the call: Tuesday 26 May

[MUSIC] The call is brought to you by Centuria, an ASX-listed property fund manager with $21 billion in assets under management. Want to diversify beyond equities? Explore the Centuria Sydney CBD Prime Office fund at centuria.com.au. [MUSIC] Good day and welcome to the call. 10 socks picked by you two experts. One hour it is Tuesday the 26th of May. I'm Andrew Gagan. Thanks for joining us also joining us on the show today. Michael Wayne from Madaglia Financial and Francesca Distratus from Ordminette. Gentlemen, welcome to you both. Francesca. We're actually expecting a higher open today given what we saw on global markets. Donald Trump is the same and close to a deal. Then the US military goes and strikes a couple of ships and military targets within Iran. Markets coming off. We may be as far away from a deal as ever. How do you play this or you just, you've got to move on from this? I think you've got to look past it. Trying to predict what might happen or could happen, I think is sort of trying to measure how long a bit of string is. I've been to a number of presentations and lunches over the last month or two about and a different scenario is that it pressed about what could happen and what might happen. I think investors have got to look past that. I think it will come to an end. The Iranians don't have an extensive range of armaments if you like. So at some point they're going to just run out, I would imagine. And the other thing is that the Trump administration has the midterm elections in their sites as well. So I don't think they want to have this continuing through or leading into the midterms as well. So I think we're probably looking at it maybe a few more months. If not maybe a month, I don't know what what what provides. But I think if you still look past it and look at the quality of the investments that you have, I think you'll be fine as long as you can write out any volatility and that's what we're doing at the moment. How are you approaching it then particularly as Venerable says, I mean this could just continue dragging on. Yeah, I mean it's a little bit irritating. It's nothing else. And you get all the headlines and it looks like progress is being made and obviously things wear up again. And then the way in the summer in a couple of months or more. There were signs there that markets were starting to really look past the Iranian conflict. I had a strong focus on the US corporate earnings and that was very positive. And in many ways the market was just ignoring what was happening in Iran. That's all willing good until you know the pressure goes up on the oil price. And then you start seeing bond yields, you know touching highs that haven't been seen in decades. And that's what sort of brought markets attention back towards towards the conflict because people are sad and get a little bit nervous about the lasting inflationary impacts. But I do stick like Francesca you do just try to put this aside. It is what look and it is positive. I think that there hasn't been a complete eruption of the conflict up until this point. And that does show that potentially behind the scenes is a lot of different discussions going on. And probably means that a deal will be reached soon and a later. But yeah, it's just it's just irritating. I think that's an understanding Michael you're a telly. I think a lot of the media is looking at from the point of view of the financial markets looking at short termism. And really most investors that are looking at long term can write out that volatility. But just on the oil price, when the conflict does end there's going to be a sharp fall in the oil price. But our energy analyst was presenting this morning in the morning meeting. He suggested it could take 12 months to get production back to normal levels. So you're going to get that knee jerk reaction. But from point of view of long term, it'll take sort of four to six months to get back to 80% production levels. And probably another six months pass out to get to full production levels. Well, meanwhile that AI trade continues. Obviously we're seeing that on Wall Street. But what's going on locally? So let's get to our stock of the day. It is good when group. It has doubled down on data centers. And mid demand for AI says data sense account of 73% of the groups. 14 and a half billion dollar work in progress. It says it's total portfolio is now at 87.1 billion dollars. Says more than 40% of work in progress is either pre-solve or being built for third parties or partnerships. And that it's on track for 9% operating EPS growth. Chevy executive grid boom adding that energy availability is the most significant constraint to building infrastructure required to power the digital economy. So that is our stock of the day. She has had come off this morning with that update certainly as far as I guess some concern there regards to heavy capital commitments. And also portfolio repositioning. Michael, what do you think? Yeah, I mean the result or the update was more or less in line with where the market or where the company had guided the market. The problem with this company is there's a lot of embedded expectations. And with the absence of any announcements of new contracts and the high expectations lead into it. I think the market was slightly disappointed. But it much of a muchness really the businesses is tracking along. Okay. It's obviously caught up in the property bucket. But also you know now it's very much capturing the AI infrastructure AI services theme as well. The company hasn't pivoted away from it's more traditional investment portfolio being logistics. And there's now focusing most entirely on new data centers and the good news is that in the short term. You know the margins are potentially twice as good for these data center projects and some of those. I'm you know, just type of elements they were doing. I think the long term question is is obviously energy supply as you touched upon. But also you know access to land. There's only so many locations or there's less locations you can build these data centers. Then say logistics warehouses. So yeah that's just something to consider long term because as more and more entrance come into the market. The competition for those sites. What up and make you know start to compress those attractive parts. Who in the group is in the fortune of position where it already has a lot of good quality locations. Some of those locations were historically. You know that we're going to be logistics sensors, but they've evolved that over time to take advantage of the balance. Let's see it from these hyper scalars in the AI of data center space. So look we like good men group. We hold good men group. We feel that for a long period of time and we continue to back management. And their ability to deliver this data center projects long term to capture that food. Today's update was needed here. Well as you mentioned, sorry, what would you do with stock right now? We'll just hold it. Yeah, at the moment. But we do like it. We just at the moment. It's just sort of just going along and they need to keep delivering and then to see more contracts come through. Of the space that they're providing to the market. All right, well you mentioned constraints there, particularly as far as land in terms of building these data centers. Well, not if you're Elon Musk and SpaceX, apparently, we'll just build them in space instead. As well. Nonetheless, let's come back down to earth as far as a good minute concern. Francisco, how do you say it? Yeah, look, good men's for some time now being priced safer perfection, I would say. And today's announcement, look, there was nothing bad in it or anything. But I suppose the market was hoping for a little bit more. So when you deliver on what expectations are and your price for perfection, sometimes that's going to pull you back a bit. Look, yeah, good men grips positioning itself to be, I suppose the infrastructure player of AI, obviously data centers. But also logistics centers that they, you know, they develop, you know, logistics centers are becoming much more automated with robotics and so forth. And AI will be a big part in supply chains as well. Look, they've got about 14 and a half billion dollars where the projects in progress, moving it towards about 18 billion by I think the end of this year or early next year. But as Michael mentioned, power constraints is the big constraint on not just on group and group, but on that whole industry of data centers. And I think processing power as well is a bit of a constraint as well. So I think we're getting to a point of, I suppose, a critical inflection point in this data center. and our slash processing power technology. And at some point I think improvements on the technological side need to come into play because of those constraints. So I think what we'll do is we see constraints on land and power. I think we'll find that the technology for side of things will start to try and find improvements in not only processing power, but also on the footprint required to store data and things like that. And as we know, the data we have on our laptops and our phones were 40 years ago stored in big data rooms. So I think that that technological improvement will start to kick in as well. Look, without mind, good McGreep, I think it's a well-run business. The gumbens have been in control of this business for some time and have done a very good job. But at these prices, we're holders. If a client has a position that is overweight relative to their investments in that sector, being property, we'd probably recommend reducing their exposure. But at this point in time, our recommendation is just a whole-- Well, it's called that a double-hold for our stock of the day, Goodman Group. Right, let's get into the first five stocks. As chosen by you, we're going to take a look at Sims and Core, Star Entertainment, Bat Core, and MediBank. Let's begin with Sims. It is that global recycling company, particularly IT asset disposal, their metal recyclers. And she has dropped about 50% out of the past year. And has signal and strong turnaround in profitability and operational momentum. They improved margins as well, particularly in North America, Francesca. How do you see it? Yeah, look. I suppose you've got to look at what they're moving towards and what they have through traditional scrap business, which is scrap metals and so forth. It's a little bit weak at the moment, I would suggest. But their investment in what they're calling Sims lifestyle, life cycle services, which is the recycling of IT assets, I think is a good potential growth path for them. So at the moment, I think it's probably a little bit overvalued. Our recommendation at all, Minette, is a hold. But I'd suggest to hold maybe even towards a lighten where the way the share prices being moving. You're not getting any or getting a real dividend out of it. It's less than 2%. Around 1.5%. So with no frinking in it. So you're hoping for much more growth. But on these valuations, I'd suggest that there's not much more growth in it. And it's actually trading above our analyst's valuation. I'm not sure how long ago we put that valuation out, unfortunately, but it is trading above that valuation. So in short, look, I like the longer term outlook with them moving more into IT recycling. But I think there's a long way for that to play out. So at the moment, I'd be the lightning or holding for now. Michael. For so long, Sims, as you can see from the 5-H chart, where there's a more boring type business, effectively going out, collecting different scrap metals and forest metals like steel, for instance, non-forest metals like aluminium and copper, and would basically buy the scrap cheaply, process it and then sell the product back into the market at a margin. So they're pretty basic, straightforward business model. Essentially, in recent times, it's all changed with a focus on electronics. And the market is excited by that. And there's going to be a lot of IT hardware from data centers and a lot of different electronic products that have a lot of different materials in there that can be repurposed and then processed and sold back into market to the market. It's got very excited by all of that. Whether it's detached from reality a little bit, remains to be seen. You'll also see, beginning of last year, the share price really took off around the period where tariffs was the hot topic of the time. It's because in the US, a lot of these materials are tariff protected, which means they have sort of insulated somewhat from the supply that's coming out of China for a lot of things like steel. So given that they do have a large exposure to the US, it doesn't mean that one of their core products or one of their core businesses somewhat insulated in the market dynamics. It's a good story, but I'd like to see some proof that the electronics part of the business is really gaining traction. It's obviously growing very quickly. There is a bit of an earnings upgrade, which always helps things, but I think even where things weren't, even how quickly things have run out of it, or just a race you ingest yet. So I'm having a go at holding. Double hold, with potentially a trim there, certainly, from Orts. Let's turn now to Ancore in terms of global packaging. Company shares are down around more than 20% over the past year. Although it's dividend payouts having increased, and that was particularly following its very acquisition in the States, Michael. Yeah, so the global legular, I suppose, in consumer packaging, things like flexing packaging, rigid plastics, cartons, those kind of things. So this is a business that's got a pretty entrenched position in the market, the acquisition or the merger with Barry, and it's been very positive in that it keeps me even more scale. Typically, in emerging markets, the industry's a bit more fragment and it develop markets, the people concentrated more recently. They have had a little bit of pressure come on them with this Iranian conflict, because a lot of the costs of the inputs have increased, and that was sort of flagged in some of their more recent updates. But look, it's obviously had a shared consolidation, hence that that being run up in the share price. But look, it's a business that is more cyclical than people think even that is exposed to a lot of consumer products. But it's saying that these guys are pretty well entrenched within their industry. So, but it's not the most exciting thing in the world, I'm going to go a hold on an offer. Jessica, yeah, look, I think this business is probably looking pretty good at the moment. I mean, that share price movement was to do with the merger. Let's say acquisition merger of Barry. And I think there's still a lot of synergies and costs to come out of the business, which from our point of view at Ordminette, we see a little bit more value there. Even though volume's probably a bit soft and maybe even declining with soft to consumer or downward pressure on the consumer, particularly in the US at the moment. But the cash flow remains strong. Follow, and it'll time will tell with the merger acquisition, if you like, whether A, they get some more synergies and cost outs from the business, which is going to give it some margin expansion we see. We see it currently trading on a PE, multiple of under 10 times earnings for this year and going forward declining. So we think the market's probably mispricing this a bit. It's got a strong dividend yield. Yes, it was increased, but the increase was partly due to the merger, so to pay out ratios may have changed somewhat because of the two businesses coming together. Our guys have got a valuation of at north of $60. So on current prices, we'd be happy buying the stock at the moment. Obviously not a not without its risks because of that acquisition, but if the acquisition flows through as well as expected, then we think there's some more upside in the share process. All right, that's a cautious buy and a hold then for Amcure. So that cost you here, did you know becoming an OZB's contributor gets your stocks straight to the front of the queue at the call and to the expert of your choice if a big if you become an OZB's contributor. It's our small way of saying thanks for your support. The link to become a contributor is in the show notes and we'd love it if you could leave us a review as well. Thanks for listening. Now let's get to our next stock. It is star edit segment. It has of course had multiple issues. Having recently secured new financing facility with Whitehawk Capital, that's part of its broader refinancing strategy given the issues it's had. Look, it looks certainly real three issues with allegations that are money laundering and so on. And look, you take a look at the share price over the past year, not great. Over the past five years, absolutely woe force completely collapsed. So Francesco, you're seeing any upside. - Because in the old days, you would have said it casinos are licensed to print money, wouldn't you? This is a life. - That's the loose money. - Might just clarify something, the money laundering side of things is not the casino, is laundering money, it's the gamble is a. - Yeah, sorry, they do use the casino. - I wanna get you in trouble there. - Sorry, Peter, I was accusing the casino, but yes, you're right, it was more of the controls and checks and balances that you have. - That's right, yeah. And look, you know, any gambling establishment is gonna be seen as a place where the laundering of black money, if you like, we'll go on, whether it be a casino or a, you know, Pokemon machine venue or anything like that. So, you know, and quite rightly, the regulators are clamping down, not sure how that reflects on the tax coming back to the government, but I know from discussing with, and this is anecdotal, discussing with gamblers that used to frequent star-city casino, they don't bother anymore. You know, if you went to a show at star-city and then decided after the show to go and have a drink and maybe put, you know, a few hundred dollars on the table, you've got to basically give them your life story these days, so people don't bother. So, I think that casual gambling is what they're gonna miss out on a bit of too. - But it's easier to do it online, that's it. - Well, it's easier to do it, but yeah, but, I mean, the funny is that you're at the casino and you want to sort of use the chips and people get that feeling that they're at Monte Carlo, if they like. You're just not gonna get that feel if, you know, obviously the key part of the business is the junket gamblers, but, you know, every little bit helps as they say. Look, this is a business that's still in distress, heavy losses, balance sheet pressure. And the regulatory risk is still gonna overhang it, how they get over that, I don't know. - Yeah, we don't have a recommendation, so we've got no coverage. And I think, you know, Audemunet's been restricted on giving coverage as well, because of ownership of the casino and ownership of Audemunet. So, I'm not gonna give a recommendation. I'd say it's obviously much more speculative than it ever has been, if they can sort themselves out. And people come back to the casinos and, and, you know, we start to see some money being put over the tables, then there's probably a lot of upside in, in, in StasiD, but at the moment, with everything hanging over the set, I'd probably steer clear at the moment. - Michael, you prepared to make a call? - It's a serious turnaround story. (laughing) Turn around. It's obviously, look, still one of the two Dominic casinos operators in the country. They've got basically the star Sydney as their flagship asset that got star in the gold post. They've got star Brisbane, which they don't have an equity stake in anymore. They've exited their equity stake, but they retain the management rights, if you like, so that where they get a fixed peak run in the casino. And then they've got the treasury in Brisbane, which is no longer a casino. It's in some of the remediation phase, which is costing the money to remediate. And really, they only operate a car park out of that building. So it's been a very, very challenging period, but there's no. It's not necessarily behind them. At the moment, they've still got a, you know, civil proceedings underway with OzTrack. There's a shareholder class action. All three of the casinos are under regulatory supervision. So from my standpoint, it's very much in the too hard basket. You'll need to certainly see some, some green shoots. And before you sort of got excited, or some of these cases, starting to roll off, the major shareholder is the amount to certain family these days. I think they've got close to 40%. So they're obviously viewing this as a very long-term turn-around project that could create even more family generation wealth for them, but they're thinking about it over decades, I imagine, rather than years. The business, I suppose, is a going concern for the moment, given the restructuring that continues to take place there, but you'd have to be a gambler to put money into this business at this point in time. So me, I'm going to go a whole, because it's just so big. So what are the odds on investing in Star City? And what are the odds of putting it on the rule at will? Yeah, I mean, exactly. It's probably some comparison there. All right, Red all Black, your choice. All right, that's the view on Star Entertainment. Let's now turn to retail. I'm going to take a look at Batcourt. Brody Anley's asking about this, sales of the Soviet vehicle, past accessories, and equipment, particularly, well, yeah, I mean, it benefited, obviously, during COVID when everyone hit the road, but since then, well, that's reflected in the share price, in fact, more acutely what we've seen over the past year, where it's collapsed about 90% and you would think then, Michael, that's only getting it worse, given cost of living pressures that we're feeling at the moment. Although it has exhibited some sales moments in there across all segments, but in particular, those elevated fuel prices clearly ahead went. Yeah, Batcourt is a bit of a fall and angel on the market. It was a bit of a darling going back five, 10 years, but it's come across very hard times, I think. Historically, people associate them with the retail network of person stores and minus stores and those kind of things, but they're called business model, auto-bounds, another one that people might be familiar with. But the core business and the major revenue source for this company is the aftermarket's parts business. So if you take your car to a mechanic, the mechanic obviously doesn't hold all different parts within their particular, two, that would see from mechanics, warehouse or whatever you want to call it. So they go online to persons and they all in that part and it's normally delivered the same day or the day after. And that's basically their service. Although the retail component is a big part of the business and that's certainly being struggling, but all aspects of business have been struggling. There's increased competition. They've had a series of earnings downgrades and then missed the number of forecasts and then consensus numbers to the market is entirely lost confidence with this business. Throw on top of that the Middle East conflict and you've got increased fuel charges, fracas, flyboss and and basically their margins are being either contracted or they have any put prices up which can turn to man. So they're in a very challenging position. As you touched upon, they have seen some positivity in momentum come forth after a very, very tough period. But this is probably very early days and we'll mark all needs and convincing to see all of what's going to be short. This is the inflection point, beginning of a new trend rather than just a flip on the radar. From my standpoint, it's a sell for now. They have completed the capital raising so they are well capitalised, but within months of that capital raising now falls down really good. So management, I think, is lost. Let's just go. Yeah, look, I think this initially was a bit of a classic sort of acquisition round up. A number of years ago, they went on the acquisition trail, bought a lot of businesses and tried to bring it all into one. And when a company like this stops making acquisitions, they've got to bring everything into order then. And that's a lot of sort of reducing exposure to multiple or dual cost structures and things like that. So, and then being exposed to the automotive aftermarket. So you mentioned during COVID people driving. So there was a lot more expenses, expenditure on automotive and aftermarket automotive. So I think they're a bit exposed, obviously, or a favourite exposed to consumer discretionary spending slowdown. Obviously, fuel prices increase, like you mentioned. That means that people are doing a little bit less driving. But that's only recent time. So that could be even more pressure or downward pressure on Babqel. So the focus now is optimising the network and bringing a lot of brands in together and controlling costs. Time will tell, but as Michael Lood too, they've had some recent downgrades. That indicates they're probably not having the greatest success in that. We've got a trading on about 21 times for 20, 20, 26. So to me, that's still expensive. Although they do, that does come down to around 10 times earnings in 27. So I need to have a closer look at the numbers and see where that is. There's some costs that come out or so on. But I would say if you've been invested in this stock, you've been in it for the long haul hold. Our recommendation is hold. We have a valuation that is slightly higher than we're in trading. So at some point in time, the market's going to appreciate that there is some value in this stock. But if you're looking for an automotive, I think there is a better alternative, a motive of the, we don't have current coverage of it, but consensus is positive on it. a bit of a different mix in in the auto aftermarket. A bigger focus on servicing, which is obviously a fairly essential part of motoring, but also at the high end of the aftermarket, so full drive enthusiasts and so on, which tend to spend a bit more money on their car because that's, you know, they're not only, it's their leisure, if you like, so it's not a one-off, it's a continual expense for them. So at the moment, we would say back core is a hold and I prefer a motive. It provides a good dividend yield as well, a motive. All right, a hold in a self-bat core. Let's now turn to MediBank, the pride of health insurer, and it has seen policy-holic growth driving earnings momentum there. Francesco, and obviously benefiting from, well, the government has allowed them to lift those premiums here again. And they continually do that, which is why I would say if you want to be privately insured, you should take some investment out in one of the private insurers at the same time. Look, it's pretty much mandated that people need to be privately insured if you earn over a certain amount of income because you're going to get sluggish on the tax side of things more than it would cost you to get your private health insurance. So there's a government forcing people to be privately insured as well. Margin's are supported by, as Andrew mentioned, premium rises. I know every time I pay my health insurance, I question my wife and say, "How much do we pay in this year?" But how much was it last year? Look, they do face a lot of claims, but I think that their premium increases outweigh that. I don't need to go into too much detail. I mean, people know what it is and what they do. It does trade on a fairly steep PE, but being a fairly defensive in nature, I would expect it to. It's going to give you about 4% dividend year, and fully frank, which takes that up to what? 6% I'd say. So I think it's an attractive income investment with the changes in CJT and everyone, supposedly focusing more on income stocks. I think there's one for the portfolio. We have a buy rating on it. Michael, would you agree? Betty Bank, look at Bruns familiar, they cover, they're probably the largest private health insurance by market share in the country. They cover the premium end through the Betty Bank brand and they've also got the more valued focus AHN. So they've got a lot of people across the country. Although everyone's often familiar with the larger names, you've got NIB, it's also listed that you've got a lots of blooper HCF. They're the main players, but it is still quite a fragmented space with over 30 providers across the country. I think the thing to keep in mind is that NIB and Betty Bank, LB, listed, have slightly, you know, have a lot of shareholder pressure to deliver earnings growth and to deliver a strong balance sheet. Whereas HCF and Booper B private or unlisted means that they're able to perhaps discount, provide offers and create a bit of disruption within the market. But by and large, as Francesco basically summarized, it's a fairly regulated industry that the premium scene to come through, you know, thick and fast. This year there was a 5% premium, which was up and around 4% last year. Those increases add up over time. There was a period in time where premiums grow for close to a 7, 8, 9%. So it's some respects that come back off the highs, but it still doesn't get a lot of growth in these businesses. In saying that the rate of growth is somewhat kept by population growth, but also, you know, the migrants that come into the country, your temporary workers often, often, Betty Bank captures that particular class of insured. So, yeah, there's a few different dynamics in place, but by and large, it's a fairly boring business and a fairly boring industry. So it's more of a halt for me than a screaming buy. Let's sum up the first half of the show. Beginning with our stock of the day, goodman group, the back of its update today, both would hold it, saying, perhaps the share price has come off today, maybe disappointing the market, not more news there in terms of positives. Sims, metals, it is a look as a halt for both, although Francesco would be tempted to trim given how it's appreciated, particularly over the past year. Amcore, that's fallen. Michael would hold it, does see that acquisition of Berry is providing scale there. Francesco is saying, look, he thinks perhaps the market's misprice, he would be buying it. Star Entertainment, it has been a tale of woe and those don't look like turning around anytime soon. So it is a look, or it's don't have, don't cover it, so it's a pass for Francesco. Michael would hold it, but does say it's too hard. Batcore, it is a sell for Michael, calling it that foreign angel, having done so well, particularly the height of COVID there, series of downgrades, the effect of the stock and Francesco pointing out potentially more headwinds there, it does prefer a motive there, he would hold it. And finally, they're meant to make a buy from Francesco and a hold from Michael. All right, now let's catch up with their own high conviction fund, pick by the investment committee. Look out for the next one. In fact, we're going to record it very soon, give it a the end of the month. But in terms of the last one you can head to waspist.com and look for that drop down menu of the investment committee going into, may it use the halves I cash to buy two new stocks, Clonuville Farmer and Delta Lithium, but reduced exposure to McQuarry cash position, sitting at 7.7%. And taking a look, the fund is up, actually I don't know that number, but then I can't quite see it. It's 31% on a cumulative basis since it began in March 2022. So you know, the deal, as soon as we're questioned, any double wise go to our investment committee for consideration. You've worked hard for your money all your life. Now your money needs to work hard for you, whether you're building, transferring or drawing down, the right information makes all the difference. At ospis retire, you'll find the latest news and insight from trusted experts all in one place. Ospis retire is powered by RAM, retirement income done differently. Now second half of the show, we're going to take a look at the integral diagnostics. Abigail Storage King, ordinate, Blue Skate Steel and Coronado Global. So let's get into it with integral diagnostics. This one chosen by Kate. Does provide diagnostics services to patients and they refer us across Australia or also New Zealand as well. A new chief executive then, Jason Martinez. Broke is seeing it as a solid medium-term growth outlook driven by particularly volume recovery there and also merged with capital health as well. Francesca, what do you think? I like this business. It's in a structural growth industry, healthcare obviously and imaging and diagnostics is I think an industry where there is significant growth. Obviously the ability for patients to access a lot more diagnostic imaging is because it's becoming cheaper as technology improves. Means the demand will continue to grow. I think there's a focus on this business to improve margins, around cost controls and a lot of that will come out of technology and utilization improvements. But I think one area and they're not alone in this is using AI algorithms on imaging to which is leading technology to to analyse MRIs and X-rays and things I know from personal experience where children have been taken to emergency with potential fractures and broken bones and the medical staff have not picked up on something. I think the AI will assist in improving diagnostics. I'm not blaming the healthcare sector or anything like that and just saying that sometimes you get hairline fractures that can't be picked up by the human eye where AI doctors, you'll notice. I don't think they're on notice. I just think it'll make their job easier and faster and prove their efficiency. A doctor doesn't have to stare at a cat skin or an MRI or an X-ray for half an hour to try and find a hairline fracture where the system can do it for them. They can move on to another patient or whatever. I think a lot of people are thinking that AI is going to replace things. I think what we should be focused on is how we can improve people's efficiencies and that's what I see AI as doing. Look, it's not a sort of fits in a number of mid-cap portfolios or small-cap portfolios even though it's not a tiny company. It's on mid-ten PEE, which for a healthcare stock is relatively cheap, although the likes of said. oil and resmed and cochlear are all come back to those levels which is probably you know long-term averages very low but it pays a good dividend too. Four percent, a hundred percent frank our expectations are next year that that yield will go up to about 4.7 and then out in a 5.2 so good dividend yield good sector so we've got to buy recommendation and I wouldn't I would agree with that. Yeah Michael would you agree? I had a look at this one for a while and you know have on a quick inspection it looks fairly attractive you know the valuations reasonable the growth is potentially there for a company like this there's a lot of consolidation that's been going on in the diagnostic space and integrals no different they recently acquired capital L from there integrating that acquisition into their business and they seem to be extracting a lot of synergies so far so that's all positive. Now the primary competitors I suppose are you know Sonic Healthcare's got a large radiology arm there's helios as well but I think the key sort of drivers for this company going forward obviously it's the agent population population growth that kind of thing but there's been a lot of deregulation taking place so there's been a lot of deregulation in the MRI space which has allowed companies like integral to increase the number of MRI licenses so for instance last year I think they they had 23 license in the prior corresponding period and now up to about 45 licenses so that's a structural tailwind for them going forward there's also been a national lung cancer program which has pushed a bit of an uplift in that they're in the CT part of their business so all that's positive there's definitely those core drivers the one thing to be careful of is as the industry becomes more deregulated and becomes more consolidated what happens is there's a bit of a land grab of sorts to be in the best locations close to hospitals close to services etc so demand is one part of the business but there's another part which is the expense side and often there's you know high rents involved which can quickly erode those profits and there's also you know the fact that a business like this entire relies entirely on Medicare so you know we were speaking about MediBank before the private health insurer and in fact they're raising their premiums well as companies like you know integral which are putting up with pressure on those premiums by demanding higher and higher prices for the scans but the problem is you know at some point Medicare goes when we can't keep passing through those price increases so what ends up happening is their revenues kept on the upside but they've got all these expenses from need the service and beneath the surface for things like rent the other thing is getting you know access to high quality radiologists in regional areas for instance and that puts up with pressure on things like wages so there's a few moving parts within these businesses but at the surface level there's no doubt this seems to have an attractive tailwind behind it from a number of different avenues I'm going to go a buy on this not that we hold it but it does seem fairly reasonable given the dividend yield evaluation and offer some big growth tailwinds and that it's gone. There you go our first double buy of the show for integral diagnostics let's now turn to an extra which is Advocacy Storage King Neil asked him about this has entered into a biting grant we advocates group to internalize its management. Red Grant is storage King that's an effective June 30th but has been the target of multiple takeover attempts to look primarily by Nathan Kirsch's KI Group plus US storage giant public storage so Michael a bit a play here how do you view it? It's a interesting diversified play in the property space basically it's the only listed or pure listed self-sourage rate operating on the market you know storage King is the the advocates is now rebranding to storage King storage King is the most prominent brand in the market although there are a number of others but you know of their operating stores I think about you know I think a 75 80% is not more errone by the company so is it a pure property play but it does you receive a lot of rents what they've recently done is they brought the operation and the management of these these centers under the banner of the company whereas previously this company owned the properties and without source the management so they're going to drive a lot of efficiencies from that supposedly and I just think it's a very high-quality property play it's not the most you know growth-driven thing in the world but if you take it a long-term view of this kind of thing I think it would sit quite well within an income portfolio you know it is seeing some decent rental growth over time just like any other property investment rental growth obviously the main driver of these things and obviously land values are a significant driver as well for instance you know they had a very big land tax the last year which is large and unexpected back from time to time can weigh on things but over a long period of time if you're getting the rental growth and land prices are going higher and something like this should do quite well so I'm going to go a hold on this if you are an income focused invests wanting a conservative explosion so that the property space and I think this means the bill pretty well. Let's just go. Yeah look I suppose the share price has been a slave to the not only the recent takeover that was rejected well that was withdrawn from due diligence but it's had a number of takeover offers as you mentioned you know I think by the rejection and you know withdrawal from due diligence I think those any takeover offers in the future might dry up for a little while now so it's going to trade on basically on its standalone fundamentals for a property trust yeah look like Michael said it is a it is a good quality property vehicle you know storage you know is quite expensive these days so I think they're they're able to demand a higher level of per square meter rental on storage but for a property trust to me I think it trades on a fairly steep multiple for my liking and you know if you're looking at an investment in the property sector you know the the reets side of things I think you probably should be looking for a yield of a bit higher maybe around the 6% level which you know pretty much most of the reets are going to give you where you're getting about 4 4 1/2% yield out of this one I'd yeah I'd say at the moment our recommendations hold if you want it I'd probably be okay holding it but I wouldn't be buying any any at the moment I mean if I'm looking at you know the property space you know things like region you know these suburban shopping centers with the calls or woollies that have you know 10 or 20 specialty stores within them they've got good yields coming out of them they're always tentated they're fairly safe as well so so something like that I would prefer over something like a storage right I double hold in for Avicus storage king let's turn to ordinate next time let's ask about this has still looked at Dante that's it's global stand-up for digital audio over IP used in live sound broadcast commercial AV and recording half your results there's showed a positive return to growth but look it's struggled certainly stock wise Francesco yeah look this is one that sort of a bit over my head with you know it's audio visual over Ethernet and IP I don't know what that really means you know and we don't have any coverage on but at the moment you know from my reading on so far that that you know other people in the market are saying that you know it's very sensitive to the market and it's got a high valuation and there's a lot of earnings delivery risk in it so I would say just based on that without going too deep into it like I said because I'm not quite certain of what they're trying to achieve from the technological side of things but I do believe that you know there is demand for what you know the platform they provide but I don't know how much demand so I look from my point of view look if you've been in there for the long haul you know the valuations probably the value of what you're holding is probably insignificant to the rest of your portfolio I'd probably just hold it but I wouldn't be buying at this stage. I was very big on ordinate a few years ago I looked like a hero there for a while when it went from sort of $5 up to $23 this was an interesting story basically this is a company through its down a product which allows pieces of electronic equipment to communicate without the needs for cords and cables. So if you think about the large audio systems in stadiums or a constant venues, those kind of things, this technology is pretty high-end. It's if you think about it more like Bluetooth but super powered. So the whole thing with ordinate was obviously these venues were closed during COVID, things reopen, there was a lot of demand for their products, a lot of cool forward demand. The market got very excited treating this temporary boom in demand as permanent. Ever since then it's continually sort of disappointed on the back of the growth numbers. They also have sort of branched out more into the visual space. So it's not purely the audio space, it's also the visual space stuff that they do and effectively this DanTech protocol gets embedded in all different types of electronic equipment. So it's used by so all the large providers of electronics essentially use this protocol in their products. The ordinate and this DanTech products are clear leader. It's just a very complex business when you get below the surface and try and understand their sales cycle and how long it takes for the revenue to come through. So this is a business that we feel is probably decent value here at the moment. I know it's a very negative trend but the stock is now training on the lowest multiple since its IPO. The balance sheet is actually very strong, they've had a lot of cyclical downgrades but that appears to have run its course and we just think that the outlook, everyone's got so negative and frustrated that the board and frustrated the large acquisitions that they've done but beneath all of that there's actually a good business here that started to see some acceleration come through. So from a value perspective we see it as a buy but I wouldn't be getting too excited about putting a massive component of your portfolio in it. All right, well hold or a pass really from Francesco. Let's now turn to BlueSco. I want to ask him about this. Now, take over speculation there has been a major drive in particular image share price. That has come from SGH and its US partner steel dynamics that had a crack at it. Chris is whether they're going to just keep going and finally succeed which perhaps they did with Borrel. What do you think Michael? Yeah, I mean BlueSco by being right on consistently over the years. It's actually been a wonderful performer. I've sort of scarred from when I've had all those issues going back over 10 years now where it was on their store there at one point when the global steel market was being flooded by cheap products from China. Obviously these days they've got more than just pure steel manufacturing they've got a few other core products such as raw oil, calibons for for ruse and that painted steel kind of stuff. They've also got a very good presence in the United States. So these days you know they're somewhat exposed to the housing cycle not only in Australia but primarily in the US as well. That has been fairly weak but there are some signs of life that are coming through there. The main drive of a blue scope in recent times as you mentioned was that big take over offer and the share price has been fairly elevated ever since given there's been a couple of bites cheering there. If I was an investor I'd probably take a little bit off the table given the strength of those offers and the strength of the share price because management keeps pushing back and there is a risk deal falls over completely and if that were to be the case I think the share price would moderate significantly from here but I do think you still want to have some exposure if you in case there is a higher stronger competing offer but by and large the business is in a pretty good strong position. The revenue growth numbers have been very good as of the earnings growth numbers but I think ultimately you're going to pay close attention to what's going on in the industrial space as well as the housing space in the US so I'm going to go a hold now on the scope. Great to see. Yeah look I agree with everything Michael just said so I don't want to reiterate anything. The anything I'd add to as you mentioned the cycle in home building you know they're exposed to infrastructure spend as well so we see a few tar winds there which might sort of give it a bit of a boost. The takeover stories in recent times you know the directors were very adamant that that they were undervaluing the the the business so the directors are very confident in in you know what BlueScape is doing based on our valuations at Ordminnet you know we see it trading on about 13 times for 2027 numbers which to me looks like good value you know it's yielding around 2% with 30% franking because obviously there's a fair bit of US operations with North Star but look I like this business as Michael said you know it's it's performed very well over the years we have a buy recommendation on it I wouldn't call it a strong buy recommendation but I'm happy to put it in a portfolio as at these levels despite the you know the takeover premium being where it's trading at the moment was the previous one I take a bit of confidence in the directors were were fairly adamant a couple of times in a row with the you know the the the the acquisition offer was no one near what they wanted. Yep all right see what happens with that where they come back again you would think so given SGO to track record let's turn to Coronado Global Gel asking out this is the biological coal producer to supply coal to steel producers globally has recently sold its Logan mining complex in West Virginia in the States and Francesco actually coal mine is doing very well at late more really the thermal coal producers because of LNG disruptions and coal is the the ready producer in sense of that. And renewables not sort of meeting targets as well you can see countries like Germany you've gone back to you know opening up some coal fire power plants over the years because of shutting down nuclear as well. Look Coronado's metallurgical coal so sort of slightly different it's Coronado wouldn't be my first pick in the coal sector you know we have a whole recommendation on it I think you know they have some issues I think more on the cost side of things as well so there's not a great deal of earnings visibility there like you said they have sold one of their mines which might improve that but you know if I'm looking at coal and we did see the other day the unfortunate situation in China where there was an explosion in a coal mine that I think it killed about 90 people. I mean that should be headline years I would imagine maybe it was in China but it wasn't so much here. So that sort of put a bullet under a number of coal miners here in Australia on the yesterday when it was trading so I do like the coal space I do like thermal coal as you mentioned my preferred at the moment is is white haven it's got a mixture of metallurgical and thermal so you know it gives you that diversity if you like it with its acquisition of some of the metallurgical coal businesses from BHP in recent times so what haven't we my preference if you own Coronado I'm looking you know I don't mind holding it but it's not one that I would be looking at because it doesn't provide any yield and there's plenty of others out there that will give you some dividends as well as some growth. Michael you like and coal the money. It's not a space we have huge exposure to it's no particular you know reason per say so should we probably prefer other commodities at the moment Coronado coal isn't one that we've really ever looked at much detail it's facing a few problems at the moment essentially what they provide is Met coal which is used in the production of steel but there's a big shift you know away from you know US high-volk coal towards these electric arc furnaces and effectively these arc furnaces you know they require scrap steel and electricity to produce steel they don't require as much new metallurgical coal so that means demand is actually you know fairly weak globally at the moment Coronado is not structurally a high-cost producer but it's acting like one at the moment and that it's got issues across you know all levels of the business whether it's operationally they've they've had a couple of deaths as well on on their couple of their minds they do also you know have some some balance sheet issues at the moment their profitability is collateral some cash flow issues too so this one's in the too high basket for the moment it believe in it like they actually are relying on on thermal coal because often there's some obvious and I don't know if you call it scraps but there's some residual thermal coal that comes off the Met coal which they've been selling to the stand well coal fire power station in Brisbane [BLANK_AUDIO] That's where they get most of their review of the moment. They've just worked through a number of issues. So I'll be pretty careful of the power now to the moment. - All right, okay, let's wrap it up then. Second half of the show, integral diagnostics. That was the one double-by of the show. So by the scene, see giving growth there. Francesco is saying, it's leveraging particularly AI at the moment, good dividend. Monica says it looks attractive. So it is a double-by. Abigail storage king is consolidated there, also some competing offers for. Look, it's a hold for both. In fact, Francesco, if you want to play a rate, prefers stock-by-region. Ordinates. Look, Francesco doesn't cover it. So he would essentially call it a hold, but really is passing on it. Whereas Michael held it, did well out of it, but then it all sort of collapsed and went pear-shaped. But Gimmarid is at the moment. He still sees that potentially, he would buy at these levels. Blue scope still, once again also a target of takeover there. Michael would trim it at these levels, whereas Francesco there, it would stay would buy. And finally there, Coronado Global, it is a hold for Francesco. No, Michael's not interested. That is our show, Michael. Thanks for joining us on the Danny Financial. - Thanks for having me. Have a good afternoon. And we know he's here somewhere. - He's here somewhere. (laughing) - Thanks for having us. - I'd like to see you again. Thank you guys. - Pleasure, Andrews. Thank you. - All right, that is the show, and thanks to you for watching. - The call is brought to you by Centuria, an ASX-listed property fund manager with $21 billion in assets under management. Wanted to diversify beyond equities? (upbeat music)