In Brief: Rare Earths, Hub24 & Sigma Healthcare

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This story features ARAFURA RARE EARTHS LIMITED, and other companies.
For more info SHARE ANALYSIS: ARU
The company is included in ALL-ORDS

Australia's AGM season is generating some upbeat stories, with rare earths taking US centre stage.

-US and Australia sign a landmark critical minerals framework
-Hub24 continues to reap momentum from markets and adviser growth
-Sigma Healthcare well positioned to benefit from structural tailwinds

By Danielle Ecuyer

This week’s quote comes from Stephen Innes, SPI Asset Management

“Gold’s collapse has rattled nerves, but it’s not the canary in the market’s coal mine. The metal’s six-percent air pocket was a liquidation, not a prophecy.”

Rare earths’ snapshot, more hype and froth than reality?

Rare earths are not the only sector to have received a dose of speculators’ enthusiasm. US day traders and punters have been busy betting on any stock that might receive the President Trump magic wand of the home-shoring, reshoring mining, and manufacturing thematic.

This week was Australia’s turn to join the de-globalisation party or at least start the process of re-affirming and growing the geopolitically significant supply chain for rare earths away from China.

The hyperbolic share price moves in the likes of Arafura Rare Earths ((ARU)) from 20c in September to a recent high of 46c, coinciding with Prime Minister Albanese’s White House meeting with President Trump, indicate the market was more than positioned for a rare earths deal.

UBS notes the US and Australia signed a landmark critical minerals framework which forms part of a more far-reaching agreement to build on defense and technological cooperation.

Details are still emerging, but the analyst believes it paves the way for a revived rare earths supply chain ex-China.

The deal is expected to move US$8.5bn of “ready-to-go” projects in rare earths forward, with each country to invest US$1bn over the next six months for joint projects.

While details are scant, one release confirmed the US Department of War (yes, that’s how it’s called these days) will invest in the construction of a 100tpa gallium refinery in WA.

As noted by Canaccord Genuity, Alcoa ((AAI)) and Sojitz will receive US$200m in conditional equity finance for a gallium refinery in WA. The investments include offtake rights. Gallium is a critical mineral for semiconductor manufacturing. China produces around 98% of the world’s gallium. The supply is currently subject to export controls.

Another project highlighted for immediate investment by the Australian government is Arafura’s Nolans rare earths project, which will receive US$100m in equity (specifics not yet unveiled). The target is for Nolans to produce 4.4ktpa Neodymium and Praseodymium (NdPr) oxides, plus separated Dysprosium and Terbium (DyTb) through an integrated mine and refinery, Canaccord explains.

Capex is estimated at -US$1.9bn with over US$1bn in ECA debt funding, including banks already committed.

UBS prefers Lynas Rare Earths ((LYC)) and Iluka Resources ((ILU)), both Neutral rated with respective target prices of $15.10 and $5.45. The analyst likes Lynas’ transition down the value chain in magnets as a potential competitive edge.

Canaccord believes the most important and relevant part of the framework is the financial support and pricing mechanisms, such as price floors.

This analyst likes projects that produce or plan to produce fully refined rare earths such as Arafura (Hold rated with a 20c target), Iluka (Hold rated, $7.10 target), and Lynas (Hold rated, $13.70 target).

IperionX ((IPX)) is rated Speculative Buy with an $8.90 target for exposure to metals recycling.

There’s no stopping a top-performing platform

For those investors looking to jump on board Hub24 ((HUB)), the stock’s consistent rise makes the ambition challenging.

The September quarterly update served up another reason for investors to be upbeat, with platform net flows of $5.2bn compared to Moelis’ forecast of $5.2bn and consensus at $4.4bn, signifying another upside surprise.

Funds under administration ended at $122bn versus Moelis’ estimate of $120.1bn and consensus at $120.7bn, incorporating positive market movement of $4.1bn.

Notably, Hub24 has maintained market share growth at 9% of the market at June 30, with adviser numbers up 11% on the previous year to 5,229.

The analyst emphasises this was another robust start to a fiscal year, with ongoing underlying business momentum from FY25. The flows are expected to be retained by new product launches, including the High Net Wealth product, on top of market share expansion.

Moelis adjusts its EPS forecasts up by 2% for FY26 and 3.1% for FY27, with a rise in the target price to $126.12 from $117.02 previously.

The ascribed valuation at circa 63 times FY27 earnings, meaning the stock trades at a significant premium to its peers, does not leave much room for disappointment.

“Strong execution is priced in.”

Hold rating retained.

FNArena’s daily monitored brokers have a consensus target of $107.957, which also includes a low-marker $58.90 by Ord Minnett. Excluding it, pulls the average up to $116.10.

Seven brokers generate two Buy-equivalent ratings, four Holds, and one Sell. No guessing who’s responsible for the latter.

Sigma catches a boost from GLP-1 drugs

Sigma Healthcare ((SIG)) equally shared a strong September quarter update. Chemist Warehouse sales rose around 18%, which Jarden highlights as over two times the market growth and above both the broker’s and market expectations.

While acknowledging sales tailwinds from GLP-1s will ease, Jarden retains a forecast of 10% like-for-like sales growth as achievable in the near term, boosted by ageing demographics and a health-conscious population.

Sector growth of over 6% p.a. over the next five years is flagged, with Chemist Warehouse anticipated to lift over 200bps of market share per annum.

GLP-1s should generate an over $2.3bn opportunity for Sigma from prescriptions and over $700m from vitamins and supplements. Compared to US consumption of supplements at around 6% of total adults, usage by Australian adults is around 1.5% of the population.

Larger and new stores are expected to provide a larger than 7% group sales boost, and front-of-store sales should rise to around 60% of Chemist Warehouse sales from around 20% historically, including incremental boosts from online, new ranges, own brand (Wagners), Amcal conversions, and beauty products.

Post quarterly update, Jarden lifts its earnings (EBIT) forecasts by 2–3%, and the analyst stresses if Sigma can retain the current like-for-like sales run rate, its valuation could exceed $4 per share.

An Overweight rating is retained with a $3.60 target, up from $3.40 previously.

FNArena’s daily monitored brokers have a consensus target of $3.123 with three Buy-equivalent ratings, two Holds, and one Sell-equivalent.

Macquarie is the laggard with a low-marker $2.90 price target and, hence, the sole Sell-equivalent rating.

The author owns Sigma Healthcare shares.

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