Target Prices Achieved for GNP, CAR, and HUB – What’s Next?

GenusPlus: Driving Growth Through Strategic Acquisitions; “Buy” Rating Reiterated with $3+ Target We’re excited to see GenusPlus Group (GNP) hitting its stride, recently reaching our initial target price of $2.50 per share. It’s clear the company is firing on all cylinders, delivering solid returns over the past four months while making impressive progress both operationally and strategically. With its recent acquisitions and expanding project portfolio, GenusPlus is positioning itself for further growth. GenusPlus has recently raised its EBITDA guidance for FY24, indicating a stronger-than-expected performance in the March quarter. This boost is thanks to some projects exceeding expectations and others starting earlier than planned. The company now anticipates FY24 EBITDA growth of 20% to 25%, a significant jump from its previous forecast of 10% to 15%. Combined with new contract wins and favourable industry trends, this update highlights solid growth prospects for GenusPlus as it heads into FY25 and beyond. Recent Contract Wins Western Power Contract: GenusPlus will manage a major maintenance and upgrade program for Western Power, a state-owned entity overseeing the Southwest Interconnecting System (SWIS) electricity network. This five-year deal is expected to bring in around $50 million in revenue during its first year. It covers various maintenance services across Western Power’s extensive network in Western Australia. Fortescue Contracts: The company has also secured two significant contracts worth about $50 million, focusing on civil foundations and a 220 kV overhead transmission line connecting Fortescue Ltd’s Solomon and Eliwana mines. These projects are part of Fortescue’s decarbonization efforts, which aim for zero emissions by 2030. GenusPlus’ involvement underscores its expertise in supporting large-scale energy transition initiatives. Financial Strength and Market Position: GenusPlus is in a strong financial position, with more cash than debt, solid profit margins, and a low price-to-earnings ratio relative to its growth. The company has consistently delivered high returns, maintaining liquidity that covers its short-term obligations. Its profitability and recent positive stock momentum further highlight its robust performance. Why We Like GenusPlus: Potential Undervaluation: The stock seems undervalued, with an estimated fair value above $2.50 per share. Strong Earnings Growth: Its earnings growth outpaces the industry average, reflecting strong operations. Essential Services: As a provider of critical power and communication infrastructure, GenusPlus plays a key role in economic growth, offering stability and growth potential. Solid Financials: With low debt and a healthy balance sheet, the company is well-positioned to pursue its growth strategies. Valuation and Outlook We’ve updated our valuation for GenusPlus using a 5-year Discounted Cash Flow model. Employing an 8% discount rate and a terminal revenue multiple of 0.5x, we factored in a projected revenue CAGR of 8.6% and an average EBITDA margin of 8.7%. Based on these inputs, we estimate a fair value for GenusPlus at $3.01 per share. With its strong earnings growth, financial health, and momentum, GenusPlus presents a compelling investment case. We maintain a long-term ‘buy’ rating, setting our target price above $3.00 per share. CAR Group Delivers Strong Growth, Impressive Returns, and Solid Long-Term Potential Across Regions – We Are Issuing a Long-Term “Buy” Rating CAR Group has really stood out as one of our top performers in the growth portfolio lately. Since we first recommended the stock at $17.70 per share, it has soared to over $41 per share, delivering an impressive 136% return. This strong performance is a clear reflection of CAR Group’s potential and why we remain confident in its long-term growth. CAR Group continues to demonstrate strong operational performance and excellent growth prospects, underpinned by its diversified global presence and solid execution in key markets. The company’s ability to generate double-digit revenue and earnings growth across all key regions, combined with its strategic acquisitions and innovations, positions it well for long-term growth. Key Catalysts: 1) Continued revenue growth across all regions, with a focus on increasing yield in the U.S. and Brazil. 2) Expansion and successful integration of recent acquisitions, particularly in North America and Latin America. 3) Strong demand for used cars, digital transactions, and premium products, especially in Australia and South Korea. 4) Technological investments that enhance customer experience and operational efficiency. Valuation and Outlook: Looking ahead, CAR Group’s forecasted profit growth paints a promising picture for its long-term prospects. While the stock is currently trading a bit above its intrinsic value, the expected surge in earnings over the next few years justifies the current price, making it an attractive option for those looking at the long haul. The company’s global presence, with operations in Australia, South Korea, the U.S., and Chile, helps spread risk while positioning it to take advantage of diverse market trends. The confidence that institutional investors have in CAR Group adds another layer of stability and suggests solid long-term potential. The company’s FY24 results show strong revenue and EBITDA growth across its markets. Its push into new regions like Latin America, along with innovations in digital vehicle transactions and advertising, are key drivers for future growth. With a leadership position in these areas and a healthy balance sheet, CAR Group has the financial flexibility to seize new opportunities as they arise. In terms of valuation, we assess Car Group to be trading slightly above its intrinsic value. However, its EV/Revenue multiple has remained consistently stable below 15x over the past four years. Regarding the Price-to-Book ratio, CAR is currently trading at 5.4x, well below its recent peak of 15x in June 2020, suggesting the stock has room for further upside before entering overbought territory. To determine the target price, we conservatively anticipate a potential near-term retracement to the $37-$38 per share range, aligning with CAR’s fair value, before it resumes its upward trajectory towards our primary target of $47 per share, which corresponds to the extension of the Fibonacci retracement from the August low to recent highs. HUB24: Strong Fundamentals and Innovation Drive Long-Term Growth – Retain ‘Buy’ Rating HUB24 Ltd (ASX: HUB) has demonstrated exceptional performance this year. Since our initial recommendation, when the stock was trading at approximately $26.06 per share, it has surpassed our target price of $60 and is currently trading well above its intrinsic value, which we estimate to be in the $55–$60 range. This represents a substantial return for our members. Despite the current valuation, the company’s strong fundamentals and promising outlook suggest potential for further growth. HUB24 continues to demonstrate its strong market position in the Australian platform sector, reporting impressive growth in funds under administration (FUA) and net inflows in Q1 FY25. With a solid performance track record, ongoing strategic initiatives, and strong market demand for its services, HUB24 is well-positioned for continued expansion, making it an attractive stock for investors seeking growth in the financial services space. Record Growth in Net Inflows and FUA HUB24 reported record net inflows of $4.0 billion in Q1 FY25, marking a 44% increase on the prior corresponding period (pcp), excluding large migrations. This growth in platform net inflows demonstrates the market’s increasing confidence in HUB24’s platform and its ability to attract new assets. FUA reached $113 billion, up 37% from the previous year, with platform FUA growing by 41%. This solid expansion underscores HUB24’s competitive edge, with the company capturing significant market share—its platform ranked first for both quarterly and annual net inflows. Strategic Partnerships and Innovation HUB24’s strategic alliance with Reach Alternative Investments further strengthens its product offering by providing access to alternative investment options that are increasingly sought after by Australian investors. This partnership positions HUB24 to capitalize on growing demand for private equity and private credit investments. The company continues to enhance its platform with features that improve efficiency for advisers, such as digital advice fee consent dashboards and enhanced cash management capabilities. These product enhancements make HUB24 an increasingly attractive platform for financial advisers, driving further adoption and inflows. Strong Market Share Expansion HUB24’s market share has increased to 7.7% as of Q1 FY25, up from 6.3% in the previous quarter. With 44 new distribution agreements signed during the quarter and a significant increase in the number of advisers using the platform (up 17% on pcp), HUB24 is effectively growing its network and customer base. Positive Outlook and Growth Targets HUB24 has set an ambitious target for FY26, aiming to reach a platform FUA range of $115-$123 billion. The company is on track to meet this target, supported by a strong pipeline of new and existing client relationships and continued market leadership. How to Trade HUB24 Shares In evaluating HUB’s valuation, we conducted a comprehensive analysis using multiple comparative models against industry peers. This included metrics such as price-to-earnings, price-to-sales, and price-to-book ratios. Recognizing HUB’s consistent dividend growth over the past five to six years, we also applied a dividend multi-stage valuation method. By averaging the results of these approaches, we determined an estimated intrinsic value of $55.53 per share. However, HUB’s strong growth potential suggests there could be additional upside. Technical analysis further supports this view, with the intrinsic value aligning closely with the 50% Fibonacci retracement level from the mid-April 2024 lows of $37.50 to the recent highs of $76. This points to a potential retracement and consolidation in the $55–$60 range before a possible rally toward $96 per share. That said, we advise our members to remain cautious and employ a dollar-cost-averaging approach to maximize the risk-adjusted entry.