The average target price of QAL.AX is 3.8 and suggests 59% upside potential. Usually, this means a BUY recommendation among investment firms, or a recommendation to increase one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 4.0. This translates into 65% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 3.1. This suggests 29% upside potential. Even the most pessimistic analyst believes there will be stock growth. 

Qualitas is a real estate investment firm which focuses on direct investment in all real estate classes and geographies, acquisitions and restructuring of distressed debt, third party capital raisings and consulting services. It seeks to provide bridge loans in the major markets of the Australian east coast, and particularly the medium and high density residential development sector. Qualitas is based in Melbourne, Australia with an additional office in Sydney, Australia. It operates as a subsidiary of Qualitas Group.

Australia

Qualitas Limited

Real Estate

The company pays dividends from time to time. It has paid dividends in less than half the past ten years. Dividend per share (DPS) has grown yearly, and there is a clear trend. In the past 12 months, the dividend yield has been good and slightly above its peers. On average, the company pays dividends annually. 

QAL.AX reported revenue of AUD 108mn in the last 12 months, up 6% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 100% from FY23 to AUD 0.16. Market expects EPS to reach AUD 0.12 in FY25.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). The stock has outperformed this peer group by 2ppts over past six months and grown 3ppts faster in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported very strong EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 56.3% in the last 12 months, a decline from 56.6% in FY24. 

Historically, QAL.AX has reported very strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 40.1%, a growth from 25.1% in FY24. 

Qualitas Limited reported a return on equity (RoE) of 11.8% in the last 12 months, up from 7.2% in FY24. The market consensus projects an RoE of 9.5% in FY25, however, this time below its peers. 

Another important profitability metric, return on assets (RoA), amounted to 7.5% in the last 12 months, an increase from 3.6% in FY24. The market analysts predict that RoA will be 5.1% in FY25, again stronger than its peers. 

In the last 12 months, the return on capital employed (RoCE) grew to 11.0%, above the peers. The consensus estimate for FY25 for RoCE is 20.2%, again ahead of the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.4 in the past several years. This ratio implies a average shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

QAL.AX has very poor trading liquidity. It will take at least a day or two for the average private investor to sell a common position under normal market conditions. Liquidity is very unstable and becomes extremely unfavourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. The stock has a small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. We note resilient historical revenue growth, robust profitability, strong debt servicing capacity, adequate interest coverage, and an favourable capital structure, among the positive credit factors. Among the negative credit factors and we point to weak positions in its industry, excessive margin volatility.

In highly turbulent market conditions, QAL.AX is not overly volatile. In other words, the stock will fall less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be low. 

In normal market circumstances, QAL.AX is moderately volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move slightly wider than the index. The stock's losses on its worst days (less than 1-5% of the time) will range from low to mild. We would also like to highlight the mild intraday volatility of the instrument. 

From both historical and forecast perspectives, the stock is fairly priced compared to similar stocks. Specifically, the stock is fairly valued on P/E, neutral on EV/EBITDA, underpriced on P/FCF. 

Qualitas Limited

A$ 2.4

4

Qualitas Limited

A$ 2.4

4

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

A$ 2.4

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