Weekly Reports | 10:00 AM
In this week's In Brief there is a new "metaverse" microcap, a major data centre and cloud services provider with a electrical infrastructure player.
- Defense wins drive Vection’s XR momentum
- Macquarie Technology touts strong data centre demand
- IPD guidance points to firmer FY26 growth
- Objective embraces AI for its new SaaS overlay service
By Danielle Ecuyer
This week’s quote comes from Phil Orlando, Chief Market Strategist at Federated Hermes:
"Despite the well-documented bifurcation between high- and low-end consumers, we expect a solid holiday shopping season driven by the beneficiaries of the wealth effect sprung from elevated stock and home prices. "
Aussie minnows reaches across extended reality and AI applications
Vection Technologies ((VR1)) is an enterprise software company operating in spatial computing, referred to as extended reality (XR), as well as an AI solutions provider.
Its core is the IntegratedXR platform, which Petra Capital describes as an ecosystem combining proprietary extended reality and AI applications with a single access point into one framework.
Put simply, Vection builds extended reality and AI software for large businesses, including virtual training, 3D simulations, and digital twins of real sites or equipment. It also makes augmented and virtual reality tools for remote assistance and interactive product or engineering visualisation, all offered through the IntegratedXR platform.
Meta referred to such technology as the metaverse.
As highlighted by the broker, Vection’s services and solutions are applicable across a wide range of sectors and include well known blue chip organisations, including Coca-Cola, Nestle, Mirvac, Volvo, Generali, Diesel and Bunnings, as well as spanning a wide range of sectors including defense, retail, government, sports, real estate, education and tourism.
The technology is underpinned by 29 global patents and four ISO (International Organization for Standardization) certifications. The company owns and develops its core intellectual property.
The company acquired JMC Group in June 2021, which is a Titanium Partner (highest status) with Dell Italy, which substantially lifted Vection’s global profile.
The broker views several major contract expansions with NATO approved partner, Area 12, and Generali as giving more credence to the technology stack and service offered.
Over the last two years, higher defense spending has resulted in several contracts with major European defense contractors and NATO approved partners.
The mission critical solutions required by the defense sector reinforce and support the company’s software platform and service.
Defense is anticipated to be the biggest earnings generator in FY26. The total framework with the NATO approved partner is $40m with an extension up to $47.2m until December 31, 2030, as explained, and the contract came from a repeat client.
Revenue growth has been achieved on an organic split of around 65%, estimated at $57.7m in FY26, and acquired circa 35%, with earnings (EBITDA) expected to be positive in FY25/FY26, followed by positive free cash flow in FY27.
Rising revenue on a fixed cost base should realise more profitable scale benefits.
Vection is a micro cap with a circa $90m market cap. It is also founder led with a robust track record of growth.
On initiation of coverage, the stock is Buy rated with a 7c target price.
Robust demand puts hyperscale ambitions within reach
Canaccord Genuity outlined a well attended Macquarie Technology ((MAQ)) Investor Day at its Macquarie Park data centre, which included the top executives for the Data Centres, Cloud Services, Government and Telecom divisions, as well as the CFO.
Data Centres described demand as “strong” across the sector, which aligns with similar statements from other listed peers. IC3 Super West is the only data centre of scale due to open in Sydney’s north zone in 2026.
If history repeats, the announcement for a major anchor tenant is likely to be four months before opening, such was the case for IC3 East, which would be in 2Q 2026.
Regarding the touted 150MW campus, the next significant addition to power supply is anticipated to be available in 2029/2030 and will be a major factor to establish a potential opening date for this asset.
The outlook for Cloud Services is described as optimistic, with demand coming from repatriation of workload to private from public cloud as a cost saving. This is creating volatility across the industry as three year contracts came up for renewal.
Macquarie Technology remains a Pinnacle Partner for Broadcom, which brings forth opportunities to consolidate workloads from other providers outside the partner network.
Major opportunities were identified from the “Essential 8” cybersecurity framework, while good growth was noted in the mid market for Telecom, which remains overcharged and under-serviced according to the group head.
The CFO explained IC3 Super West (6MW) of capacity will be opened in 3Q2026 from existing cash, operating cash flow and net borrowings facilities of $240m.
Expansion of the future IC3 Super West stages, estimated at $500m, would be generated from free cash flow and an increase in debt facility.
Funding of the planned hyperscaler 150MW campus could be achieved through the sale of an 80-90% stake in the “stabilised” assets at Macquarie Park, which Canaccord values at $2.2bn in total.
The estimated cost of the planned campus is -$2.5-$3bn to construct after -$240m land acquisition.
The sale of a majority stake in existing assets would provide a significant proportion of the company's share of investment in its new campus.
The broker remains Buy rated with an unchanged $95 target.
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