Weekly Reports | 10:00 AM
A burgeoning rare earths player with a balanced risk/reward profile joins BetMakers' increasing operational leverage and Australia's only water utility resetting the dividend dial.
- Elevate NdPr prices will help Arafura's Nolan project over the line
- New Apollo platform positions BetMakers for upside surprise
- Long term water challenges position Rivco for net asset value uplift
By Danielle Ecuyer
This week's quote comes from Stephen Innes, SPI Asset Management:
"The rebound across Asia should be interpreted carefully. Markets are currently trying to price two realities that do not comfortably coexist.
"On one side sits an American economy that continues to expand with surprising resilience. On the other side stands a Middle East conflict with an open-ended timeline.
"Growth wants to rally equities. Geopolitics wants to tax them with an inflation premium. The market is effectively attempting to trade acceleration and uncertainty at the same time."
Arufura ticks many boxes, but remains dependent on NdPr prices
Rare earths are critical minerals used in a wide suite of modern technologies, including magnets for EV motors, robotics, wind turbines, as well as electronic goods like smartphones and the defence sector.
While rare earths are relatively abundant, the challenge is finding concentrations that are economically viable to mine and process.
Current supply chains are concentrated in China. With rising geopolitical risks, rare earths have a newfound significance.
Barrenjoey has initiated coverage on Arafura Rare Earths ((ARU)) as part of a broadening of the sector’s coverage.
The analysts estimate non-China exposed rare earths for EV and wind markets will see demand grow to 122kt of NdPr by 2031 from circa 83kt currently, a compound average growth rate of 7% per annum.
China is estimated to control around 60% of mining and 90% of downstream rare earth processing.
Enter, 100% owned by Arafura, the Nolans rare earth project, some 135km from Alice Springs (Central Australia).
The project has a resource of 56mt grading 2.6% rare earth oxides (REO) with a reserve of 29.5mt, grading 2.9%.
Compared to other hard rock projects, this project’s reserve grade is viewed as one of the higher observed and has relatively high “in-situ” value against peers.
The scale and quality of the resource have the potential to underpin a consistent ore feed of around 38 years.
This contrasts with peers which will be reliant on gathering different feedstocks into the upfront separation facilities, Barrenjoey explains.
From a location perspective, the existing infrastructure in the Northern Territory can be used and the project is some 10km off the Stuart Highway. A gas pipeline crosses the site which will be used for a gas power plant.
Still, with an upfront capital cost of around -$1.8bn, the Nolans project remains heavily dependent on the NdPr price.
Applying what are described as “conservative” forecasts for the project, including -$2.2bn capex cost, a 14% internal rate of return is modelled based on a long term NdPr price of US$110/kg. The project’s return would slip by around -10% at a price of circa US$90/kg. All-in-sustaining-costs are assumed (modeled) at circa US$50/kg over 15-years, with the current spot price of US$114/kg.
At this stage, Arafura has secured off-take agreements for 65% of the project’s production including with Hyundai and Kia (Korea) and Siemens (Germany), with ongoing discussions to take the off-take to around 80% of project sales which is required for financing.
Governments including Australia, Germany, Korea, Canada and the US have agreed to provide funding.
A final investment decision is expected by mid-2026 which would pave the way for the move into construction phase, with commissioning flagged for 2029.
Barrenjoey highlights the hefty upfront capital costs as a potential negative risk, but views the project’s relatively low opex as a positive.
Arafura is Neutral rated with a 30c target, with the risk/return viewed as balanced.
Apollo platform underwrites better than expected growth
Betmakers Technology Group's ((BET)) 2026 interim result struck a positive response from Canaccord Genuity, with the analyst pointing to a revenue rise of 14% on the prior year excluding the legacy customer and earnings of $6m coming in above expectations.
Growth was underpinned by a revenue uplift of 20% by Global Betting Services, the company’s core B2B technology/services division which allows customers like bookmakers, racing operators and betting platforms to plug into BetMakers’ infrastructure, including its next generation wagering platform, Apollo, which replaced the earlier Global Betting platform in April 2025.
Eight new customer wins went live in 2Q26 and another eight are planned for 2H26, underwriting robust momentum for FY26, Canaccord notes, which should translate into operating leverage.
Cloud costs fell over the period allowing the gross margin to reach 66.5% versus 59.6% in 1H25, excluding inventory write-offs, which is attributed to efficiency gains from Apollo.
Gross margin is now expected to track to management’s long-term goal of 70%-plus which is forecast by the broker to be reached by FY28.
Adjusted earnings (EBITDA) swung into profit of $6.3m from a loss of -$1.3m in 1H25 and annualised EBITDA is forecast to move towards $15m as the fiscal year progresses.
EBITDA margins are also improving and expected to move to the high teens and revenue growth over 10% could boost the margin to over 20%.
Management is targeting over 25%.
The launch of CrownBet in Australia, one month ahead of plans, could potentially become a future big customer for BetMakers with the potential to “de-risk” 2H26 earnings estimates.
Canaccord upgrades the stock to Buy from Speculative Buy with a higher target of 24c from 22c.
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