OUR QUEST IS NOT TO BE BULLISH OR BEARISH, BUT TO CORRECTLY ASSESS FUTURE TRENDS

Citi rates A2M as Downgrade to Sell from Neutral

Citi downgrades its rating for A2M to Sell from Neutral, citing downside risk from ongoing supply challenges, largely outside management's control.

These issues come at a difficult time, the analyst points out, with industry volumes under pressure following a weaker 2025 birth rate, with impacts potentially extending into FY27.

While supportive of the company's strategy and business model, Citi feels the FY26 PE multiple of 28x leaves limited room for error.

The broker sets a $5.85 target price, down from $8.40, and adopts a more cautious stance.

Macquarie rates RRL as Outperform

Macquarie takes a closer look at the proposed scrip merger between Regis Resources and Vault Minerals ((VAU)) and concludes the merged company could rival Evolution Mining ((EVN)) in terms of production, becoming the second-largest Australian gold producer with FY27 production of around 772,000 ounces.

While there are no operating synergies on offer other than synergies that include $500m in corporate tax benefits from the anticipated write-up of tax assets, a reduction in Australian corporate costs and lower future cost of capital.

The likelihood of a counter bid is considered low and there would be limited operating synergies for other Western Australia mid-cap gold companies. While there is potential for the divestment of non-core assets, Macquarie acknowledges these would be those that have limited mine life, limited exploration upside and low valuations.

Outperform with a $9.50 target.

Morgans rates SHA as Initiation of coverage with Accumulate

Morgans initiates coverage on Shape Australia with an Accumulate rating and $8.62 target. The company is seen as a higher-quality contractor supported by short-duration projects, repeat client relationships and a capital-light operating model.

Shape is a national fit-out and construction services contractor, with office fit-out and refurbishment historically forming the core of its earnings base, the analyst explains.

Morgans expects growth to come from expansion across adjacent sectors including data centres, retail, education and government-funded work, alongside upside from modular construction and maintenance capabilities.

The analyst explains modular construction moves a significant portion of the building process from the construction site into a controlled manufacturing environment.

Strong earnings growth is forecast, supported by a growing backlog, robust project pipeline and continued net cash generation.