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Your thoughts on Inghams (ING) and PEXA Group (PXA)

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Question asked 03/05/2025

Your thoughts on Inghams (ING) and PEXA Group (PXA)

Dear team, A few days ago you suggested ING as a possible income stock with some upside. It looks pretty good , but, I have some concerns. #1. is that it appears to have a very high debt to equity ratio. This is not appealing at any time. However, during a time of possible recession, it can mean catastrophe. #2. is that it is highly dependent on Woolworths and that Woolies is seeking to diversify ( which probably means 'screw') it's poultry suppliers. Your thoughts on these issues would be welcome. I am a big PXA fan. I already own some PEX shares and they are underwater. You have them in your emerging companies portfolio as a moderate risk and a medium to long horizon. At last they have UK approval and may move into a huge new market with proportionate opportunities. The price has jumped up accordingly. Do you still see it as an excellent opportunity? Thank you for your superb work. Keep on keeping on. Paul

Answer

Hi Paul,

As you said two very different stocks but at interesting junctures in our opinion:

Inghams (ING): at the end of FY24 its net debt was $347.9mn, which represented 1.5x underlying EBITDA, reflecting a balanced approach to debt in our opinion while its 68% rise in net profit to $101.5 million has us relaxed at this stage. We believe the possibility of a recession works in the company’s favour with chicken one of the cheapest sources of protein, and significantly cheaper than beef. Lastly the Woolies news has already largely been addressed by ING:

In August 2024, Inghams announced a new multi-year supply agreement with Woolworths that involved a reduction in poultry purchasing volumes . This adjustment contributed to an 18.8% decline in Inghams’ net profit to AUD 51.5 million in the first half of FY25.
To mitigate the impact of reduced volumes from Woolworths, Inghams has secured new business in the retail and quick-service restaurant (QSR) sectors, covering approximately 75% of the volume reduction.

PEXA Group (PEXA): For members of MM who are not familiar with PXA its an Australian technology company that operates a digital platform for property settlements and related services. Its expansion into the UK signifies its commitment to bringing digital transformation to property transactions globally and by definition opens the doors to a share price rerating.

PXA reported strongly in February, including a $50mn buyback. We believe the stock looks great around $12 after getting FCA approval for its Sale & Purchase Product with a test of $15 not out of the question, hence we remain long the stock, seeing it as a great medium to long term opportunity.

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PEXA Group (PXA)

LAST UPDATED 01/05/2025 14:30

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