MoneyTalks: Why Goldman Sachs has slapped Buy recommendations on Maas Group and Fineos

Goldman has a Buy rating on constructions services provider, Maas Group
The broker also rates insurance focused tech stock Fineos a Buy

Residential property a tailwind for Maas Group

Goldman Sachs has slapped a Buy rating on Maas Group (ASX:MGH), with a 12-month price target of $3.85 (versus current price of $2.52).

Listed on the ASX in 2021, Maas was founded by former fringe South Sydney Rabbitohs first grader Wes Maas, who played a few games for the club in 2002.

Maas Group provides construction materials, equipment and services with diversified exposures across the civil, infrastructure, mining and real estate markets.

Following MGH’s investor day in June where the company revised its FY23 guidance from $150m-$180m to $150m-$165m, Goldman has downgraded its view on MGH.

“We believe that the near-term residential environment will likely remain choppy until purchasers can gain greater comfort in the rate outlook,” said Goldman.

However, despite this challenging near-term environment, Goldman says it remains positive on the fundamental strength of MGH’s real estate division given various factors at play including a severe shortage in the Australian housing market.

“Furthermore, MGH outlined its strategy to recycle capital in its Commercial real estate business, with $70m of opportunities identified and expected to be realised in FY24,” said the broker’s note.

Meanwhile, MGH’s Civil Construction & Hire (CCH) and Construction Materials (CM) segments are performing well, benefiting from strong spending on infrastructure and renewable energy.

“Pricing has generally improved across CM, helped by industry leader Boral exercising pricing rationality under their new leadership,” Goldman said.

Overall, the broker has revised its FY23, FY24 and FY25 EBITDA guidance for MGH to -11%, -5% and 1% respectively from yesterday’s figures based on lower near-term residential real estate settlements.

“However, we continue to see MGH as being valued as an ex-growth industrial stock, with the market focused only on near-term headwinds.

“We believe MGH’s valuation is missing the defensive infrastructure and renewables exposures of the CCH and CM segments; and the latent value realisation opportunity as its land bank is developed over time.”

Fineos to grow as current market ‘conducive to insurance’

Goldman Sachs has a Buy recommendation on tech stock, Fineos Corp (ASX:FCL).

Fineos is a provider of core systems for life, accident and health insurance carriers globally with seven of the 10 largest life and health carriers in the US using its systems.

In June, Fineos announced a new contract win with US-based Guardian Life, a provider of group employee benefits and financial wellness solutions.

Under the deal, Guardian will implement four products from the FINEOS Platform for its absence business, which involves the outsourcing of leave management from employers to life insurance companies.

Outsourcing of this particular task is a growing trend given the complexities of managing employee leave across different state jurisdictions.

The deal represents FCL’s first core platform contract win for a large North American insurance carrier since mid-2021 (when it signed up Beneva).

Goldman says while the deal size and implementation phasing was not disclosed, it expects the Guardian contract to ease investor concerns over FCL’s trajectory to breakeven in the second half of FY24.

“As we outlined when we upgraded FCL to a Buy in January, the current economic environment of low unemployment and higher interest rates is supporting life insurance industry profitability, which bodes well for IT investment after multiple years of Covid uncertainty,” said Goldman.

Goldman however noted key risks for FCL include slower new deal sales cycles, higher-than-expected growth investment as well as customer concentration risk.

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The views, information, or opinions expressed in the interview in this article are solely those of the broker and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.