Author: Greg Peel

Mader Group’s Competitive Advantages

Small Caps | Nov 19 2025

Mader Group’s casual workforce model, diversification into segments beyond mining maintenance, and strong earnings growth rate, have Macquarie initiating with Outperform.

-Mader Group is Australia’s largest provider of heavy equipment maintenance
-Yet underpenetrated in Australia’s mining industry
-Attractive model for employees, solid growth trajectory
-Macquarie initiates with Outperform

By Greg Peel

Mader Group ((MAD)) is Australia's largest independent provider of heavy mobile equipment maintenance services to resource companies.

The company specialises in providing diesel mechanics and auto electricians using a flexible "tap on, tap off" service model.

Mader employs largely casual employees, matching the flexible nature of its customer terms. The company offers a strong value proposition to customers, with rapid deployment of specialists, catering to all major brands and at a lower cost compared to original equipment manufacturers (OEM).

Mader’s competitive advantage, Macquarie suggests, is the ability to attract, develop and retain its skilled labour pool.

Underpenetrated

You may have heard Australia’s economy is reliant on mining, and particularly on iron ore. Bell Potter notes Australia’s iron ore majors posted a solid set of September 2025 quarterly updates, headlined by strong growth in mining rates and shipments across their respective Western Australian iron ore businesses.

Key callouts include: record quarterly material mined by BHP Group ((BHP)), 9.0% higher year on year, Rio Tinto ((RIO)) achieving its second highest third quarter shipment volume since 2019, up 5.5% on the prior quarter, and Fortescue ((FMG)) delivering 5.3% year-on-year growth in total ore mined.

Importantly, Bell Potter points out, sector activity appears to be growing --the Australian government forecasts 2.0% growth in iron ore production in FY26-- a positive for Mader’s core heavy mobile equipment service offering and implies workforce utilisation is supported.

Yet, despite its size, Mader is still underpenetrated in Australia's core mining market, where the ageing of mining equipment continues to support maintenance activity. In fact, notes Macquarie, Mader's entire WA iron ore exposure accounts for less than 1% of the majors' cash costs.

Mader is a “cog in the resources machine”, Macquarie suggests, and a vital one to keep the miners' gear running. Mader has a “surprisingly simple” but effective business model, providing heavy equipment maintenance services to resource companies, has built a reputable brand over the last 20 years and is known for its high quality service levels, geared to optimise mine productivity.

Mader’s strong reputation, combined with the market's ageing mining fleet, rising mining production, and historically low productivity (in Australia) have all contributed to increased demand for outsourced maintenance services. The company has achieved an impressive earnings per share compound annual growth rate (CAGR) of approximately 22% since FY18.

Macquarie expects core growth to remain strong given low penetration of services with Australian miners.

Diversify to Grow

Mader has accelerated efforts to replicate its success in adjacent markets to mining, including infrastructure and road transport, as well as in North America. Macquarie forecasts circa 15% revenue CAGR to FY28, driven by commercial success in core and growth verticals.

Mader’s FY25 result, reported in August, achieved guidance of $870m in revenue and $57m of profit and was broadly in line with consensus. The Australian segment continued to grow strongly at 17%, Moelis noted, with strong contributions from infrastructure, rail, and road transport, while the North America segment showed second half improvement, with 8% half-on-half revenue growth and a stable segment earnings margin of 19.2%.

Corporate costs were well controlled, Moelis noted. Mader’s headcount exceeded 3,900 (quadrupling since FY18), of which 550-plus are located in North America.

New service lines in Australia, geared to road transport maintenance and infrastructure maintenance services, will contribute an increasingly large component of growth, Macquarie suggests. Mader's Canadian expansion should also aid future growth, while Macquarie thinks the US is a wait-and-see at this time.

Moelis notes the company’s FY26 guidance, first announced with its FY25 result, implies continued growth and is in line with a previously announced five-year strategic plan. Management has guided to annual revenue of at least $1bn and profit of $65m, which Moelis calculates implies 14.6% revenue growth versus FY25.

Mader carried net debt of $8m as at end-June, down from $23.2m at the end of December. The business remains on track for net cash target in the next twelve months, Moelis notes, with leverage reduced further to 0.1x.

Skills Shortage

You may have heard Australia has a skills shortage problem. For Mader, Macquarie suggests a skills shortage is a tailwind, not a headwind.

Mader has become an employer of choice in the industry, which makes Macquarie confident the group can continue to deploy staff to a growing customer set. The ability to attract, develop and retain staff is Mader's competitive advantage, and that is not by chance. Macquarie points out founder and executive chair Luke Mader was once an apprentice at WestTrac ((SVW)), prior to starting Mader with John Greville, who is now COO of North America.

Further, the CEO and CFO have an extensive resources background which drives the strong employee and customer value proposition, Macquarie suggests. Mader's casual workforce is not just offered a strong culture of competitive pay, but also flexible rosters, as well as interstate and global secondment opportunities — all of which make for an attractive offering.

Mader is in a powerful position as a large independent provider of trades in structural shortage. Macquarie found 10 out of 47 occupations in structural shortage in Australia relate to Mader's talent pool, including heavy duty diesel mechanics that account for more than 50% of its workforce.

When pockets of the labour market do loosen, Mader expands ahead of new customer wins to strengthen its position.

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Solid Momentum Drives Orica’s FY26 Optimism

Australia | Nov 17 2025

Orica posted a strong FY25 result and forecasts improving growth across all three business segments through FY26.

-Orica’s FY25 result solid, slightly ahead of consensus
-Specialty Chemicals and Digital Solutions now primary drivers
-Around half of earnings stem from gold and copper sectors
-Adds incremental $100m to recently completed $400m buyback program

By Greg Peel

Orica ((ORI)) is not only the world’s largest explosives company, it’s the global leader in geotechnical and structural monitoring in mining and civil infrastructure and the world’s largest producer of sodium cyanide.

Orica is leading the industry with its technology offering. Importantly, notes Morgans, this area is high growth and high margin work. Orica’s management team continues to execute well and has a solid track record.

The company delivered a strong FY25 result (September year-end), with earnings growth across all segments reflecting improvements in mix and margin, ammonium nitrate re-contracting benefits, elevated mining exploration activity and record gold prices driving demand for sodium cyanide.

Earnings per share increased by 30% year on year, slightly ahead of consensus. Net operating cash flow was a standout, UBS suggests, increasing by 18% to $949m. Leverage of 1.4x was therefore at the low end of the target range of 1.25-2.0x. As such, Orica has allocated an incremental $100m to its recently completed $400m buyback program.

In Morgans’ view, this was a strong outcome given the geopolitical risks, economic uncertainty, adverse weather and weak demand for thermal coal. In FY25, Orica benefited from its continued commercial discipline, the uptake of its premium products and technology (mix benefits), which resulted in higher margins.

FY25 also benefited from new acquisitions (Terra and Cyanco), re-contracting benefits, less turnaround activity than FY24, and a general uptick in exploration activity.

Macquarie notes the composition of Orica's earnings growth is changing, with Speciality Mining Chemicals and Digital Solutions coming to the fore and the rate of growth in Australia-Pacific slowing after moving through the bulk of ammonium nitrate price re-sets.

Specialty Mining Chemicals is benefiting from strong demand from the gold mining sector for sodium cyanide, while Digital Solutions is benefiting from increasing global exploration activity.

Good momentum

Orica has started the year "with good momentum", according to management, which expects improved FY26 earnings across all three key segments.

Blasting Solutions earnings growth is now expected above that of GDP growth “through the mining cycle”, supported by improved product mix, wider margins earnings and technology benefits, up from previous guidance of just “growth”.

Digital Solutions' earnings growth is now forecast to be in the mid-teen percentage, up from low double-digits previously, as customer adoption accelerates and exploration activity increases.

Specialty Chemicals' earnings growth is now guided to high single-digits, up from mid single-digits prior, buoyed by strong mining sector activity, especially in the gold industry.

The gold and copper sectors now make up around half of Orica’s group sales, Ord Minnett points out.

Blasting Solutions is forecast to see further re-contracting benefits, offset by weaker demand from the US and Indonesian thermal coal markets, the major Carseland ammonium nitrate facility (Canada) turnaround (scheduled for early second half FY26) and a non-repeat of a $15m carbon credit benefit.

Expanding global exploration activity and further cross-selling opportunity conversion is expected to support Digital Solutions. Speciality Mining Chemical earnings are anticipated to strengthen on strong demand for sodium cyanide from gold customers and higher manufacturing facility output as Winnemucca (Nevada) ramps up.

Operational challenges at the Winnemucca facility have been progressively addressed with the planned critical safety upgrades completed successfully.

It’s a blast

Despite Blasting Solutions volumes falling by -4.2% in FY25, earnings were up 14.9%. Morgans notes earnings per tonne increased to $217.2/t versus $181.1/t in prior year, proving Orica doesn’t require rising ammonium nitrate volumes to grow but is now a mix and margin improvement story. Its premium products and advanced blasting technologies are gaining strong traction.

Blasting Solutions is in the driver’s seat, Jarden suggests, despite disruptions. Orica saw its underlying earnings per tonne accelerate through the second half, driven by improving pricing dynamics (Asia-Pacific) and prudent cost control across its operations.

The outlook for FY26 starts the year mixed, Orica will cycle the $15m of carbon credit benefits and will undergo a major turnaround in North Americas (Carseland), which has been well flagged to the market in Orica's disclosures.

The balance of the outlook for North Americas now swings on Orica's ability to offset any near-term supply chain disruptions for its North Americas distribution market where its major supplier, CF Industries, has declared force majeure.

Orica can likely offset these headwinds via its global sourcing, but that likely will come at the sacrifice of some near-term margin given higher transportation and route to market costs, Jarden points out.

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Less Than Perfect CBA Threatens Its Premium

A sharp sell-off in CommBank shares post a relatively benign first quarter update has yet again put the focus on that large valuation premium. Is the competition catching up?

CommBank’s Q1 update disappointed on net interest margin, costs
Given sizeable valuation premium, some view this as 'simply not good enough'
Ord Minnett believes CBA is the most expensive bank ever in developed markets
Is a large relative premium sustainable if/when peers achieve better operational momentum?

By Greg Peel

CBA's large valuation premium versus peers is yet again being questioned

Stockbroker Morgans sums it up nicely: as well as being Australia’s largest bank, compared to its peers Commonwealth Bank ((CBA)) has the highest return on equity, lowest cost of capital, leading technology, largest position in the residential mortgage market (with the lowest risk portfolio in this low risk market segment) and largest low cost deposit base (with a greater skew to households and transaction accounts than its peers), plus a loyal retail investor and customer base.

Why then do all six brokers monitored daily by FNArena covering the bank have Sell or equivalent ratings on the stock?

A clue likely lays in their consensus target price. An average of $117.81 is around -25.60% below yesterday's closing share price of $158.38.

Mind you, this is after a near -9.50% shellacking of the share price post quarterly market update, while price targets have hardly moved in the aftermath.

Only one of the six brokers adjusted its target post CBA’s first quarter update: Morgans cut to $96.07 from $100.85. That’s -39.34% below the current price. The high-marker on target is Morgan Stanley with $144.80. That’s a big gap to Morgans', but still -8.75% below.

The reality is CBA has drawn a full suite of Sell ratings for about as long as anyone can now remember. Yet the share price has risen 118% over the past five years. Broker targets have been ticked up over that period, but the overwhelming view from analysts has long been “priced to perfection”.

Thus when analysts saw a sharp sell-off in the stock in response to the first quarter update, the initial thought was one of “overreaction”. Until one takes “priced for perfection” into account.

The bottom line is CBA is a must-own in any market portfolio (or even global portfolio), vying as it does with BHP Group ((BHP)) to be Australia’s largest listed company. (Currently, that contest has been decisively won, but nothing is ever set in stone indefinitely).

This ensures a reliable safety net under the share price, but this week's sell-off provides a warning to investors: CBA is not bullet-proof.

As Ord Minnett notes, current twelve-month consensus forward earnings (PE) multiple remains above 27x (now 25x post sell-off, on FNArena's consensus), which keeps CBA as the most expensive bank ever in developed markets.

“There will be only one way to go when the cycle turns.”

Earnings Meet Consensus

CBA’s revenue grew 3% in the quarter and both net interest income and “other” income grew 3%, in line with consensus.

Pre-provision operating profit was actually better than expected. But the result showed more pressure on the bank’s net interest margin (NIM) than the market expected, and surprisingly high growth in costs.

That’s what spooked the market.

The bank blamed customer switching in the search for higher deposit rates, the falling interest rate environment, and ongoing fierce competition in the home loan market for the squeeze on margins, while wages inflation and increases in IT vendor spending were cited for the disappointing cost outcome.

CBA’s NIM contracted -5 basis points quarter-on-quarter to 2.03%. Removing the -3bp impact of strong growth in liquids and its repurchase agreement (repos) activity, which will wash out without really affecting returns, Ord Minnett fears the remaining -2bp of contraction may be a longer-lasting impact rather than just a short-term blip.

Costs increased 5% including notable items, such as an -NZ$136m charge related to the class action lawsuit against its ASB business in New Zealand, while underlying costs rose 4%, driven by the above-mentioned wages inflation and IT vendor expenses.

Brokers were all drawn to management’s commentary that IT vendor costs were actually “seasonally lower” in the quarter, which suggests cost growth, at least that related to IT, could pick up pace from here.

The last three years’ experience suggests cost growth accelerates through the year, and Citi is estimating circa 5.4% cost growth for FY26 (ex one-offs).

Asset quality erosion at CBA remains benign, with non-performing loans as a proportion of total committed exposure actually falling to 0.45% from 0.97% in the prior quarter, while its capital position remains robust with a common equity tier-one (CET1) ratio of 11.8%.

Relatively Speaking

At first blush, Citi suggests CBA’s in-line September quarter cash profit of $2.6bn looks “odd” versus the stock selling off sharply on the print. However, Citi also believes the generally unremarkable earnings update is potentially the issue relative to peers.

Revenue growth of 3% in the quarter was in line with consensus, but not dissimilar to peers (Westpac ((WBC)) achieved 4%). Credit growth is solid, but the associated NIM attrition (competition, deposit mix) is a sector story. Asset quality and capital remain fine, but aren’t differentiated versus peers.

Historically, CBA has tended to de-rate if peers exhibit better earnings momentum or as market breadth improves. Given recent positive earnings revisions from ANZ Bank ((ANZ)) and Westpac, following FY26 results, and a lack of differentiation in CBA’s numbers, Citi thinks the valuation premium will increasingly come under pressure.

Macquarie notes despite generally better margin commentary from peers, CBA flagged a more challenging margin outlook, highlighting headwinds from deposit mix (as customers switch from low-rate online savers to higher-rate bonus savers), continued competition, and the impact of rate cuts.

Quarterly results have historically been unpredictable, UBS notes, making it challenging to form a definitive view on this release due to limited information. However, the headline figures indicate CBA is delivering results broadly in line with expectations for the first half FY26, as reflected in consensus estimates.

The increase in costs is somewhat surprising, UBS suggests, even excluding notable items, as is the decline in the CET1 ratio to 11.75%, compared to the first half consensus estimate of 12.3%. Further credit RWA (risk-weighted asset) optimisation at CBA appears limited relative to peers, given the substantial progress already made by the bank.

UBS believes these results could impact the stock's performance. Over the past month, CBA's share price had risen 3.91% (to November 11), outperforming National Bank ((NAB)) and Westpac but lagging ANZ, which gained 8.95%.

“Given the current valuation, it would appear perfection is implicitly expected.”

In comparing the Big Four post this month’s earnings results, Jarden (not monitored daily) suggests ANZ has the clearest, most numerate plan, but new CEO Nuno Matos must now execute and deliver.

Westpac has the best momentum in its operating franchise, but must not stall as it moves into the heavy lifting of its UNITE platform implementation.

For NAB, Jarden sees lots of talk but little action, and believes NAB has lost its clear market leadership in business banking for which CBA and Westpac have superior growth, return and customer experience metrics.

For CBA, Jarden sees “business as usual”.

Given CBA’s valuation premium, is “business as usual” enough?

The Same Song Sheet

While CBA remains the leading banking franchise in Australia, with cracks appearing in its deposit “moat” and further downside risk to consensus, Macquarie believes valuation of circa 26x FY26 PE (FNArena: 25x) and 3.5x price-to-book value remains detached from fundamentals.

UBS also highlights CBA’s price-to-book is significantly higher than its historical average. FY28 consensus earnings are around 26.9x the bank’s current price alongside a dividend yield of circa 2.94%. UBS sees better value elsewhere in its coverage universe.

CBA has a number of structural advantages versus peers, but Citi thinks the valuation premium will continue to come under pressure while trends are in-line and earnings revisions momentum is stronger at peers.

Share price performance has not been as strong as it was ahead of the FY25 result, but Morgan Stanley sees little reason why CBA should outperform the other majors.

Morgans believes potential medium-term returns are too compressed at current prices considering CBA’s earnings and dividend outlook and elevated trading multiples. This broker recommends clients “aggressively reduce” overweight positions given the risk of poor future investment returns arising from the even-now overvalued share price and low-to-mid single digit earnings and dividend growth outlook.

Ord Minnett maintains its negative view on the banking sector in general as valuations remain at elevated levels that this broker does not see as reflective of industry fundamentals. As noted, Ord Minnett points out CBA is the most expensive bank ever in developed markets and “there will be only one way to go when the cycle turns”.

Jarden also has a Sell rating on CBA, with a $100 target.

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FNArena is proud about its track record and past achievements: Ten Years On

Woodside Targets Significant Dividend Increase

Woodside Energy’s growth projects should generate cash flow sufficient to materially boost its dividend payout, but investors should not hold their breath.

Woodside Energy’s growth projects running on time and on budget
Focus on a selldown and new trains at Louisiana LNG
Goal to increase dividends by 50%
Shareholder returns not the focus in the near term

By Greg Peel

Woodside Energy’s ((WDS)) capital markets day highlighted best-in-class execution, with the Scarborough (offshore WA), Sangomar (Senegal), Trion (offshore Mexico) and Beaumont New Ammonia (Texas) projects all progressing on time and budget.

With no change to 2025 guidance, no issuance of 2026 guidance, and no material update to sanctioned growth, the focus was on Woodside's base case scenario, which highlighted confidence of a further Louisiana LNG equity sell-down and rapid progress towards a final investment decision (FID) on two further LNG trains at Louisiana, and not much else, Jarden comments.

The Pelican State

The capital markets day delivered no major surprises, but confidence in execution continues to build. The market remains preoccupied with Louisiana LNG’s (LALNG) headline returns, Morgans suggests, yet overlooks how the Stonepeak and Williams partnerships (stakes) meaningfully lower Woodside’s funding exposure and execution risk.

Morgans views the company’s risk-averse, partnership-first model of front-loaded third-party capital, fixed-price EPC (engineering, procurement & construction), and disciplined sell-downs, as a proven playbook now being applied globally.

Woodside’s base-case scenario highlights bullishness around an LALNG equity sell-down and expansion. The investor pack provided included a number of charts showing forecast sales volumes, capex, operating cash flow and free cash flow. Of note for Jarden were the assumptions underpinning these charts.

For LALNG, Woodside is factoring in a further -20% sell-down of “HoldCo” and the sanction of trains 4 and 5. Jarden’s forecasts now reflect a further -20% sale at metrics similar to the recent -10% HoldCo sell-down to Williams.

While the broker has not included trains 4/5 in forecasts, awaiting details on costs and timing estimates, Jarden has included risked value for these trains as Woodside has promoted this to its number one unsanctioned growth project.

Citi came away more positive on LALNG economics but acknowledges many remain skeptical. Citi thinks FID of trains 4/5 could occur within two years following further sell-downs, which the broker sees as the next important catalyst for the stock.

Management laid out a positive long-term outlook, saying it was targeting a "step-change in net operating cash flow” to circa US$9bn by the early 2030s, nearly double current levels, underpinned by a 6% compound annual growth rate (CAGR) in sales revenue from 2024 onwards.

Growth in sales and cash flow would, in turn, support a 50% increase in the company's dividend payout from 2032, which would equate to a 14% dividend yield (at today's share price) based on a five train Louisiana LNG plant coming online.

Risky?

Ord Minnett notes there are risks to LNG pricing in an environment where more than 200 million tonnes per annum of LNG are planned to come onstream globally over the next five years, more than 50% of which will be from US sources.

Specifically, Ord Minnett highlights three factors that could affect the free cash flow outlook:

(1) A widely expected contraction in the spread between the Asian LNG benchmark, the Japan-Korea Marker (JKM), and the US natural gas benchmark price (Henry Hub), that will reduce the margin available to US-based producers selling into Asian markets;

(2) Woodside’s significant exposure to spot rather than contracted LNG prices; and

(3) minimal exposure to US upstream assets which would partially mitigate the risk of rising Henry Hub prices.

The Second Wave

The capital markets day also introduced a clearer “second-wave” growth picture, Morgans notes, with management flagging conviction in LALNG trains 4-5, Sangomar Phase 2, Trion Phase 2 and Beaumont Phase 2 as value-heavy, long-term value drivers.

Guidance for US$9bn of net operating cash flow from 2032 implies both volume and margin expansion. While LALNG is a lower-returning, mid-stream style project, Morgans suggests it fills the looming production gap from declining Pluto and North West Shelf (offshore WA) fields and adds geographic diversification across the Atlantic and Pacific LNG markets.

There was no material update on other sanctioned growth projects but Jarden remains confident Scarborough is tracking to schedule (second half 2026) and continues to believe first LNG production could even occur in the June 2026 quarter.

Woodside did highlight Pluto Train 1 will be offline for 35 days in 2026 for scheduled maintenance, but the North West Shelf JV is close to sanctioning Greater Western Flank Phase 4.

While Sangomar Phase 2 was not included in Woodside’s base case, Jarden sees potential for rapid progress on the project from 2027, assuming reservoir data and the Senegal tax review are supportive.

Management’s presentation highlighted the cash flow potential from its current growth projects, with forecast operating cash flow increasing from US$5bn in 2024 to US$8bn in 2030 and US$9bn in 2032. While Jarden’s estimates do not match Woodside’s forecasts (due to a US$65/bbl Brent assumption versus Woodside’s US$70/bbl), this broker does forecast gearing peaking at around 20% in 2027 before declining rapidly.

This should support new growth investment from 2028 onwards, Jarden suggests, with Sangomar Phase 2 the next most likely growth candidate. Sangomar Phase 2 is under review as Woodside optimises a development plan and high internal rate of return brownfield projects remain the key focus, Citi notes.

Browse (offshore WA) remains a longer-dated option but is currently challenged in meeting required 12% internal rate of return and payback hurdles.

Market Fatigue

Woodside remains the sector’s best-in-class execution story, Morgans suggests, offering a combination of high reliability, strong dividend yield and a balance sheet positioned to fund growth without strain.

The current share price discount is seen as reflecting both poor oil sentiment and market fatigue rather than fundamentals. With major projects advancing as planned and balance sheet risk declining, Morgans sees a favourable entry point and maintains a Buy rating.

Morgan Stanley views Woodside's traditional leverage to energy prices as relatively preferable among oil & gas producers in view of the company's LNG hub exposure versus global peers (10-20% of Woodside’s total production is sold on spot pricing, increasing to circa 40% from 2029).

Woodside’s strategic evolution into gas platform trading (eg LALNG and Beaumont New Ammonia developments) appears logical to Morgan Stanely, but adds uncertainty to near-term cashflows during development.

The Australian East Coast Domestic Gas Market Review is due by year end, Morgan Stanley notes, with Santos ((STO)) seen as the most impacted in this grouping. Morgan Stanley believes Karoon Energy ((KAR)) is least impacted and also offers the most upside potential in this grouping, while Beach Energy ((BPT)) and Origin Energy ((ORG)) are least preferred.

Morgan Stanley sees upside risk skew to its Karoon and Woodside Energy valuations, but stays Equal-weight given the commodity outlook, and development scenarios clouding near-term free cash flow outlook.

The company’s presentation made it clear management was focused on using its balance sheet to drive longer-term value as opposed to boosting returns to shareholders in the shorter-term.

The longer-term prospects for Woodside are appealing to Ord Minnett, which forecasts a dividend yield of 4–5% currently that increases to 8% by 2029 when the broker expects a free cash flow yield of 16%.

But the lengthy waiting period until that free ash flow translates into returns to investors, along with the significant execution risk in the company’s large projects and the vagaries of the LNG market, means Ord Minnett maintains a Hold recommendation for now.

Citi also retains a Neutral rating, as do UBS and Macquarie, but the latter two haven't updated on the capital markets day.

That leaves one Buy and five Hold or equivalent ratings among the six brokers monitored daily by FNArena covering Woodside Energy. The consensus target is $25.78, a tick up from $25.62 prior to capital markets day.

Jarden’s new target of $25.40, up from $24.70, (due to the LALNG sell-down, T4/5 risked value, North West Shelf Greater Western Flank Phase 4) includes unrisked value for producing assets and Scarborough/Trion.

Key risks to this broker’s Overweight rating, Jarden notes, include production, commodity prices, growth project timing/costs and delays in equity sell-down at LALNG.

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FNArena is proud about its track record and past achievements: Ten Years On

Macquarie Group: Not As Bad As It Looks

Australia | Nov 11 2025

Macquarie Group posted a first half miss, sparking a sell-off, but green asset write-downs were mostly to blame and FY26 guidance has been retained.

-Macquarie Group’s first half misses by -10%
-Green asset write-downs the main culprit, FY26 guidance retained
-Significant performance fees ahead
-When the end for the operational soft patch?

By Greg Peel

Macquarie Group’s ((MQG)) first half FY26 earnings missed consensus by around -10%, as did the interim dividend, leading to a -6% selldown of the shares on the day.

Brokers are nonetheless circumspect, citing a number of moving parts within the result, and noting full year guidance has been retained.

It’s Not Easy Being Green

The miss was to a great extent due to -$150m in write-downs of the book value of the Cero solar energy and Corio wind energy businesses, leaving the two valued at $900m and $300m respectively, and prior year gains of $300m for green assets not being repeated.

Cero and Corio have been moved from under the Macquarie Asset Management (MAM) banner into Macquarie Corporate as a prelude to a (hopefully) rapid divestment, although Ord Minnett suggests whether those book values can be realised in the sale process remains an open question.

On the reasons behind the move of existing green assets (on balance sheet) into Corporate, management said this was to allow MAM to fully focus on developing its green assets fiduciary capabilities.

The write-downs and movement of assets resulted in a -$2.13bn loss for the Corporate division, which was 38% greater than the loss posted in the first half FY25.

Morgan Stanley suggests the transfer implies that MAM spent -$440m in FY25 on green asset development costs.

Costly Investment

Outside of Corporate, Commodities & Global Markets (CGM) had the softest first half divisional result, with its net profit contribution down -15% year on year, some -18% below consensus.

While CGM’s operating income was broadly in-line with the prior year, the result 'miss' was driven by higher operating expenses (-$200m) related to: 1) increased investment in CGM’s core platform; 2) remediation-related spend, and 3) significant transaction-related costs.

Morgans notes while some of these costs will plateau near term, management did say elevated platform investment spend is expected to run for a couple of years. This reflects Macquarie’s aim to build scalability and synergy across the CGM platform, which is needed to support its global ambitions.

Revenue in the commodities segment of the CGM division also proved harder to come by, Ord Minnett points out, as more players entered the US and European oil and gas trading market, although growth in the financial markets business provided some buffer against the commodities segment slowdown.

This is a disappointing CGM result, Morgan Stanley says, given softer income on higher capital consumed. Timing of asset finance platform costs step-up and commodities income recognition should see a better second half.

Fee Performance

The key positive from the result was the strong MAM performance fee outcome, which was underpinned by the sale of the AirTrunk data centre assets and the divestment of Korean industrial gas producer DIG Airgas in the period.

Ord Minnett notes the more recent sale of the Aligned Data Centre assets to a consortium of infrastructure investors will generate performance fees in the next few years, and the accounting and timing recognition options for these could provide a buffer against revenue weakness in other segments of the group.

The agreed divestment of MAM funds' stake in Aligned Data Centers goes a long way to underwriting the next three or so years of performance fees, Jarden suggests.

Morgan Stanley agrees performance fees from MAM funds in Aligned should start in the second half and support earnings for several years.

However, Jarden was surprised to see some already recognised in the first half.

Other Businesses

Macquarie Bank reported an increase in its loan portfolio of circa 11%, most of which came from home loans, funded by deposit growth of circa 12%.

As with its larger retail sector peers in Australia, its net interest margin was squeezed by competition in the home loan segment, Ord Minnett notes.

Banking & Financial Services (BFS) continues to motor along nicely, Jarden suggests, “beating up” the major banks.

Macquarie Capital’s profit, up 91% year on year, benefitted from higher investment related income (up $164m) due to growth in Macquarie’s Private Credit portfolio (and higher repayment income), and also increased M&A fee and commission income.

Public markets’ assets under management of $543bn was down -2% half on half, with net outflows and forex movements more than offsetting positive markets, Jarden notes.

The previously announced sale of US/Euro public markets to Nomura (settlement due in the fourth quarter) should remove around -$285bn assets under management and -$100m of earnings, which will impact in FY27, but with a $400m gain on sale in FY26.

Private markets markets’ assets under management of $417bn, was up 7% half on half, with real estate up 15% and infrastructure equity 7%, supported by positive markets and new inflows $10.7bn.

Jarden notes recycling capital out of public markets is expected to drive better growth from private assets, across industries of core expertise, with $23.5bn of equity to deploy.

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Can Ventia Continue to Re-Rate?

Small Caps | Nov 10 2025

Developer & contractor Ventia Services has re-rated significantly this year, and recent contract wins support valuation. Is there room for more upside?

Ventia Services has enjoyed a multiple re-rating in 2025
Department of Defence contract wins underpin earnings growth
Telco contracts offer higher margin work
UBS initiates coverage with a Buy rating and standout price target

By Greg Peel

In September, the Australian Department of Defence announced the long-awaited awarding of infrastructure contracts to the local Developers & Contractors sector.

Ord Minnett suggested at the time the total value of contracts awarded to three companies, Downer EDI ((DOW)), Service Stream ((SSM)) and Ventia Services ((VNT)), is actually higher than the reported headline $7.4bn due to variable works provisions.

Ventia Services secured contracts worth $2.7bn, including Living and Working Services (LWS) in Tasmania, the Northern Territory and Victoria, and Property and Asset Services (PAS) in Western Australia, Victoria and Tasmania.

Macquarie noted the contracts total $700m annually versus $460m currently, driven by annual indexation and likely higher volumes/spend. Importantly, this broker highlights the announcements confirm no contagion from ACCC proceedings.

The contracts add to Ventia’s prior National Firefighting Services contract. Operations commence in February 2026.

When Ventia reported its first half FY25 result in August, showing a modest 3% increase in earnings year on year, Morgans noted the company was positive about revenue growth in the second half due to strength from recent contract wins in telecommunications.

However, the broker saw the defence unit as a drag, especially given a belief half of the upcoming $460m per year contract renewals were at risk.

Morgans retained a Hold rating. The September Defence Department announcement has alleviated this risk. Morgans has not since updated.

In the wake of the announcement, Macquarie retained an Outperform rating on Ventia and Canaccord Genuity a Buy. Ord Minnett upgraded to Accumulate from Hold.

Last week UBS initiated coverage with a Buy rating.

Above Market Growth

Ventia is a diversified industrial services provider, specialising in the long-term operation, maintenance and management of critical infrastructure. Ventia's earnings growth has been driven by key contract wins and renewals and by expanding operating margins through increasing exposure to more specialised, higher value work, UBS notes.

Looking ahead, increased infrastructure investment (Ventia is a late cycle beneficiary) provides a growing market opportunity, which, combined with balance sheet de-leveraging, underpins UBS’ 9% three-year compound annual earnings growth rate forecast, which is around twice that of the ASX200 average.

UBS’ earnings per share growth forecasts are underpinned by increasing Australian infrastructure maintenance demand, a shift to higher margin services (telecommunications) and balance sheet deleveraging, supported by efficient cash conversion.

The broker estimates the company has around $300m in balance sheet capacity at the midpoint of its target leverage range, with the potential to allocate this to further share buybacks, or bolt-on M&A.

UBS’ scenario analysis suggests these initiatives could support 2-4% earnings per share accretion, which combined with solid organic growth provides an attractive earnings per share outlook.

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The Quality Of Qualitas

Small Caps | Nov 06 2025

Private credit is growing as an asset class in Australia, and brokers agree fund manager Qualitas stands out as best-practice operator in this field.

-Private credit market in Australia playing catch-up with other Western economies
-Dubious practices in the market have drawn ASIC scrutiny
-Brokers agree Qualitas will benefit as others hit trouble
-Positive views dominate

By Greg Peel

“Private credit, done well, has a valuable role to play in the Australian economy. It can make an important contribution to economic growth. Private credit complements other sources of debt financing for businesses, including banks and public markets.

"Its development has largely occurred since the global financial crisis (GFC) – when prudential regulators increased bank capital requirements on higher-risk, leveraged corporate lending, as well as real estate construction and development financing – and its growth has partly been supported by the growth in superannuation savings.

“The Australian private credit market has grown in recent years and continues to grow strongly. The size of the market is estimated at around $200 billion, approximately half of which is real estate–focused finance.

“The funds with large superannuation and institutional investment, and the best international private credit managers operating in Australia, generally demonstrate sound governance, and transparent valuation and fee practices. Segments of the market targeting wholesale investors using the ‘sophisticated investor’ exemption and retail-based offerings, including platforms, have practices that do not compare favourably against international practice.

“Lenders in these segments are more likely to have conflicts of interest, opaque fee and interest margin arrangements, inconsistent and non-independent valuation methodologies, and ambiguous terminology. These practices are more prevalent in real estate–based funds. We have noted some improvement in practices over the past 12 months, as international managers have invested into local managers.

“Investors in private credit are, in most cases, appropriately rewarded for taking sub-investment grade credit risk and maturity/liquidity risk; however, these risks are not always adequately described in offer documents and subsequent performance reporting.”

--Private credit in Australia, ASIC report REP814, 22 September 2025

Australia's emerging private credit sector has a firm footing in property

The conflicts of interest and other issues ASIC has found with private credit funds came to the fore recently, ahead of the publication of the above report, as Jarden reported at the time.

Investment advisor Lonsec downgraded private credit funds Master Income Trust ((MXT)) from "highly recommended" to "recommended" and the Income Opportunities Trust ((MOT)) from "recommended" to "investment grade".

The key points were: (1) Related-party transactions: Metrics acquired two companies from its fund, paying with Metrics shares instead of cash, so the fund now owns part of its own manager, creating conflicts of interest. (2) Committee conflicts: Lack of separation between debt and equity investment committees, with Metric converting bad loans into equity stakes. (3) Manager loans: Metrics borrowed $58m from its own funds at below-market rates for working capital. (4) Reduced transparency: MOT's growing "other assets" segment dilutes original strategy and reduces visibility.

Jarden’s conclusion was that competing funds troubles and regulatory reviews could be a long-term positive for Qualitas ((QAL)), with it likely benefiting from incremental flow into its funds, potentially at the expense of Metrics, which has been subject to recent negative press and ASIC's private credit report yet to be published at the time.

Late last month Canaccord Genuity initiated coverage of Qualitas.

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Material Matters: Energy Demand, Copper, Aluminium & Gold

Commodities | Nov 04 2025

US energy demand to resume growth; super-cycle in copper; investment in critical aluminium; downside risk for gold.

US energy demand on the rise again
All aboard the copper super cycle
Critical aluminium
When can gold resume its bull run?

By Greg Peel

Rising Energy Demand

US energy demand has been on a slight downward trend for the past two decades, Morgan Stanley notes.

After peaking in 2007, total US energy consumption has been slowly declining at an average rate of -0.0-0.5% per year. Technological advancements, efficiency improvements, and the de-industrialisation of economic growth have all pushed the energy intensity of US GDP lower, falling -36% over the period.

The mix of energy types has been changing, but slowly. Notably, says Morgan Stanley, the share of fossil fuels (coal, natural gas, and petroleum) has only declined -9% over the last 45 years, moving from 92% in 1980 to 83% in 2023. For just oil & gas (ex-coal), the share has actually held fairly steady for the last half century.

But Morgan Stanley points out US energy demand is set to resume growth in the decade ahead. Two emerging trends are set to push domestic energy needs higher, reversing decades of stagnation: reshoring of manufacturing, alongside rising electricity use from AI data centers and broader electrification.

Total domestic energy demand across all end-markets is forecast to rise by 10%, eclipsing the prior 2007 peak by 2030.

Renewables alone will struggle to keep pace with rising consumption, keeping the transition away from fossil fuels fairly slow. The energy intensity of GDP should continue to decline, but at a slower rate (-0.9% per annum in 2025-35 versus a -2.2% average over the past 20 years).

What Morgan Stanley does not address in this conclusion is Trump’s antipathy towards renewable energy, his cancelling of funding for projects previously approved by Congress, and his determination to dismantle Biden’s Inflation Reduction Act, which was largely focused on a renewable energy push.

Significant investments in data centres create strong demand for metals

Energy Requires Copper

Over the past year, leading US copper miner Freeport-MacMoRan halted operations at its large mine in Indonesia following an accident, and has subsequently been unable to meet contract obligations or its planned project ramp-up timeline.

Canadian miner Ivanhoe Mines halted production at its mine in the Congo due to flooding and a mine in Chile due to a tunnel collapse. These three mines produce around 7% of the world’s mined copper, Bell Potter notes, creating a short-term production headwind for the metal.

The US is viewing copper as strategic asset, with its supply critical to defence, electronics and autos. Hence, Trump decided in August to put a 50% tariff on copper imports, alongside steel and aluminium, until the price of US copper soared above the price of LME copper, creating a significant arbitrage. Then he TACO-ed.

Rising US copper inventories are currently suppressing the copper price, Bell Potter notes, effectively neutralising the impact of the significant supply shocks seen over the last 3-6 months. Looking ahead to 2026, the analysts anticipate a tighter global copper market.

Bell Potter expects the global copper market to tighten considerably as inventories fall and supply disruptions continue to persist. With demand simultaneously rising due to cyclical and structural factors. A tighter market is expected to manifest into a higher copper price.

Growing demand for copper rests on transition to a low-carbon world, in which demand for renewable energy continues to balloon. Bell Potter points to data collated by the International Energy Association, suggesting nearly 80m kilometres of power lines will need to be replaced by 2040 and power grid capex will need to double to US$600bn per annum by 2030 to support climate-related goals.

Estimated incremental copper demand is set to increase by circa 6 Mt/year to meet the IEA’s Stated Policy Scenario, designed to capture trends within the current policy landscape. The combination of new demand from growing industries including data centres, electric vehicles and emerging economies together with traditional supply channels is set to boost copper demand growth from a 2% compound annual growth rate over the last 15 years to a CAGR of 2.6% out to 2035.

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Australian Banks: Results Season Preview

Feature Stories | Oct 30 2025

Back in May, analysts declared Australian banks overvalued. Share prices outperformed since. Heading into the November season, analysts declare banks overvalued.

Analysts continue to believe Australian banks are overvalued
Not one Buy rating afforded to the majors or regionals
Focus on bank restructures
Macro backdrop improving, but unemployment rising

By Greg Peel

The November Australian bank reporting season kicks off with Westpac’s ((WBC)) full year FY25 result on November 4, National Australia Bank ((NAB)) on November 6 and ANZ Bank ((ANZ)) on November 10.

Macquarie Group ((MQG)) provides first half FY26 earnings on November 7 and Commonwealth Bank ((CBA)) a September quarter update on November 14.

The Backdrop

Macquarie’s Macro Strategy team expects Australia’s economic growth to recover from a weaker pace in 2025 towards pre-covid trends in 2026.

The consumer is expected to drive the recovery as RBA rate cuts flow through, while business investment recovers in 2026. With strong house price growth, improved labour availability, and rate cuts, the outlook for housing construction is improving.

The housing market is accelerating faster than Macquarie anticipated, with annualised price growth lifting to 10%, and household expectations for prices lifting to record highs despite stretched affordability.

With the expansion of the first home buyer scheme (FHBG) from October 1, Macquarie expects the housing market to strengthen further in the months ahead. This has driven the strategists to upgrade their near-term housing credit growth forecast and suggests a favourable backdrop for banks, and non-bank financials.

Unemployment remains a risk to growth in bad & doubtful debts (BDD), and unemployment surprised to the upside in lifting to 4.5% in September.

While this is the highest level since 2021, it remains below pre-covid levels and close to the RBA's estimates of non-accelerating inflation rate of unemployment (NAIRU). Leading indicators are somewhat mixed, Macquarie notes, but suggest the potential for a slight further deterioration ahead.

That said, given rising house prices Macquarie sees limited risk to credit quality from the modest rise in unemployment.

bulls and bears lightning

Elevated Valuations

Heading into the May bank reporting season, analysts warned bank valuations were elevated, and feared a rise in bad debts as cost of living pressures had their impact, particularly mortgage costs, despite surprisingly low unemployment.

The reasons for elevated valuations were several.

In between banks closing their books on the first half in March, and reporting earnings in May, came Trump’s Liberation Day. As share prices crashed globally, Australia’s banks were seen as a safe haven by the world.

While TACO Trump quickly stalled his tariffs, the risk of high tariffs on China impacting on commodity demand and thus the Australian economy had Australian resource stocks being sold off, and selling out of Australia’s second largest sector typically leads to buying in the largest –- the banks.

A typical super fund is index-tracking, and flows into super funds from employees currently continues to exceed withdrawals from retirees, hence more and more needs to be allocated to the stock market, and into the biggest sector in particular.

There are a large number of long-term retail shareholders sitting on significant capital gains from their bank positions, who thus face significant capital gains tax implications if they sell.

Finally, rising bank share prices become self-fulfilling. As the market cap share of the ASX200 rises, index-tracking funds must adjust their portfolio allocations accordingly, buying more bank shares and selling something else, such as resources.

Heading into the May season, analysts declared the banks “fundamentally overvalued”. To that end, banks would have to post reasonable results or swift selling would eventuate.

They did. Bad debts were the biggest surprise, remaining benign. Bank share prices have risen ever since (although CBA has come off its highs to be back around its May level). As of last week, bank share prices have outperformed again, up 17.4% year to date versus the ASX200’s 10.1%.

Heading into the November season, the banks have had a strong run of outperformance. Qualitatively, it isn’t difficult to understand why, says Citi. Credit growth continues to strengthen, margin expectations will benefit from fewer RBA rate cuts now expected, productivity is being addressed and asset quality remains sound.

While bank valuations remain stretched, and Macquarie continues to see downside risk to margins and earnings, the macro backdrop for banks has improved.

Indeed, in the near term, this broker sees upside risk to consensus earnings from faster credit growth and benign credit quality. While in the medium term, margin headwinds are likely to offset these tailwinds, they will take time to emerge, Macquarie suggests.

Macquarie remains Underweight the banks sector.

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Valuation vs Sentiment For Pilbara Minerals

Commodities | Oct 28 2025

The US-Australia critical minerals investment agreement has driven lithium miner Pilbara Minerals’ share price on sentiment, well above fundamentals, on most assessments.

US-Australia critical minerals deal sends miner share prices surging
Pilbara Minerals posts solid September quarter beat
Lithium prices remain below new production threshold
Most brokers see Pilbara Minerals as overvalued

By Greg Peel

The much anticipated, belated face to face meeting between Prime Minister Albanese and President Trump was hailed a raging success, with the lever of joint rare earth and other critical minerals investment deftly pulled, as expected.

The agreement has since put a rocket under the share prices of relevant miners, particularly rare earth miners but also others in the wider spectrum of critical minerals, including lithium miner Pilbara Minerals ((PLS)).

Throw in a slight rise in otherwise wallowing lithium prices recently plus an impressive September quarter production and sales report and Pilbara Minerals’ share price has risen 45% year to date compared a 10% rise in spodumene prices and 4% for Chinese lithium carbonate prices.

Is this justifiable? The jury is somewhat out.

pouring lithium salts

Record Recoveries

Pilbara Minerals’ September quarter production of 225kt was a 6% beat to consensus and 2% higher quarter on quarter, reflecting a stable performance from the optimised Pilgan plant post the P1000 project, Macquarie notes.

Lithium recovery saw a significant step-up to a record 78.2%, from 71.6% in the June quarter, which was attributable to its ore-sorting facility -- a key positive in Macquarie’s view as it also presents upside to future spodumene output growth and unit cost reduction.

Adding to the impressive performance was a -13% quarter on quarter fall in unit operating costs, alongside a 20% increase in realised prices.

The key downside, Ord Minnett suggests, and a result of the soft pricing environment for lithium overall, was a reduction in the company’s cash balance of -$122m, although that fall shrinks to -$72m if a build-up in working capital is excluded.

After removing working capital adjustments and pricing adjustments, the miner still made a loss of -$40m, Citi notes, even at a record low unit cost.

With unit costs expected to pick back up for the remainder of the year, Pilbara is focusing on optimising at the lowest cash burn until spodumene concentrate prices recover.

Navigating A Volatile Environment

Pilbara Minerals continues to navigate a volatile lithium market environment, Bell Potter notes, through several initiatives targeting cash preservation during the current weaker lithium price environment. At Pilgangoora, cost reduction and operational enhancements include the transition to an owner-operator mining fleet and the processing of higher levels of lower grade ore.

At its South Korean lithium hydroxide facility, the miner and joint venture partner POSCO have agreed to moderate production in the short term. While Train 2 delivered first customer certification in the quarter, Macquarie notes the POSCO JV operated with a lower run-rate and the full-year spodumene offtake was reduced to circa 150kt.

Macquarie believes this indicates the plant is not generating a positive margin in the current price environment.

Pilbara Minerals continues to advance earlier stage projects (Colina Project in Brazil, P2000 expansion and mid-stream demonstration plant at Pilgangoora, downstream conversion partnership with Ganfeng), preparing itself to capture value on what Bell Potter expects will be stronger lithium markets over the long term.

Despite beats across the board on September quarter metrics, management has retained FY26 guidance. Notably, unit cost guidance was maintained despite the 7% beat in the September quarter, with management assuming some negative seasonal impact on operations from the wet season and a decline in recoveries from the increased use contract (low grade) ore at the plant.

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Underpenetrated

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Earnings Meet Consensus

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Rising Energy Demand

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