In Brief: Carma, Intelligent Monitoring, Steadfast

This week’s quote is from National Australia Bank:

“US news just in has President Trump saying, ‘I think Chris Waller is great’ (following a flagged interview), that he is talking to three or four Fed chair candidates and will be making a decision very quickly on the next Fed chair. It rather sounds like he still can’t make his mind up.”

Carma, Carma, Carma, chameleon?

Carma ((CMA)) listed on the ASX on November 5 at an IPO price of $2.70 after raising $100m consisting of $70m in new shares and the balance of $30m from existing shareholders selling down.

The implied market capitalisation at listing was around $369m.

The stock has since retreated by around -38% which no doubt sparked the attention of brokers like Canaccord Genuity with an initiation of coverage and a robust “reiterate” Buy rating on the stock with a $3.50 target price.

Canaccord Genuity was one of the joint lead managers for the IPO, alongside E&P Capital.

As far as the analyst is concerned, Carma’s operations are performing in line with expectations with management serving up a positive 1H26 year-to-date trading update.

This included total retail units delivered of 1,135 including an acceleration on growth over the 2Q period, up 26% q/q to 502 units in Oct/Nov compared to 398 units in July/Aug.

Total units per month are tracking at 227 cars with November at 253 units delivered which infers to the analyst Carma needs to achieve around 315 retail units per month for the balance of FY26 to achieve its prospectus forecasts of 3,346 units delivered.

December has maintained the acceleration and the broker anticipates another move up in the monthly run rate as the company progresses to the most robust seasonal period in 3Q26 and is forecasting growth of 9-18% m/m (275-300 units).

Management attributes the step up in momentum to the ramping in re-conditioning volumes which delivered retail revenue for the first half to date of $35m (ex-Dec).

Although the update did not offer any transparency around the number of re-conditioned cars per day.

Based on the year-to-date revenue, Canaccord views 1H26 total revenue of $50m as probable which aligns with forecasts and also suggests growth in revenue will need to accelerate to 132% y/y to achieve the forecast of around $78m and the FY26 prospectus forecasts of $127m or 79% growth y/y.

Carma also pointed to the expansion of its largest and highest margin Sell-to-Carma sourcing channel to six sites in Sydney versus three at the IPO. The sites have been strategically positioned for a circa 10-20 minute driving radius for potential customers.

The analyst sees the strategy as helping to optimise conversion rates and is likely to be expanded and rolled out to other states.

Canaccord believes Carma is disrupting the large and fragmented $118bn Australian used car market. Some 3.6m used cars are sold annually in Australia of which circa 67% are sold via used car dealers.

There are over 4,400 dealers with Eagers Automotive ((APE)) having the largest market share at 5%.

The report emphasises forecasts differ from consensus with growth being retained and free cash flow breakeven in FY28 with no further capital needs.

Operating leverage is also expected to improve the unit economics of the business as it scales.

Intelligent Monitoring purchases recurring revenue, geographic diversification and much more

In what Moelis describes as a positive move, Intelligent Monitoring Group ((IMB)) has acquired Tyco New Zealand (Tyco) and Red Wolf Security Group (Red Wolf).

The broker views the strategic move into fire protection services as well as the expansion into New Zealand including commercial security as a significant transition to grow the total addressable market and underpin cross selling of key offerings.

Red Wolf is a high-level security provider and is complementary to Tyco with both offering service, maintenance and installations for commercial customers, as well as high recurring revenue business models.

Commercial service contracts underwrite 75% recurring revenue from both acquisitions. The additions were also picked up at attractive valuation multiples with Intelligent Monitoring paying -NZ$45m for the combined businesses which are anticipated to generate around NZ$10.9m in earnings (EBITDA) which equates to around 4x EV/EBITDA valuation.

The acquisitions will be funded via both debt and cash with post transaction gearing remaining around 1.9x which stands lower than the industry’s average and within the Board’s gearing target of 1.0-3.0x.

Management flagged EPS accretion of 24.6%-28.3% on previous FY26 guidance.

The stock is rated Buy with a 95c target price.

Steadfast rollup strategy continues to support a softer premium rate cycle

At Steadfast Group’s ((SDF)) October 31 AGM management downgraded its premium rate expectations alongside with the latest trading update confirming confidence in the insurance broker reaching FY26 net profit after tax guidance of $365m-$375m with consensus at $369.4m, Jarden explains.

Earnings are expected to be 2H26 skewed, more so than historically due to cost-outs and acquisition impacts taking longer to flow through.

Uncertainty around premium rates raises the level of doubt around FY26 earnings despite the levers around costs and acquisitions to smooth earnings.

Year to date ending November 30, -$127.7m in acquisitions have been completed with an additional -$20m in the pipeline to be completed over the balance of the year.

Maximum gearing is rising to 40% from 35% in line with existing banking covenants to accommodate the acquisitive strategy.

The CEO offered additional feedback on the premium rate backdrop. Steadfast has noted an average base insurance premium rise year to date of 2.4% which is above FY26 guidance of 1-2% growth.

Rate weakness is being experienced in specific lines. Over 74% of renewals in Oct and Nov either saw no change or rate increases which is down from around 81% rate rises last year, the analyst notes.

Jarden believes it is too early to call time on the bottom of the insurance rate cycle. The forecast 1% rise in premium rates is retained for FY26 and FY27.

Notably, management has underestimated the rate of premium rate declines for the last two years, but it does possess a robust track record in achieving earnings against guidance provided, the report highlights.

The stock remains Overweight rated with a $6.25 target price, revised down slightly from $6.50 prior to the trading update.