTI and ROTE targets, UNITE update

Westpac Banking Corp
3:27pm
April 1, 2025
WBC’s new CEO hosted a market update which, amongst other things, provided FY29 CTI and ROTE targets, discussed the UNITE technology simplification program, and gave business unit updates. We’ve made forecast upgrades and lifted our 12 month target price to $29.02. WBC remains our preferred major bank, albeit potential TSR at current prices is -3%. Next key event is the 1H25 result due 5 May.

The Pursuit of Ravensthorpe

Medallion Metals
3:27pm
March 31, 2025
MM8 continues to progress the Ravensthorpe Gold Project (RGP) from concept to reality. The company has received multiple funding and offtake proposals from various counterparties, including project financing offers of up to A$50m, permitting efforts remain underway. Exclusive negotiations with ASX-listed IGO Ltd for the acquisition of the Forrestania processing infrastructure are advancing, with binding documentation well progressed. MM8 anticipates completion of negotiations within the 12-month exclusivity period. We reiterate our SPECULATIVE BUY rating, increasing our target price to A$0.41ps (from A$0.32ps).

Right Time, Right Place, Right Commodity

Meeka Metals
3:27pm
March 31, 2025
Development of the Murchison Gold Project (MGP) is tracking well to schedule with first gold due mid-2025. Expansions work on the process plant are progressing to schedule. Key infrastructure of the larger 750kW ball mill, cyclone cluster and structures have been installed. Open pit mining has commenced ahead of schedule with mining rates ramping up well, achieving ~20kBCM (Bank Cubic Meter) per pay, first ore is expected in April. We reiterate our SPECULATIVE BUY rating, increasing our target price to A$0.25ps (previously A$0.23ps) a function of increased spot gold prices.

Remaining hope fades as second Phase 3 fails

Opthea
3:27pm
March 31, 2025
After disappointing results in the Phase 3 COAST trial, showing lead drug candidate sozinibercept combined with standard of care (SOC) Eylea failed to show an improvement in mean change in best correct visual acuity (BCVA) at 52 weeks, the primary endpoint, the company opted to accelerate the readout of its other Phase 3 trial (ShORe), comparing sozinibercept with SOC Lucentis over the same timeframe and with the same primary endpoint. Like COAST, the ShORe trial failed to demonstrate any statistical difference in BCVA when comparing sozinibercept combination therapy with SOC. Management continues to access its obligations under a 2002 inked development funding agreement (DFA), where the company may be required to pay amounts that could material impact its solvency.

27 months to get back on track…a challenging goal

Healius
3:27pm
March 31, 2025
The investor day provided an update on the Lumus sale (closes 1 May-25; cA$300m special dividend (41.3c/sh fully franked)), a brief trading update (volumes +4%, revenue +6.2%), and importantly, the go forward strategy, which aims for operating leverage in the high single digit range by the end of FY27. Management’s ‘T27 plan’ aspires to grow revenue and lower the cost base via improved workforce planning and digital enablement across customer service, lab modernisation and emerging diagnostics. While management is confident the right ingredients are in place to succeed, with only 30% of flagged milestones completed to date, and an estimated A$110m+ in cost savings/efficiencies (>10% of the cost base) required to deliver on the goal, we view it as challenging. We adjust FY25-27 estimates with our target price falling to $1.32 from $1.35. Hold.

A great buy

The Reject Shop
3:27pm
March 27, 2025
TRS has entered into a scheme implementation agreement with Dollarama (DOL-TSX) to acquire all shares for $6.68 per share, which is a 112% premium to the previous closing price. This values TRS equity at A$259m. We think this is a strong offer which represents 95% upside to our previously published target price of $3.50. We move our price target to align with the TRS scheme offer price of $6.68 per share. Given the share price is now trading in line with the offer price, we retain a HOLD recommendation.

Strong heartbeat

EBR Systems
3:27pm
March 27, 2025
CY25 results were in line with expectations, with adequate funding for more than six quarters at the current burn. We see little risk to FDA approval for the company’s wireless cardiac pacing device (WiSE) on or before 13 Apr-25, with 2H25 launch. We view commercial and manufacturing readiness, along with a reimbursement path that is both streamlined and incentivised, as helping to smooth the transition from developmental stage into a commercially viable medical device business. We make nominal changes to CY25-26 forecasts, but raise our DCF-based valuation to A$2.86 (from A$1.76) on increased probability of FDA approval. Speculative Buy maintained.

Simplifying the business

Catalyst Metals
3:27pm
March 26, 2025
CYL has agreed to sell the non-core Henty Gold Mine to Kaiser Reef (ASX.KAU) for an upfront consideration of A$33m. The agreement lowers group unit costs and grants CYL the option to acquire 50% of the 250ktpa Maldon processing plant in Victoria. Drilling at Trident continues to validate the belt-scale growth proposition at Plutonic, mineralisation has been intersected 430m along strike and 600m below the existing resource indicating potential for material mine life extension. We upgrade our recommendation to ADD and our price target moves to A$5.69ps (previously A$4.56ps).

International Spotlight

Tesla
3:27pm
March 25, 2025
Tesla designs, develops, manufactures and sells fully electric vehicles; energy generation and storage systems; and offers related services around these products. The group operates under two reportable segments: (1) Automotive; and (2) Energy generation and storage. Within Automotive, Tesla manufactures five consumer vehicles and in 2022 began early production and deliveries of a commercial electric vehicle, the Tesla Semi. Tesla has product plans to launch a lower priced point vehicle and develop an autonomous Tesla ride-hailing network. Tesla continues to leverage developments in its proprietary Full Self-Driving (FSD) capability, battery cell and other technologies (namely robotics). The energy generation and storage segment includes the design, manufacture, installation, sales and leasing of solar energy generation and energy storage products. Tesla’s stated mission is to ‘accelerate the world’s transition to sustainable energy’.

International Spotlight

Siemens
3:27pm
March 25, 2025
Siemens AG is a technology company which engages in the areas of automation and digitalisation. It operates through the following segments: Digital Industries, Smart Infrastructure, Mobility, Siemens Healthineers, and Siemens Financial Services.

News & Insights

From Houthi attacks on Suez Canal shipping to Trump’s Operation Rough Rider and Iran’s nuclear facility strikes, explore how these events shape oil prices.

At the beginning of the week, I was asked to write something about Iran. When I started looking at what had been happening , I realised that what we were talking about begins with an action by a proxy of Iran back in November 2023. How  that was initially handled with the Biden regime, and how then it was dealt with  deftly by Trump this year,   in turn led to  the need for an attack on Iran's nuclear facility.

Winston Churchill noted in his first volume of his history of the Second World War that it was important to understand that the United States is primarily a naval power. Indeed, the US remains the world dominant naval power. As such, two major strategic concerns remain for the US : the control of the Suez Canal and the Panama Canal .

To the US The idea that another country might block access to either of these must be intolerable. Yet what began happening, beginning on the 19th November 2023, was that , Houthi rebels that controlled a the northern part of a small country in southwestern Arabia, began to act. These Houthi rebels were acting as a proxy for Iran. They were funded by Iran, and armed with Ship-killing rockets, by Iran.

By February 2024, they had attacked 40 ships which had been attempting to sail northwards towards the Suez Canal. By March 2024, 200 ships had been diverted away from the Suez Canal and forced to make the longer and more expensive voyage around the Cape of Good Hope of South Africa. At this point, I think The Economist magazine said that this was the most severe Suez crisis since the 1950s.

The U.S. did respond. On the 18th December 2023, the U.S. had announced an international maritime force to break the Houthi blockade. On the 10th January, the UN National Security Council adopted a resolution demanding a cessation of Houthi attacks on merchant vessels.

As of the 2nd January 2024, the Houthis had already recorded 931 American and British airstrikes against sites in Yemen. Then Trump came to power. To Trump, the idea of the proxy of Iran blockading the Suez Canal could not be tolerated.

From the 15th March 2025, Trump began "Operatation  Rough Rider". This was named for the cavalry commanded by the then-future President Theodore Roosevelt, who charged up San Juan Hill in Cuba during the Spanish-American War of 1898. The U.S. then hit the Houthis with over a thousand airstrikes. So they were bombing at ten times the rate they previously had been. The result of that was that by the 6th March 2025, Trump announced that the Houthis, these proxies of Iran, had capitulated as part of a ceasefire brokered by Oman. This directly led to the main game.

It was obvious that the decision to do the unthinkable, and block the Suez Canal, had come from Iran.
What other unthinkable things was Iran considering?

It is obvious that Trump now believed that the next unthinkable thing that Iran was considering was nuclear weapons. As Iran's other proxies collapsed, Iran's air defence collapsed. In turn, this gave Trump the room to act, and he took it. He launched a bombing raid which severely disabled Iran's nuclear capacity. Some say it completely destroyed it.

Iran retaliated by launching 14 rockets at the American base in Qatar, warning the Americans this was going to happen, and this had no other effect than allowing Iran to announce a glorious victory by themselves over the Americans. Iran had thought the unthinkable and had achieved what was, to them, as a result, an unthinkable reverse.

The ceasefire that has followed has been interpreted by markets as a relief from major risk. Now, the major effect of this on markets has been a dramatic rocketing in the oil price, followed by a fall in the oil price. So I thought I’d look at the fundamentals of the oil price, from running two of my models of the Brent price, using current fundamentals.

Now, the simplest model that I’ve got explains 63% of monthly variation of the Brent oil price. And it’s based on two things. One is the level of stocks in the U.S., which are published every week by the Energy Information Administration .  Those stocks are  down a bit in the most recent months because this is the summer driving season where oil stocks are being drawn down to provide higher demand for gasoline. So that’s a positive thing. And the other thing that I’ve been talking about this year is that I think  we’re going to see a steady fall in the U.S. dollar, and that’s going to generate the beginning of a recovery in commodities prices. So if I also put the U.S. dollar index into this model, it gives me an equilibrium model now of $78.96. And that’s about $US12  higher than the oil price was this morning.

If I strengthen that model by adding the U.S. CPI, because, you know, the cost of production cost of oil raises over time, that increases the power of the model . And that lifts the equilibrium price very considerably to $97 a barrel, which is $30 a barrel higher than it currently is. So I regard that as my medium-term model, and the first one is my short-term model.

What’s really interesting is that the U.S. dollar  has continued to fall.  That puts further upward pressure  on the oil price. So in spite of this crisis having been solved, I think we’re going to see more upward price action on the oil price by the end of the year.

Read more
The US economy is growing strongly at 2.34% in Q2 2025 but is expected to slow to 1.4% in 2025, with falling interest rates and a weaker US dollar likely to boost commodity prices, benefiting Australian markets. Michael Knox discusses.

We think the US economy is currently experiencing solid growth, with data from the Chicago Fed  National Activity Index indicating an annual growth rate of just above  2%. This aligns with projections from other parts of the Federal Reserve System, such as the New York Fed. The New York Fed’s weekly Nowcast, updated every Friday, estimates that for the second quarter of 2025, the US economy is growing at an annualised rate of 2.34%, surpassing the 2% mark. This robust growth is consistent with our model’s view that the US economy is now performing strongly. However, we anticipate a slowdown in the second half of 2025.

On 18 June the Fed released its Summary of Economic Projections  with the Federal Reserve’s  forecasting US GDP growth to drop to 1.4% in 2025, down from their March estimate of 1.7%. Looking further ahead, growth is expected to pick up slightly to 1.6% in 2026 and 1.8% in 2027, aligning with the long-term trend growth rate of around 1.8%. We believe this recovery trend could be even  higher,  driven by reduced regulation under the second Trump administration and aggressive tax write-offs for companies building factories in the US, allowing 100% write-offs for equipment and buildings in the first year. This policy should foster stronger systemic growth.

Economic Projections of the Federal Reserve

The Fed expects that as the economy slows,  unemployment is projected to rise to 4.5% from the current level of 4.2%. Inflation, measured by the Consumer Price Index (CPI), is running at 3.5% this year, approximately 50 basis points higher than the Personal Consumption Expenditures (PCE) index of 3.0%, with 1.6% of this  inflation  attributed to tariffs. The Fed expects PCE Inflation  to ease to 2.4% in 2026 and 2.1% in 2027. The Federal Reserve anticipates cutting the effective  federal funds rate, currently at 433 basis points (according to the New York Fed), by 50 basis points by the end of 2025, followed by an additional 25 basis points in each of the next two years. This aligns with our own Fed Funds rate  model’s current equilibrium federal funds rate of  3.85% . The Fed Outlook  supports our scenario of a slowing US economy and rate cuts in the second half of 2025 and beyond. A falling US dollar is then expected to exert upward pressure on commodity prices, benefiting Australian Equity markets.

Taking questions during the Press Conference after releasing the Fed statement  ,Federal Reserve Chair Jay Powell,   addressed the certainty and uncertainty surrounding the inflationary effects of tariffs. Initially, at the start of 2025, the inflationary impact of tariff policies was unclear, but three months of favourable inflation data have provided this clarity, indicating that the inflationary effects are less severe than anticipated. Powell noted that the Feds own uncertainty on the inflationary effects of  tariffs  peaked in April 2025, and the Federal Reserve now has a clearer understanding that  the inflation effects, are lower than initially expected.

The Fed view  supports our own scenario of a slowing US economy in the second half of 2025, allowing for Fed rate cuts  . This in turn should then lead to  a falling US dollar, which we in turn  expect to drive rising commodity prices.

Read more
The Your Wealth publication is our half yearly scrutiny into current affairs for wealth management. Our latest Issue 29 is out now.

The second half of 2025 will be an interesting time for everyone. Geopolitical uncertainty prevails. How will all of this impact the Australian investor and in particular, their wealth and retirement savings? Whether you are an accumulator, saving for short- and long-term goals, or a retiree, hoping for a comfortable retirement, the ability to manage this uncertainty will be key.

When we published the previous Your Wealth – First Half 2025, the Division 296 Bill (Div296) was also facing uncertainty. The Bill was eventually blocked in the Senate prior to the Federal Election. The Labor Party succeeded in winning so it’s Ground Hog Day for Div296. The Government doesn’t have the numbers in the Senate to pass the Bill without support from other parties. The Greens are the likely negotiating party but will undoubtably have their own agenda. Regardless, there is a high probability this legislation will be passed once Parliament resumes.

Our message to our clients is to wait until we know more details and to not act in haste.

In addition to our Feature Article which provides further insights on Div296, this edition also Spotlights the Aged Care changes due this year, with the start date pushed back to 1 November.

We hope readers enjoy this edition of Your Wealth.


Morgans clients receive exclusive insights such as access to our latest Your Wealth publication. Contact us today to begin your journey with Morgans.

      
Contact us
      
Read more