Research notes

Airtasker’s (ART) 1H24 result (whilst largely pre-released) was a solid performance in what has been a challenging consumer environment (booked tasks -~5% on pcp). Positives include the group seeing revenue growth (+~7% on pcp to ~A$23m) on an improved take-rate and the business achieving positive free cash flow in the period. We make minor adjustments to our estimates over FY24-FY26 (details below). Our price target remains unchanged at A$0.54. We maintain an Add recommendation.

Deep Yellow’s portfolio contains an attributable resource base of 420Mlb of U3O8, to support the aspirational goal of production of +10Mlb per year of U3O8, from the stable jurisdictions of Namibia and Australia, with Tumas, in Namibia, the more advanced, and the fully-permitted Mulga Rock, Western Australia. A final investment decision (FID) for Tumas is anticipated in the September 2024 Quarter for this US$360M development with production projected up to 3.6 Mlbpy of uranium yellow cake (U3O8), at a projected All-in sustaining cost (AISC) of US$38.80/lb U3O8 after a vanadium by-product credit of sub-US$3.00/lb U3O8. The DYL management team has successful experience in developing and operating uranium production, in particular at nearby Langer Heinrich, operated by Paladin Energy (ASX:PDN – 75%), and which provides a template for Tumas.

1HFY24 results were above expectations, driven by mid-to-high single digit admissions growth across key geographies, tariff and indexation gains, as well as lower tax and minority interest. Earnings improved in Australia and UK, with a turnaround in Elysium, but were offset by ongoing inflationary pressures in the EU. While wage pressures have “stablised”, digital/data investments and higher funding costs remain a drag on full margin recovery, but growing volumes and numerous productivity initiatives portend an improving earnings profile. We adjust FY24-26 earnings modestly, with our price target increasing to A$60.76. Add.

IME released its FY23 result, which was in-line with our topline expectations, although EBITDA came in lower than expectations with the services division creating a margin drag across the business. FY24 looks to be a more positive year with an enhanced software value proposition expected to accelerate software market traction in LATAM, whilst the services division focuses on generating margin expansion through a review of its customer profile and profitability. Expecting a turnaround here. We have made a number of changes to our forecasts and currently sit at the bottom end of the updated consensus range. Our target prices reduces marginally to A$1.50 p/s (from A$1.80 p/s) and retain a Speculative Buy recommendation.

We revise our coverage approach for NTD, continuing to monitor and provide updates (we will cease providing a rating, valuation, and forecasts). Our previous forecasts, target price and recommendation should no longer be relied upon for investment decisions. For 1H24, NTD reported: Sales down -10.5% on the pcp (-7.5% hoh); EBITDA up 25.5% (-15% hoh); and NPATA up +64% (-65% hoh). NTD is undertaking a meaningful business transformation (brand rationalisation; business reorganisation; and warehouse consolidation); in order to reposition and refocus the business for the long term. However, given the significant operating leverage in the business, this disruption has created short-term earnings volatility. Despite improving margins through the half, the lower revenue outcome resulted in lower underlying EBITDA of A$19.7m (+25.5% pcp; -15% hoh) and underlying NPATA of A$2.3m (+64% pcp; -65% hoh). NTD closed 1H24 with net debt of A$63.1m and leverage (net debt / annualised 1H24 EBITDA) of 1.6x (excl. leases) and ~3.5x (incl. leases). Operating cash flow A$9.9m (-A$1.4m pcp) and inventory was +2% on Jun-23 (closing at A$132.7m).

GDG’s 1H24 Group underlying NPAT (A$4.9m, +67% on the pcp) was +2% above both MorgansE and consensus (A$4.8m).  While the 1H24 Investment Bond business result was a bit below our expectations, this was overshadowed by a stand-out performance from Lonsec. We lift our GDG FY24F/FY25F EPS by ~4%-8% driven mainly by higher Investment Bond sales forecasts and improved Lonsec earnings. Our target price rises to A$2.30 (from A$2.01). We continue to believe GDG is well positioned to execute a compound earnings growth story over time. ADD maintained.

We issue this report to correct our earnings forecasts for FY24-26, which previously did not properly adjust for the impact of AASB16 on underlying EBITDA. These adjustments see FY24-26F underlying EBITDA rise by between 28-30% and underlying NPAT increase by 42-50%. Despite these changes, our base assumptions for FY24 remain unchanged. We continue to forecast FY24 revenue growth of 6% and underlying EBITDA to be up 7%. This is compared to management’s guidance for FY24 revenue and pro forma EBITDA growth of between 5-8%. Our equally-blended (SOTP, PE, DCF) target price lifts to $1.45 (from $1.30) and we maintain our Add rating.

M7T released its 1H24 results. No surprises here, with a recent trading update providing expectations and updated guidance following a marked shift to recurring revenues in new contracts. It’s clear to us that the company continues to see this trend play out in its contract pipeline, and a trend which we view will result in a more sustainable and investor friendly business model. No changes to our forecasts and we continue to see significant upside potential in the name. M7T remains one of our key picks within the space.

PER has reported its 1H24 results. No surprises here given quarterly updates. Cash balance remains the major key metric, which is sufficient to fund PER until the Ph2b topline outcome at the end of the year. Focus remains solely on near-term catalysts including recruitment milestones, toxicology study, and Ph2b top-line results due to read out by the end of the year. No changes to our valuation which remains A$0.23 p/s. We view PER as having one of the best risk/return profiles in the space with clear near-term catalysts, strong board and management team, and scientific support for success.

MDR reported its 1H24 result which was in line with pre-released update, with revenue up 18% and EBITDA up 21%. Management is guiding to profitability for FY24. The investment into the UK is completed and the transition to a SaaS platform is complete. In addition MDR will invest A$10m to A$15m to build out a shared service structure, looking to optimise a cloud native platform with the aim of reducing operating costs over time.