Research notes

IPD share price has come under selling pressure after the release of its 2Q24 cashflow report which was below expectation. However we believe this is an overreaction with excellent progress being made with private payor coverage. IPD highlight that 13 states in the US have reached critical mass (ie 80% of population covered for reimbursement from private payors or Medicare). The target is that 85% of the US will be providing coverage by the end of FY24. Following a change in management estimates of revenue recognition to equal monthly payments across the term of each contract we have revised our revenue forecast. As a result our DCF based valuation has reduced to A$0.20 (was A$0.22). we maintain our Speculative Buy recommendation.

The 4Q23 traffic and toll revenue data presented minimal surprises on the key roads that contribute to the bulk of ALX’s equity valuation. 12 month target price lifts 3 cps to $5.61, mostly driven by higher Chicago Skyway toll escalation for FY24 and FY25 than previously assumed. HOLD retained, albeit value does look attractive at current prices with c.10% potential TSR (underwritten by a c.7% cash yield).

MX1 posted its 2Q24 report which showed a net operating cash inflow of A$4.3m which was boosted by the receipt of a R&D rebate of A$6.2m. Pleasingly, Mobile DR receipts are ticking up and project work with the ASA and DHA remain on track. Our focus remains on turning customer and distributor demonstrations of the Argus into sales. At this stage we have made no changes to our forecasts, valuation or target price of A$0.27. We maintain a Speculative Buy recommendation.

ARX provided a disappointing update at its 3Q24 results, downgrading its FY24 revenue forecasts by ~8% and now expecting a small EBITDA loss (NZ$1-3m) for the year (was positive NZ$1-2m). The downgrade was due to an overestimation of revenue from its distribution partner, TELA Bio and a focus on selective procedures for Myriad. We have reduced our forecasts in line with guidance and have downgraded our target price to $1.20 (was $1.50) but retain our Add recommendation.

NWL reported 2Q24 FUA of A$78bn (+8.3% qoq; +24.6% pcp), with a ~A$3.4bn positive market move and net inflows of A$2.6bn (in-line with expectations). 2Q24 net inflows of A$2.6bn were up ~27% qoq and 25% on the pcp. Net inflows returned to more ‘normalised’ levels as gross outflows slowed. Pooled cash levels are stable (lower revenue margin) and NWL stepped up hiring (low job vacancies). We still expect some incremental margin improvement in 1H. NWL continues to execute and the opportunity runway remains long. The groups market position; earnings defensiveness; and growth outlook is strong, however, the stock is trading in-line with our valuation.

BAP’s 1H24 NPAT is expected to be down 13-15% on pcp. Whilst below our forecast (~7%), the trading update was overall in-line with expectations. Retail was weak (EBITDA -13% on pcp), however in-line. Trade divisions +4-5%. BAP reconfirmed Better-than-Before (BTB) targets for 2H24, expecting A$7-10m NPAT. The exit run rate should be greater, given timing through the half. We see the trading update as providing some increased clarity of the core earnings trajectory/base. Whilst there is still earnings risk evident (Retail), FY25 is positioned to see earnings increase (vs FY23/24 which faced downside risks). Several factors remain against the BAP investment case: negative earnings momentum; recent CFO departure; and transformation targets which look unachievable. Whilst hard to hurdle, there is now arguably lower downside earnings risk and higher prospects for earnings improvement into FY25. Coupled with a reasonable valuation (16.5x a re-based FY24), we see this as providing enough risk/reward to accumulate ahead of the firm evidence of the earnings uplift. Upgrade to ADD recommendation.

FDV has released its 4Q23 quarterly update. While 4Q23 group revenue was down -13% on the pcp, we saw the quarterly update as mirroring recent trends of a broadly robust performance from FDV’s consolidated businesses, held back by some continued headwinds in Zameen. We adjust our FDV FY23F/FY24F EPS by +2%/-1% on a broad review of our earnings assumptions. Our target price is unchanged at A$0.77. We continue to be attracted to FDV’s long-term growth profile and the earnings potential of the assembled portfolio. ADD rating maintained.

A quarter with some challenges, in particular impacted Brazil volumes following a hydrate issue and subsequent mechanical failure at one of Bauna’s wells. KAR delivered a largely in-line December quarter operational and sales result. Despite issues Bauna achieved above midpoint of guidance production. Who Dat only contributed 11 days of production at the end of the period. We expect more data (and a much larger contribution) in future periods. We maintain an Add recommendation, with an unchanged A$2.80 Target Price.

WOW’s trading update overall was weaker than anticipated. Management has guided to 1H24 group underlying EBIT of between $1,682m-1,699m, which at the mid-point was 2% below our forecast and 1% weaker than Visible Alpha (VA) consensus. While the company said Australian Food and PFD’s performance remained solid, it was a more challenging half for NZ Food and BIG W. We make minimal adjustments to FY24-26F group underlying earnings forecasts (reduction of between 0-1%), with upgrades to Australian Food and Australian B2B slightly more than offset by downgrades to NZ Food and BIG W. Our target price falls to $39.45 (from $39.90) and we maintain our Add rating. Despite the weakness in NZ Food and BIG W, our positive view on WOW remains predicated on a continued solid outlook for the core Australian Food segment.

MedAdviser (MDR) is a medication management, pharmaceutical adherence and patient-pharmacist communication application that aims to simplify the way patients manage their medication. Following a number of transformative acquisitions over the last few years, Factset consensus expects solid revenue growth of 15%/13%/7% over FY24/25/26 respectively and importantly achieving profitability in FY25. MDR posted 1Q24 revenue of A$25.4m, up 27.0% and gross profit of A$15.7m up 30.8% with available funding of A$11.6m to achieve consensus growth of ~11.0% over the next three years.