We discussed HMC in detail this time last month, just before Liberation Day! Our thesis hasn’t changed, and we believe the stock is oversold/cheap as the “AI Trade” comes back into vogue courtesy of its major position in DigiCo (DGT) – the weak and speculative longs have certainly been washed out of both DGT and HMC. Interestingly, a block of 2.1 million shares in HMC traded earlier in the week, above the previous close, implying a buyer led transaction. We like the risk/reward around $5 with potential capital raises the key moving forward. If it can raise organic unlisted capital in the coming few months, it could re-rate sharply to the upside.
HMC’s weakness hasn’t just been around AI. It has its fingers in a few pies that have endured issues of late: Healthscope failed to fully pay rent due for March at 11 of its facilities owned by HealthCo Healthcare & Wellness REIT (HCW). HCW is an ASX-listed healthcare property trust managed by HMC Capital, of which HMC is its largest shareholder with a 6.24% stake. Again, these issues, while very real, are affording investors attractive entry levels into HMC.
- We believe HMC is now attractive, and the next 10-20% is expected on the upside: MM owns HMC in its Emerging Companies Portfolio.
MM remains long and bullish HMC
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