Weekly Reports | 10:00 AM
Small and mid cap stocks highlight how earnings timing, operational transitions and regulatory catalysts are shaping valuation inflection points.
- Have we seen this Credit Corp movie before?
- Horizon's transition to standalone gold producer underpins medium term cash flow
- FDA approval catalyst sets stage for Artrya's US commercial scale up
By Danielle Ecuyer
This week’s quote comes from Rick de los Reyes, portfolio manager and Head of Commodities at T. Rowe Price:
"Recent volatility in precious metals reflects a period of consolidation rather than the end of the gold trade.
"The final leg of gold’s recent rally unfolded very rapidly and bore the characteristics of a short squeeze, pushing prices higher in a compressed timeframe.
"Historically, spikes in realized volatility have tended to be followed by periods of sideways consolidation before the uptrend resumes.
"Against this backdrop, gold is likely to remain range-bound in the near term before potentially reaching new highs."
Another sell off in Credit Corp shares
Taking a step back from the harsh share price reaction to Credit Corp Group’s ((CCP)) half year net profit result, Canaccord suggests not only the market’s reaction, but the underlying earnings dynamics appear “strangely familiar”.
The analyst suggests the first half/second half trends that disappointed the market in the latest announcement --and have sent the stock down to a two-year low share price-- are not as perilous when interpreted on further inspection.
Lending in Australia and New Zealand saw book growth of 7% to $33m on the prior year with contributions from both Wallet Wizard and Wizit, which now has a $17m book.
Accordingly, to meet regulatory standards, provisioning levels rose to account for potential credit losses in the future. Canaccord highlights this elevated upfront provisioning is at a level that has not been seen before.
For every $100m of book growth, in a “steady state” the analyst estimates an incremental lift of $11m-$12m in net profit after tax for 2H26, which equates to a return on equity of 15-17% and 30% gearing. Marketing expenses also rose, which impacted the 1H26 A&NZ lending business.
Regarding debt buying in A&NZ, the result was a 'miss' for the analyst and was lower again, the business facing headwinds from flow disruption of the debt ledgers generated in the system. Flow disruption can come from multiple sources including lower consumer leverage, tighter bank credit settings, and better arrears management.
The broker doesn’t view this division as a “material” incremental earnings generator for medium-term growth, although there is hope some of the headwinds are now in the rear-view mirror.
Looking to the US, the debt buying business experienced its third sequential rise in net profit after tax, which has moved to $11.7m in the latest half from $10m in the previous half and $7.1m a year earlier.
Seasonally the second half tends to be stronger, resulting from tax season. Canaccord forecasts an incremental $2m in 2H26 to net profit after tax and around $8m in incremental net profit after tax in FY26 on FY25 as productivity improves on better operational metrics alongside the legal collections process.
Management is pursuing new products and entry into the UK market with other growth strategies, such as a change in gearing policy, which are flagged as sufficient levers for Canaccord to anticipate EPS growth advancing into low-double-digit levels or the mid-point of management guidance.
Contrasting the outlook against the stock’s valuation, which stands at a decade low around 8x FY26 earnings, the analyst believes the timing is opportune and re-iterates a Buy rating alongside a $19.70 target, down from $21.60 previously.
Horizon Minerals' transition continues
Research as a Service (RaaS) drilled into the December quarter update from emerging junior gold producer Horizon Minerals ((HRZ)).
Strategically, management recently shifted the company to become a standalone producer post the acquisitions of Greenstone Resources and Poseidon Nickel in 2024, which shifts it from periodically producing gold under toll agreements.
The acquisitions bring in another source of core feed with the Burbanks gold mine, while the Black Swan plant has refurbishment potential.
The company has 1.8Moz of gold resources positioned around Kalgoorlie and Coolgardie in WA and is aiming to achieve a 2.2mtpa throughput from 1.5mtpa previously through the Black Swan plant. The longer-term aim is to produce up to around 100kozpa for five years, up from previous models of around 85kozpa for five years.
The latest December quarter update missed the analyst’s expectations with processing rates at the Paddington mill lower, around 120kt ore for 3.9koz produced, and revenue came in at $22.3m from gold sales at Boorara, which experienced lower tolling rates for most of the period.
Processing of the balance run-of-mine ore, some 350kt from Boorara, is expected to be finished over 1H2026 and result in positive cash flow.
At the Phillips Find JV, RaaS notes the final 132kt of ore is being processed with the JV expected to be concluded in the March 2026 quarter. A final distribution of circa $9m, for around $14.5m in total payments, is expected to be made to Horizon.
Adjusting for the updated cash flow estimates from Boorara and the Phillips JV, as well as a delay for the Black Swan refurbishment by one quarter, the analyst lowers the company’s valuation to $3.62 per share from $3.675 previously.
RaaS does not assign ratings to the stocks it researches.
The full story is for FNArena subscribers only. To read the full story plus enjoy a free two-week trial to our service SIGN UP HERE
If you already had your free trial, why not join as a paying subscriber? CLICK HERE