Weekly Reports | Jun 26 2026
This week's In Brief highlights three cyclical companies whose share prices seem to be discounting the macro headwinds and recent negative impacts.
- Australian Financial Group's cyclical, not structural, challenges
- Lifestyle Communities strengthens despite property headwinds
- Mastermyne poised for recovery after a challenging year
By Danielle Ecuyer
This week’s quote comes from The Coppo Report:
"As a preview – the tech run is now in train & JULY is usually a cracker for NASDAQ & ASX200
"Looking at how the ASX200 traded each July since 2000
"Quite incredible ...
"ASX 200 over the last 17 years- July still looks very good most times ...
"Has been up 15 times or 88% of the time. And up 15 out of the last 17 years !
"Average move has been very large at +3.14%"
Subscription revenues the unsung growth lever
Jarden initiated coverage of Australian Financial Group ((AFG)) post the stock’s -40% de-rating since August 2025.
While acknowledging the risk of a “higher-for-longer” interest rate cycle, the analyst views the market as having already discounted a “structural” decline in the share price.
Contrary to the market’s downbeat assessment, Jarden envisages only cyclical pressure on the group’s earnings.
AFG’s network writes one in nine Australian mortgages, with its broker channel market share at a record circa 81% of Australian mortgage settlements.
Jarden points out the value of advice is strengthened every rate cycle when factors such as higher rates for longer, and more recently the new “complexities” around negative gearing changes, boost the premium ascribed to broker advice.
Isolating the different earnings levers for the group, the Distribution arm produces an even annuity stream via trail commissions, which were 5.3% retained in 1H26. Recurring broker subscription income also generates a generally predictable revenue stream, which compounds as the loan book grows.
Upfront commissions are highlighted for greater volatility and are more reliant on market conditions. Jarden highlights mortgage settlement growth rose 19% y/y in 1H26, which exceeded management’s FY29 target of 8% annual growth.
Distribution accounts for some 70% of earnings.
Commenting on AFG Securities, the book stood at $6.3bn, up 14% in 1H26, and tracking towards the target of $9bn by FY29. Net interest margin of 124bps in 1H26 came in above targeted 120bps.
Management noted the uplift was “funding led, not risk led”. Jarden observes term funding is now 53% of the book and this segment has grown to around 30% of earnings in 1H26 from circa 18% at the end of FY24.
Ongoing tighter monetary policy or problems in credit markets remain risks to both margins and volumes for Securities.
Jarden views subscription revenue/broker services, as well as the technology aspect, as the most undervalued earnings drivers for AFG.
Subscription revenue growth was up 11% in 1H26, resulting in 10%-plus growth over the last 8 years. That revenue represents 21% of Distribution, with a target of 30% by FY29.
Strategically, management is continuing to build scale for the group, but the business model remains sensitive to the interest rate environment.
The stock is trading under 10x 12-month forward price-to-earnings. EPS growth is forecast to compound at plus-or-minus 13% over three years. Return on equity should rise.
Jarden’s initiation of coverage brings forth an Overweight rating and $2.30 target price.
Upside potential for a favourable Supreme Court ruling
Lifestyle Communities ((LIC)) announced guidance for around 239 settlements in FY26 this week, with Moelis observing the gross margin was flagged to come in under 10% in 2H26.
Net debt has been lowered to $278m from $320m at December 2025, while there are 217 contracts on hand and due for settlement in FY27-onwards.
Splitting the settlements, the analyst notes 128 for 1H26, with 111 now expected in 2H26. As of 15 June, 230 had already been settled, with the remaining nine planned for FY26 end (30 June).
Gross margins have fallen from 11% in 1H26 to between 5.5%-8% in 2H26. Moelis explains the pressure on margins reflects, in part, weakness in average Melbourne house prices, as well as management aiming to lower debt and inventory levels.
The latter has declined to 126 homes from 189. No new communities have been started. Moelis has a Buy rating and $6.60 target price, with the analyst explaining the stock trades around a -7% discount to NTA, which is essentially supported by mature assets.
A successful VCAT appeal, to be heard in the Supreme Court on 23 June, would offer additional upside.
Canaccord Genuity also retained a Buy rating, albeit tweaking its target price to $5.80 post what has been labeled a “solid” trading update.
This analyst views the robust sales while reducing leverage in the balance sheet as a positive, particularly against the backdrop of a challenging Victorian property market.
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