Weekly Reports | 10:00 AM
This weeks In Brief captures companies benefitting from the AI data centre buildout and commodities cycle, with EchoIQ leading an AI platform for under-diagnosed cardiovascular disease.
- Sims goes from strength to strength with another guidance upgrade
- EchoIQ positioned to grow its platform to combat the leading cause of death globally
- CleanSpace embraces facial hair to grow market share
By Danielle Ecuyer
This week's quote comes from James Cook, Investment Director for Emerging Markets at Federated Hermes:
"AI is clearly reshaping parts of the earnings landscape in Asia, but the market response has been uneven.
"Capital has been drawn into a concentrated subset of companies, reinforcing both performance and benchmark concentration.
"The result is a growing divergence between crowded growth and more overlooked areas where expectations remain subdued."
Sims rides the tailwinds of a mega trend
The Australian economic cycle is not generally favouring a swathe of Australian companies, ex those exposed to the mega trends of AI-related infrastructure and defence spending.
At FNArena we have been writing about the numerous earnings guidance and forecast downgrades over the past number of weeks, so when an upgrade surfaces, it’s worth peeking.
Sims ((SGM)) is benefiting from the tailwinds of a positive US backdrop, with the US metals division doing the heavy lifting in terms of this week’s upgrade to guidance.
Management increased FY26 underlying earnings (EBIT) guidance to $420m-$435m, from $350m-$400m in March, a 14% rise at the midpoint and a narrowing of the range to $15m.
Sims Lifecycle Services' (SLS) FY26 earnings are now guided to $170m-$175m, narrowed from $165m-$185m, which represents around 40% of total earnings. This division is responsible for helping large enterprises and hyperscale data centre operators securely decommission, refurbish, resell, redeploy and recycle IT equipment.
The large price rise in DDR4 (DRAM memory modules recovered from decommissioned servers and data centres) and the ongoing build-out of data centres are underpinning powerful tailwinds for SLS, Jarden highlights.
Due to the lumpy nature of the timing of decommissioning works, Sims management points to ongoing variability in earnings streams for the SLS division.
The guidance upgrade was also boosted by better ferrous trading conditions and continued strength in non-ferrous metals.
The recycling operations at Sims are made up of ferrous metals, including scrap steel and iron, which account for the bulk of recycling volumes, and non-ferrous metals, including copper, aluminium, brass, stainless steel and other high-value metals.
The improvement in US domestic steel demand, as well as higher prices for the likes of copper and aluminium, has supported spreads and earnings.
Strength in earnings over the second half is boosting both North American Metals and SA Recycling (SAR), Sims' joint venture investment, one of the largest scrap metal recyclers in North America.
Jarden notes Sims shares have outperformed the ASX200 by more than 60% year-to-date.
Since December, FY26-FY28 consensus earnings estimates have been upgraded by around 53%, 57% and 48%, respectively, which would account for the share price rise.
The stock trades around a one-year forward PER of 16.6x on the broker’s upgraded earnings forecasts, but remains below its 10-year average of circa 19.1x.
With uncertainty around DDR4 prices going forward, Jarden feels the share price is adequately discounting the current earnings outlook.
Sims was downgraded to Hold from Buy with an upgraded target price of $30.50 from $23.
It’s hard to remove oneself from the AI thematic, which is likely to become even more pronounced as we move towards the August reporting season.
AI enhances the probability of cardiovascular assessment
Shaw and Partners initiated coverage on EchoIQ ((EIQ)), owner of an AI-driven cardiovascular diagnostics platform, EchoSolv, designed to improve the detection and management of serious heart disease from echocardiogram data.
In terms of total addressable market, heart disease remains one of the major causes of death, with around US$250bn spent annually on cardiovascular disease in the US.
As noted by the analyst, this includes some 25m echocardiograms per annum with an inconsistent rate of detection, as well as high under-detection rates, opening the way for improved diagnosis.
Shaw highlights around 50% of heart failure cases are missed or underdiagnosed.
EchoIQ’s EchoSolv detects aortic stenosis, one of the most complicated and often missed conditions, with one in five patients missed when not using AI.
It is a condition in which the aortic valve, the valve that controls blood flow from the heart's main pumping chamber into the aorta and the rest of the body, becomes narrowed or stiff.
The service takes measurement data obtained across all echo images and transposes it into a multi-dimensional AI model, the broker explains.
In turn, it offers a probability-based assessment which doesn’t rely on the images, just the data.
The EchoSolv platform can be directly embedded into hospital Picture Archiving and Communication Systems (PACS).
The platform has two major modules, EchoSolv AS, which was approved by the FDA in October 2024 for aortic stenosis detection, with reported accuracy of up to around 97%.
The second is EchoSolv HF, which is an “investigational” heart failure module lodged with the FDA in December 2025. Expected clearance is 1H2026.
The analyst emphasises the EchoSolv HF validation results represent a “high-performance” benchmark for heart failure detection.
The MedAI platform is partnered with the Mayo Clinic Platform, with distribution agreements reaching Mayo hospitals and more than 80 external partner hospitals.
EchoIQ also has an exclusive licence to train and commercialise an AI model within what management articulates as “the world’s largest longitudinal echo dataset”, which assists with model training via NEDA (National Echo Database of Australia and New Zealand).
Shaw and Partners forecasts sales to grow to $26.1m in FY28 from $1.6m in FY26 and expects the company to become EPS positive in FY28.
The stock is rated Buy, High Risk, with a $1.50 target price.
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