J.P. Morgan Australia FTM 22 May 26 SGH Ltd; Arafura Rare Earths; Australian labour survey: Range break and More

Research evidence excerpt

J.P. Morgan Australia FTM 22 May 26 SGH Ltd; Arafura Rare Earths; Australian labour survey: Range break and More

Asia Pacific Equity Research

Australia First to Market 22 May 2026

Top Stories

SGH Ltd (Lee Power) (SGH AU, N)

Investor Day: Flywheel spinning, but return to 10% EBIT growth requires M&A

SGH targets 10% organic operational EBIT growth per annum (~50/50 core organic/post M&A improvement). This is broadly in-

line with history, and the operating model is clearly capable of extracting value from the assets it owns. But the near-term

organic levers we can identify – a continuation in Boral growth (FY27E), robust WesTrac aftermarket growth on an aging fleet,

and the ramp-up of Crux/Energy (FY28E) – get us to MSD EBIT growth in FY27 and FY28. The rest requires M&A, above-

normal capital to be invested into the current business, or is longer in timeframe (incl. property). While the CEO noted a

geographic broadening towards offshore M&A (in response to changing domestic policy settings), we still believe domestic

expansion is the most logical and most likely option. SGH’s sensible rigour in sticking to its returns-driven process means this

may take time. In the meantime, Bloomberg consensus still expects 7% EBIT growth in FY27/28 (JPMe 4%). We remain

Neutral-rated.

Arafura Rare Earths (Jonathon Sharp) (ARU AU, N)

FID taken and Aus government on board, but we remain cautious on ramp-up - retain Netural

We retain a Neutral rating on Arafura with an unchanged A$0.29 PT following Thursday’s FID Nolans announcement. ARU now

targets construction from Sep-26, and we update our model to reflect this timing. However, we leave first production unchanged

at Sep-30, with no change to our capex, NdPr price or ramp-up assumptions. ARU’s capex forecast is unchanged, and our