Weekly Reports | 10:00 AM
This week's In Brief focuses on three turnaround stories: Nuix, Abacus as management restructures its assets, and Netwealth, viewed as structurally sound but cyclically impaired.
- Nuix: Neo drives the next growth phase
- Abacus Group: Simplification unlocks value potential
- Netwealth: Softer flows test growth story
By Danielle Ecuyer
This week’s quote comes from Stephen Innes (The Dark Side Of The Boom):
"Nvidia arrived just as the artificial-intelligence trade was beginning to look like a grand investment thesis in search of a business model.
"For several weeks, investors had been circling the same uncomfortable questions. Was the AI boom becoming an enormous construction project with no tenants?
"Were companies spending billions on computing capacity simply because they feared being left behind?
"And if the machines were becoming more intelligent by the month, what would happen to the software companies whose business models appeared to be standing directly in their path?
"Then Jensen Huang walked in with a forecast large enough to drown out the funeral music."
Migration to Nuix Neo beats expectations
The software company once upon a time very badly presented to investors by Macquarie, Nuix ((NXL)) continues the August reporting season trend of beating FY26 expectations at a time when the share price has been beaten down.
As highlighted by Moelis, FY26 revenue came in above forecasts by around 6%, boosted by a higher-than-estimated contribution from multi-year deals signed over the second half, contributing more than 50% of the positive surprise in revenue.
Positively, growth in revenue was also above cost growth, with the analyst pointing to operating costs slightly higher by $1.7m than forecast. Expenses associated with acquisitions added an additional $2.8m in non-recurring costs.
Nuix Neo is viewed as the “primary” growth engine for the company’s strategy. Annualised contracted value momentum over 2H26 is viewed as a positive indicator for the pipeline and FY27 outlook, with estimated growth between 9.6% to 15%.
Growth is supported by the customer transition to Nuix Neo as well as new customer wins.
Moelis has lifted its FY27 revenue growth forecast to 10%, with management not offering any specific revenue guidance.
The forecast broadly aligns with management’s annual contracted value outlook, as well as an assumption that multi-year deals will be sustained at 35% of revenue in FY27.
The analyst emphasises Nuix has “re-engineered” its Neo sales strategy to boost migration and pipeline conversion.
Management’s FY27 adjusted EBITDA guidance is for a ‘similar’ result to FY26, which includes a -$15m cost from one-off investment projects.
Importantly, the company stressed that the project workload will not require the addition of permanent resources.
Management also indicated more use cases for Neo in AI-related applications, with Nuix able to process unstructured data in a swift manner which can be applied to AI workflows.
Net dollar retention recovered to 105.2%, underpinned by renewals and government sector clients globally. Moelis points to upsell opportunities, including migration of module sales to Neo, Neo AI solutions and Linkurious.
Moelis remains Buy rated with a target of $3.33.
Excessively discounted
Abacus Group ((ABG)) has caught the attention of several brokers this reporting season, including by Shaw and Partners.
Abacus is as much about a simplification strategy as it is about FY26 results, which were in line with expectations.
Post the sale of management rights for Storage King Group ((SKG)), Abacus no longer receives either management or equity income from the group.
This has resulted in a resetting of FY27 distribution guidance to 6.7c per share based on an 80%-90% payout ratio. The analyst notes this implies FFO of 7.4c-8.4c.
The office segment, which is now the principal asset class for Abacus, remained “resilient”, with occupancy of 89.2% at FY26 end compared with 89.5% at 1H26.
Like-for-like rental growth was 2%, with incentives unchanged at 33%, aligning with FY25.
Over the year, the office cap rate was consistent at 6.8%, with no major portfolio changes, the broker notes.
Some 11% of the office portfolio remains vacant, largely at 710 Collins Street, Docklands and 201 Elizabeth Street.
Shaw expects occupancy to exceed 90% in FY27 and rental growth to improve as the Sydney office market tightens and inflation-linked rent reviews flow through.
The retail asset exposure is highlighted as being via two “high-quality” assets, Myer Melbourne and Oasis Shopping Centre on the Gold Coast.
In FY26, occupancy was 97.4%, with like-for-like rental growth of 4.4% underpinned by annual reviews and contractual escalations, Shaw explains. In FY27, occupancy is expected to remain stable, with rental growth of around 4%.
Management has guided to a cost of funds of around 5.25% on drawn debt, up from FY26.
Gearing came in at 36% at the end of FY26. Post the expected sale of its 19% equity stake in Storage King ($295m) and the Camellia property ($55m), gearing is forecast to decline to around 25% in FY27.
Post divestments, the REIT is expected to have scope for around $500m of acquisitions. Shaw highlights that at a cap rate of 6.9%, this could generate around $30m of annual rental income, which would largely offset earnings lost, net of cost savings, following the change in the Storage King management arrangements.
Shaw has a new Buy rating with a $1.05 target price. Excluding Goodman Group ((GMG)), Charter Hall Group ((CHC)) and Centuria Capital ((CNI)), the A-REIT sector trades on 13.9x FY27 FFO, a 5.5% yield and a -7.7% discount to NTA.
In contrast, the broker details, Abacus trades on 11.5x FY27 FFO, a 6.7% yield (67% franked) and a -43% discount to NTA.
With the Storage King and retail assets likely worth close to book value, the analyst stresses the market is ascribing a discount of around -60% to the office portfolio, which is considered “excessive”.
The author owns Abacus shares.
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