Australasian Equities - Fat Prophets

Fat Prophets
Australasian Equities

Core

high

Hold

Fuel Costs Bite, Loyalty Did Its Job Qantas (ASX: QAN) finished FY26 with resilient passenger demand, growing Loyalty earnings and a credible fleet-renewal plan, but elevated fuel costs and heavy investment mean near-term shareholder returns depend on its ability to protect airline margins. Qantas earns most of its income by flying passengers through the premium Qantas network and lower-fare Jetstar network. Airline profitability is shaped by fares, passenger volumes, aircraft utilisation and fuel costs. Qantas Loyalty earns money differently: it sells points

WiseTech Global

Speculative

high

Hold

Faster Than Planned, Further to Go WiseTech’s (ASX: WTC) acquisition of e2open has made the business larger and increased the size of the total addressable market opportunity. The investment case now rests on proving that early cost savings can restore margins and reignite CargoWise growth. WiseTech sells logistics and supply-chain software. Its main product, CargoWise, helps freight forwarders and logistics providers manage shipping, customs, finance and compliance through one system. Customers pay recurring licence or subscription fees, with revenue rising as they

Telstra

Core

medium

Buy

Holding the Line We remain positive on Telstra. The mobile franchise is still growing, pricing remains firm, and cost reductions are supporting margins, while strategic investment is moving past its peak and should improve cash generation over the next few years. The dividend continues to rise, and a further $1 billion share buyback was announced, building on the earlier concluded $1.25 billion programme. Recent share price weakness in Telstra reflects a mix of company-specific and macro concerns. Retail subscriber momentum

South32

Speculative

high

Buy

Strong Foundations, Heavy Lifting Ahead South32’s (ASX: S32) FY26 result shows that its retained copper, zinc and silver assets are producing stronger earnings, while the planned aluminium sale should sharpen the portfolio. We don’t believe the market is fully pricing the shift in the business, given our constructive view on commodities. We upgrade to BUY. Underlying earnings rose 55% to US$1.03 billion and underlying EBITDA rose 28% to US$2.46 billion, lifting the operating margin from 26.3% to 31.0%. Higher copper, silver,

St Barbara

Speculative

high

Buy

Cash ‘Back’, Production Next St Barbara (ASX: SBM) ended FY26 with A$393 million of cash on hand, plus A$81 million of restricted cash, and no debt. It has declared a fully franked dividend of 5 cents a share, its first since September 2021. The company also flagged a potential share buyback. The stock rallied sharply after the release. The market wasn’t expecting this. Management must have significant confidence that it won’t have to go back to shareholders for more capital as

Collins Foods

Core

medium

Buy

Cutting Losses, Doubling Down Collins Foods (ASX: CKF) has started FY27 with a stronger Australian KFC business, improving European sales trends and a simpler KFC-only strategy, giving the group a clearer path to earnings growth. Collins operates KFC restaurants in Australia, Germany and the Netherlands. It earns revenue from food and drink sales at company-operated stores, while shareholder returns depend on customer visits, spending per transaction, restaurant-level profit and the returns generated by opening or acquiring new restaurants. The exit from Taco

SRG Global

Core

medium

Hold

A Strong Result, though not all Organic SRG Global (ASX: SRG) finished FY26 ahead of guidance that had already been upgraded in June, and lifted its FY27 outlook. Revenue exceeded $1.6 billion for the first time, work in hand reached a record $5.1 billion, and the balance sheet returned to net cash less than a year after the TAMS acquisition pushed the group into net debt. A fully franked final dividend of 4 cents (+33% YoY) will be paid on 11

GrainCorp

Speculative

high

Buy

Higher Grain Prices Revive Volume Upside GrainCorp (ASX: GNC) is one of the ASX’s most direct exposures to the grain leg of the commodities upcycle we see underway. Wheat has risen sharply as Black Sea supply is disrupted, with Chicago futures up strongly from the start of July through late August. GrainCorp earns from receivals – the grain that growers deliver into its network – along with storage, handling, export, processing and marketing, rather than from owning grain itself. What matters

Domino’s Pizza Enterprises

Core

medium

Hold

Fewer Orders but Better Economics Domino’s Pizza Enterprises (ASX: DMP) has improved franchisee economics and reduced debt by accepting lower volumes. From a financial point of view, the shift in focus worked. Domino’s cut broad discounting, closed underperforming stores, and reduced operational costs, choosing fewer but more profitable transactions. This strategy lifted underlying EBIT by 1% to A$200.1 million and underlying NPAT by 4% to A$121.6 million, even though network sales fell 6.8% to A$3.87 billion and same-store sales declined 4.1%.

Paladin Energy

Speculative

high

Buy

Ramp-Up Delivers, but Valuation Needs Support Paladin Energy’s (ASX: PDN) Langer Heinrich restart has moved from a funding and ramp-up phase to steady production and cash-generative. The investment case now depends on sustaining an output increase and advancing Patterson Lake South without causing further funding strain. Paladin earns revenue by selling uranium produced at its 75%-owned Namibian mine, while the Canadian Patterson Lake South project is intended to provide the next source of growth over the medium-term. The key change is that

Sandfire Resources

Speculative

high

Buy

The Next Act: Capital Returns FY26 was a record year for Sandfire on several metrics. Copper is a preferred base metal exposure in our House view due to our expectations for a structural deficit for the red metal over the coming years. We note that Sandfire’s FY27 guidance was struck at a forward price deck we find conservative, with each of the key metals trading above those levels currently. Secondly, the balance sheet has finished its repair job. Debt has been

Genesis Minerals

Speculative

high

Buy

Positioned for a stronger gold market We are upgrading Genesis Minerals to Buy. Our house view on gold over the coming quarters has turned more constructive, dovetailing with our medium-term stance, which has remained positive. We believe the correction earlier this year has run its course, and expect the metal to reclaim a US$5,000 handle by year-end. Second, Genesis is becoming one of the clearest large-cap ASX exposures to that view. From October it will be completely unhedged. The position at

Woodside Energy

Core

medium

Hold

Growth Arrives as Capital Peaks Woodside Energy’s (ASX: WDS) first-half result shows rising commodity prices are supporting earnings and dividends, but the investment case now turns on delivering Scarborough safely and on schedule while funding a large global project pipeline. The first half was a price story rather than volume. Realised prices rose 20% to US$74 per barrel of oil equivalent while production fell 13%, lifting underlying profit 7% to US$1.33 billion. With the Strait of Hormuz effectively closed or hampered since

Scentre Group

Core

medium

Hold

Full House at Scentre We maintain our HOLD rating on Scentre Group (ASX: SCG). The result actually reads better than the rating implies on the surface. Guidance is up, occupancy is at its highest in over a decade, and funding costs have fallen. What holds us back is not Scentre Group’s performance but the broader backdrop that poses a headwind to a substantial upward re-rating from current levels. In our view, the RBA is boxed in. Inflation is still well above

Ansell

Core

medium

Hold

Strong Result, Higher Expectations Ansell’s FY26 result was strong, and the market quickly paid up for it on the day the results dropped and again on Thursday, with the shares surging roughly 18% across the two sessions. Adjusted EBIT rose 14.9% on 5.7% sales growth, the margin expanded to 15%, and cash conversion of 113% funded US$118.4m of buy-backs while net debt fell to 1.3x. For a few years, the Ansell story has largely been one of self-help, restructuring the business,

Fortescue

Speculative

high

Hold

Strong Cash Flow, but Costs Rise Fortescue’s (ASX: FMG) FY26 result confirms the cash generation strength of its core iron-ore operation and dividend capacity, even as rising FY27 costs, Iron Bridge execution risk and uncertainty around Chinese trade conditions prevent the outlook from being more positive. An important part of that cost step-up forecast is currency. Guidance assumes the Australian dollar holds near 70 US cents, up from 65 cents in FY26, worth roughly US$0.80/t of the increase on the company’s own

JPMorgan Global Emerging Markets Research Enhanced Index Equity Active ETF

Speculative

high

Buy

A Direct Route Into Asia’s AI Buildout We’re moving JPMorgan Emerging Markets Research Enhanced Index Equity Active ETF (ASX: JEME) from Traffic Light to BUY, as earnings momentum has better caught up with the price action and we believe the market is underestimating the durability of this cycle. TSMC’s July sales rose 45% year on year, with 2026 US-dollar revenue guided to grow more than 40%. The world’s largest cloud providers are projected to spend US$886.7 billion on capex in 2026,

Austal

Speculative

high

Hold

Worth waiting Hanwha recently put a price on Austal’s American business before a significant news event. The 11 August announcement says plainly that the offer arrived before the trading update. The headline range of US$1.05bn to US$1.20bn was set without sight of an A$175m hole. The downgrade was a big one, which the market looked through because of the Hanwha offer, with a share price spike for Austal on the day the announcement was released and the trading halt was

Northern Star

Speculative

high

Buy

Peak Capex, Turning Gold We are upgrading Northern Star (ASX: NST) from Hold to Buy. Two things drive the upgrade. The first is gold. Our earlier move to Hold in May was mainly a call on the metal as it endured an extended correction. We think that correction has now run its course. Gold has recovered materially from July levels and popped in US trading on Wednesday after the Treasury doubled its programme of buying back its own long-dated debt. The

Whitehaven Coal

Speculative

high

Buy

Better Coal Prices Meet Lower Costs Whitehaven Coal’s (ASX: WHC) FY26 profit decline masks an improving earnings set-up: stronger coal prices, lower interest costs and fewer acquisition payments improve the cash-flow outlook. The FY26 profit fall was a price-and-currency story, rather than an operating one. Underlying NPAT fell 29% to $227 million and revenue declined 7% to $5.4 billion as lower coal prices and a stronger Australian dollar reduced realised Australian-dollar revenue, even as managed production of 40.3 million tonnes and sales

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