Research notes

SDR’s 1H26 result was largely per expectations at the revenue line (A$131m, +23% on the pcp on a constant currency basis), however marginally below at EBITDA. Growth in transaction revenue and the mix shift towards the higher margin Smart Platform offering saw the group gross margin expand ~98bps to 67.8%. Key business metrics remain robust (e.g LTV/CAC of 6.7x, ARR and Rule of 40 growth). We undertake a broad review of our assumptions in this update (details below). Our price target is lowered to A$7.00 (from A$8.10) as a result. However, given the significant discount of the current share price versus our valuation we upgrade to a BUY recommendation.

1H26 marks a clear strategic reset for DMP, with management prioritising a more profitable operating model over near-term volume. SSS was hard to digest, below expectations, but the balance of new information was encouraging, underpinned by a 4.5% lift in franchisee profitability and further cost-out opportunities. We believe early actions from the new leadership team are directionally sound, although this is a multi-year turnaround and proof of execution is still required. Returning economics to franchisees is a prerequisite for improved sales momentum and store roll-outs, meaning shareholders may need to be patient, but the prize is there if the strategy is delivered. BUY maintained with an unchanged target price of $25.00.

1H26 comprised EBITDA +22%; EBITDA margins +80bps yoy; and ongoing recovery of the core Collision business (sales +10%; EBITDA +A$8.1m). Whilst 2Q was slightly softer than expected (broadly flat yoy), the group continues to make good progress on its recovery with a seasonally stronger 2H ahead. We see a good growth profile as the business continues its recovery, with a FY25-28F EBITDA CAGR of >15% and further upside potential through network optimisation and margin outperformance. Upgrade to BUY (from Accumulate).

AX1 reported 1H26 EBIT which was down 30% yoy to $56.5m, in line with the revised guidance range provided in November ($55-60m). The decline was driven by soft comp sales and significant operating de-leverage from lower gross margins. AX1 has made the unsurprising decision to cease operations of loss-making Glue store, which contributed $8.4m EBIT loss in 1H26. On an underlying basis, EBIT fell 10%. We see this providing incremental benefit on group earnings in FY27. We have increased our EBIT by 1.5% in FY26 and by 11% in FY27. Our blended valuation lifts to $1.30 (from $1.10). We have upgraded to a BUY (from HOLD). We see significant earnings growth in FY27, driven by underlying FY26 run-rate (ex-Glue), this makes the stock look inexpensive at ~10x FY27 P/E and ~5.6% yield.

IMR posted its FY25 results which were in line with our recently adjusted forecasts. IMR finished the year with cash of US$40.8m which, at the current burn rate, is equivalent to eight quarters of cash. 2026 is setting up to be a big year for IMR. There are multiple value accretive milestones which are expected to be achieved from a clinical, regulatory and commercial perspective. We have made no changes to our forecasts or valuation. We maintain our SPECULATIVE BUY recommendation and IMR remains our key pick in the emerging healthcare space.

Underlying fund performance, along with offshore and product expansion has seen RPL grow FUM 16% in CY25, driving management fee growth of 25%. Performance fees, up 108% (vs pcp), are a clear leading indicator for future FUM growth and sets the business up for continued growth in the higher multiple recurring income streams. Despite record growth, RPL trades at an undemanding multiple and attractive dividend yield, on this basis we reiterate our BUY rating with a $5.00/sh target price.

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).