• Canaccord Genuity put a big price target on AI road technology stock, Acusensus
  • Sequoia has also initiated a coverage on Duxton Farms

 

Buy recommendation and big price target on Acusensus

Broker Canaccord Genuity has initiated a Buy recommendation on road safety tech company Acusensus (ASX:ACE), with a price target of $5.40 (vs current price of $3.17).

Acusensus provides a broad range of technologies to combat the growing problem of distracted driving.

The company’s AI-enabled road safety solution is a pioneering technology that provides a patented first mover advantage in what it considers to be an immediate $1.8b market opportunity.

The flagship is the Heads-Up product, which was designed to detect illegal use of mobile phones while driving.

The product suite has since evolved into a comprehensive, multi-solution offering which supports speed (average and point), seatbelt non-compliance, and licence plate-based detection and enforcement.

Since the company’s inception in 2018, ACE has grown rapidly, with Canaccord estimating revenues of $41m in FY23 compared to just $7m in FY21.

“ACE represents one of the fastest-growing small cap stocks over the previous three years,” said the broker.

Canaccord has identified five core growth drivers for ACE including geographic expansion with pilot programs in 10 countries, as well as product expansion into other verticals such as railway crossing monitoring, drugs or alcohol, and road worker safety monitoring.

The broker also sees other tailwinds including distribution agreements in new markets, bolt-on acquisitions, and upsell from existing contracts (more than 75% of FY23 revenue is from existing customers).

Canaccord also believes that ACE has a highly recurring and profitable revenue growth profile that should see the company grow revenues independent of the economic cycle.

“ACE is a profitable, high growth with recurring revenues business that should generate elevated incremental EBIT margins,” said Canaccord’s note.

“We initiate coverage of ACE with a BUY recommendation, and $5.40 price target premised on a two-stage discount rate factor and FY28 revenue expectations of $83m.”

 

Duxton Farms to benefit from global tailwinds

Meanwhile, Sequoia has initiated a coverage on Duxton Farms (ASX:DBF), and slapped a share price target of $1.49 (vs current price of $1.32).

Duxton Farms is the only publicly listed farming company in Australia that cultivates both crops and livestock.

On average, since their IPO, crops have made up approximately 85% of all revenue and livestock roughly 15%.

Duxton’s portfolio of assets is spread across Australia, but with a heavy focus on NSW cropping properties.

The company’s core focus is its exposure to both dry land and irrigated farming, providing a range of summer and winter crops – mainly cotton, wheat, barley and canola. Livestock, in the form of cattle and sheep, also delivers additional forms of revenue.

Sequoia believes that global demographics point to a big tailwind for the company.

The world population is expected to grow from 8 billion in 2022 to 9.7 billion in 2050, whilst global GDP and per capita income  are expected to grow over the next decade.

As incomes rise, Sequoia says eating patterns will shift to more Westernised diets while traditional staple foods such as rice will increasingly be substituted for other grains, meat, and dairy products.

Another key driver for Duxton Farms includes purchasing and developing land.

The company’s core aggregation is in NSW but has recently expanded into Northern Territory and Victoria, with further plans to expand elsewhere

Sequoia believes Duxton can capitalise on increasing farmland values over time as well as acquire mispriced land.

In addition, buying lands in various places can diversify against the effects of adverse climactic conditions on production.

“By cultivating a variety of both summer and winter crops, the company can mitigate the risks associated with dryland cropping in one region of Australia, and fluctuations in grain prices,” said Sequoia.

Meanwhile, the size of Australian farms has expanded over the last four decades, ie; the number of large farms has increased while the number of small and medium farms has declined.

“As smaller family farms exit the industry, there is a greater opportunity to purchase and aggregate land into a corporate farming business.”

 

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