• Mach 7 Tech is rated Overweight by Wilsons, with price target of almost double
  • Goldman slapped a Buy rating on neobank Judo Capital

 

Wilsons says Mach7 could be worth almost double current price

Wilsons has initiated coverage of Mach7 Technologies (ASX:M7T), with an OVERWEIGHT rating and price target of $1.15 (versus the current price of $0.63 at the time of writing).

Mach7 is a new, growing provider of Enterprise Imaging (EI) software, having only secured the ‘other half’ of its EI solution in 2020, through the acquisition of Client Outlook for its eUnity viewer product.

Since then, alongside servicing ‘the little guys’, Mach7 has established contracts with some of the top IDNs (integrated delivery network) and imaging chains within the US, which now serves as the company’s core market.

Wilsons says M7T’s solution is winning because it streamlines patient data across the entire healthcare facility whilst saving customers’ money. The company’s Enterprise Imaging suite hits the sweet spot for radiologists’ wants, and healthcare facilities’ needs.

“We see FY24 as an important year for Mach7 – they are in a prime position to beat expectations with scheduled contract renewals, and a material catalyst in the Phase 2 Veterans Affairs contract,” says Wilsons.

The broker believes Mach7 has been overlooked by the market because at face value, the company does not scream ‘cheap’, and investors have held back due to a lack of development in earnings quality.

“But the company is only early in establishing their recurring revenue, and recent contract wins, yet to be factored in, can see this increasing >2.0x over the next three years.

“With that, operating leverage can be realised quickly,” noted Wilsons.

Mach7 has $31m in contract renewals at hand, and Wilsons expects ‘upgrades’ in sales order targets to occur across FY24.

“It is not to say that all volatility in their revenue, cash flow and earnings will be immediately solved, but Mach7’s underlying business, supported by the imaging industry tailwinds should prove valuable for investors in the long-term.”

In the near term, Wilsons says Mach7 will benefit from the share price being driven by material contract wins.

“Our 12-month price target of $1.15/share is informed by our DCF (discount factor) valuation and FY25 EV/Revenue of 6.0x,” said Wilsons.

 

 

Goldman has a big price target on Judo Capital

Goldman Sachs, meanwhile, has a BUY rating on Judo Capital (ASX:JDO), with a price target of $1.57 by August 2024 (versus the current price of $0.84 at the time of writing).

Despite margin headwinds, Goldman believes business fundamentals remain strong for the neobank.

Judo is the only pure play bank exposure to SME (small and medium enterprises) lending, a market segment for which Goldman’s growth outlook is relatively more positive.

“JDO continues to demonstrate strong volume growth such that despite NIM (net interest margins) pressures, and net interest income is still expected to grow,” said the note from GS.

Management remains confident JDO will reach its targeted metrics, including a lending portfolio of $15-20bn, and a low-to-mid teens ROE (return on equity).

In FY23, JDO’s total loans grew by 46% on pcp to $8.9bn, driven by growing banker portfolios, continued recruitment of high-quality relationship bankers, and national footprint expansion.

At the same time, write‐offs for FY23 were minimal, at only $0.3m, driven by a partial write‐off of a single customer group, and the BDD (bad and doubtful debt) charge was almost entirely due to provision build.

In terms of FY24 outlook, JDO highlighted that its pipeline is stated to be around 0.25% above existing portfolio.

“Our FY27 Judo ROTE (return on tangible equity) forecast is 12%, which we think justifies a 1.2x P/NTA (price to net tangible assets) multiple on $1.9 billion of FY27E book equity,” says GS.

Discounting this back to Aug 2024, Goldman has derived a 10-month target price of $1.57, which implies an 86% upside from today’s price.

 

Mach7 and Judo Capital share prices today:

 

 

The views, information, or opinions expressed in the interview in this article are solely those of the brokers 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. 

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