Research notes

Whilst the announced settlement timetable for Stage 3 at Horsley Park (industrial estate) has little impact on our valuation, given our Property division is valued on an NPV of future cashflows, it does suggest the business could be delivering c.60% EBIT margins at West Schofields and Badgerys Creek as they are developed in coming years. The recent announcement does however give cause to reassess our valuation, given the stock is up 18% since Nov-23. To that end CSR is now trading at a PE ratio of c.16x, one standard deviation above its long run average and with the business unlikely to grow earnings over the next two years, we see the stock as fully priced, hence our decision to downgrade to a Hold rating, despite incrementally increasing our target price to $6.90/sh.

Following a successful A$2.7m rights issue, CBL is now funded into 2024 with new products (DROVE and NeuroStrip) adding to the improving sales position. Australia delivered solid revenue growth in 1H24 (despite NDIS delays) and momentum is expected to continue in 2H. However, sales in North America in 1H24 were flat although management expects an improvement in 2H. We are moving a number of our early stage development companies to the new ‘Keeping Stock’ format which enables us to continue to provide regular and timely updates. We will cease providing a rating, valuation and forecasts. Therefore, our previous forecasts, target price and recommendation should no longer be relied upon for investment decisions.

DXC’s 1H24 result delivered stable portfolio metrics with the focus during the half on maintaining balance sheet resilience. Gearing at c32%. Dec-23 revaluations saw cap rates expand 20bps (-1.7% portfolio impact). NTA stands at $3.63 vs $3.75 at Jun-23. FY24 guidance has been tightened slightly and now comprises FFO and DPS of 20.8-21.1c (was 20.7-21.1c). This equates to a distribution yield of approx. 8%. DXC remains an Add with a revised price target of $3.23.

Microba Life Sciences (MAP) is an emerging leader in the microbiome industry specialising in gut health testing and therapeutic development. The company provides a comprehensive end-to-end solution, encompassing internally developed tests and therapeutic candidates generated via its discovery engine and artificial intelligence (AI) capabilities. In collaboration with renowned microbiome specialists worldwide, MAP stands out as a distinctive value proposition, offering high-margin products and opportunities through its therapeutics discovery platform. The expanding testing services business and increasing awareness among healthcare professionals about the pivotal role of the microbiome are driving a surge in demand. This heightened awareness is fueling increased interest in microbiome-related services, products, and advancements, indicating a growing recognition of its impact on overall health across diverse medical applications. We initiate coverage of MAP with a valuation and target price of A$0.35 p/s with a Speculative Buy recommendation.

Group NPAT was flat on the pcp at A$30.2m and in line with expectations. Affiliate NPAT contribution was +31% on pcp but -9% ex-performance fees. Group FUM closed at A$100.1bn, up 9% over the half. Starting 2H24 FUM is up ~8% on 1H24 average (flows and market uplift late in the half). 1H24 Net flows comprised: retail +A$1.8bn; domestic insto -A$0.4bn; and offshore +A$3.1bn. QoQ improvement was experienced (1Q A$0.2bn; 2Q A$4.3bn). PNI’s near-term valuation (~26x FY24 PE) sees the stock susceptible to short-term volatility. However, PNI has structural growth drivers and we see the medium-term (FY25/26) earnings step-up is supported by: a return to improved flows; higher performance fee FUM; significant operating leverage on improved FUM; leveraging the recent investment spend; and the eventual addition of new managers.

MoneyMe (MME) has released a 1H24 trading update, which whilst brief, did highlight the continued execution of management’s strategy to improve the overall credit quality of the book itself (average Equifax score 741) and focus on profitability. The gross loan book remained stable at A$1.2bn, generating revenue of >A$105m (-~13% on pcp) and a statutory NPAT of A$6m. Our FY24F-FY26F EBITDA is lowered by ~3-9% on slight adjustments to gross loan book growth rates, loss rates and book yield. Our DCF/PB blended valuation (equal-weighted) and price target remains unchanged at A$0.25 on the above changes offset by timing impacts of our DCF.

CCP’s 1H24 underlying NPAT of A$33.5m (+5% on pcp) missed consensus expectations (>15%) on higher lending provisioning; and high cost growth. CCP held NPAT guidance. The mid-point looks achievable (implied 2H24 NPAT ~A$51.5m), with 2H Lending volumes the main swing factor. Despite the ‘miss’, CCP’s FY25/26 earnings outlook remains largely unchanged. However, the composition skews further to Consumer Lending; and trust in the USA execution is required (only slight incremental US ‘evidence’ in this result). Backing management’s execution in delivering on USA divisional growth expectations over FY25/26 is needed. We think the valuation point (11.5x FY25PE) provides enough upside and risk/reward to do so. Add maintained.

Airtasker (ART) released a broadly positive 2Q24 trading update in our view, which saw an +8% increase in group revenue to A$12.2m, and the business achieving positive free cash flow for the period. We make upward revisions to our FY25-26F revenue estimates on an improved take-rate (details below). Our DCF/Multiples derived price target increases marginally to A$0.54 (from A$0.53). Add maintained.

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).