MoneyTalks: Brokers excited about AI road-safety tech Acusensus, and farming stock Duxton Farms
A firm helping combat distracted driving has caught the attention of Canaccord Genuity. Meanwhile, a farming stock has also been given a tick.
MoneyTalks is Stockhead’s regular drill down into what stocks investors are pondering right now. We’ll tap our extensive list of experts to hear what’s hot, their top picks, and what they’re looking out for.
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 $3.20).
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 $1.8 billion market opportunity.
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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 noncompliance, and licence plate-based detection and enforcement.
Since the company’s inception in 2018, ACE has grown rapidly, with Canaccord estimating revenues of $41 million in FY23 compared to just $7 million in FY21.
“ACE represents one of the fastest-growing small cap stocks over the previous three years,” said the broker.
Canaccord has identified 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 per cent of FY23 revenue is from existing customers).
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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 $83 million.”
Duxton Farms tipped to grow
Meanwhile, Sequoia has initiated a coverage on Duxton Farms (ASX:DBF), and slapped a share price target of $1.49 (vs current price of $1.34).
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 per cent of all revenue and livestock roughly 15 per cent.
Duxton’s portfolio of assets is spread across Australia, but with a heavy focus on NSW cropping properties.
The company’s has 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, while 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.
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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 – with the number of large farms increasing as 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,” said Sequoia.
This content first appeared onstockhead.com.au
The views, information, or opinions expressed 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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