0245 GMT - a2 Milk's potential acquisition of a manufacturing facility raises a couple of significant questions for Citi analyst Sam Teeger. He points out that the dual-listed dairy company ended its last fiscal year with A$931 million of net cash on its balance sheet, and wonders what capital management might look like post-acquisition. He is also interested to discover what the market might think of a manufacturing acquisition to obtain more China-label slots, when buyers appear to be shifting to higher-margin English-label products. Citi has a buy rating and A$7.04 target price on a2's Australia-listed shares, which are up 1.7% at A$4.89. ([email protected])

0043 GMT - Australian banks' balance-sheet strength and the economic backdrop aren't enough to justify the rise in their shares over 2024, Macquarie analysts write in a note to clients. They say that pre-provision earnings growth looks sluggish, with headline earnings supported by low impairment charges. They say that tailwinds from low impairments are probably ending, while competition and cost headwinds limit scope for further EPS upgrades. Higher impairments could weigh on dividend yields, they add. ([email protected])

0029 GMT - Healius's divestment of its Lumus Imaging unit makes sense but the Australian pathology provider needs to give further detail on where it will deploy the proceeds, Macquarie analysts say. They see the divestment improving the Australia-listed company's balance sheet position, but want to know how it will deploy surplus proceeds into productivity and profitability initiatives. The analysts tell clients in a note that they expect net proceeds of about A$800 million and for Healius to repay its existing debt facilities, thus reducing net interest costs. Macquarie cuts its target price 16% to A$1.35 and keeps a neutral rating on the stock, which is down 4.7% at A$1.2725. ([email protected])

0021 GMT - Xero needs to demonstrate that its products can add value for customers in order to drive long-term performance amid slowing subscriber growth, Morgans analyst Nick Harris says. He tells clients in a note that the cloud-accounting software provider has delivered what he calls an immaterial uplift to average revenue per user from uptake of additional services. With subscriber growth slowing, Xero's strong price rises need to be justified from customers' perspective. He points to payroll's first-half performance as an example of how Xero can do this. Morgans lifts its target price 34% to A$188.00 and keeps a hold rating on the stock, which is down 0.8% at A$171.23. ([email protected])

2332 GMT - The incentives offered to Lovisa's new CEO help support confidence that the Australian jewelry retailer can accelerate earnings growth, Macquarie analysts say. They tell clients in a note that John Cheston will have strong motivation to deliver annual earnings growth above 18% once he arrives. They forecast 20% Ebit growth in both FY 2026 and 2027, compared with 14% in the final fiscal year before Cheston starts work. Even without this growth, the Macquarie analysts see benefits to the appointment. Cheston's remuneration is lower than that of his predecessor, which they say will help expand Ebit margins. Macquarie cuts its target price 2.8% to A$34.10 but keeps an outperform rating on the stock, which is down 7.2% at A$27.00. ([email protected])

2227 GMT - Healius's recent performance by its pathology business underwhelms Citi. Healius indicates profitability of Pathology division in 1H would be broadly in line with the same period a year earlier. That implies some A$4 million Ebit, well below Citi's A$14 million forecast and an even bigger miss to consensus hopes. It also comes despite a 5.9% improvement in revenue in FY 2025 so far. Healius says it has faced labor cost rises and is investing to keep its revenue growing. "Healius believes its share has stabilized in the last six months, albeit it seems to have come at a cost to profitability," says analyst Mathieu Chevrier. Citi retains a sell call on Healius's stock. ([email protected]; @dwinningWSJ)

2211 GMT - Australian banks' recent market updates indicate the lenders need lower inflation and interest rates to support earnings, Citi says. Its analysts tell clients that Australian banks are unlikely to enjoy the same benefits as U.S. counterparts from the incoming Trump administration. The latest advance by shares of the country's four largest banks over the past two weeks only stretches valuation further, they say. Stubbornly high costs, pressure on revenue growth and deteriorating asset quality are all seen as headwinds at Citi. Their order of preference remains Westpac, Commonwealth Bank, NAB and ANZ, but they are sell rated on all four. ([email protected])

2153 GMT - Bell Potter remains confident in its buy call on Australian Agricultural Co. Domestic cattle prices have rebounded and remain undervalued relative to meat price indicators, analyst Jonathan Snape says. Also, values of agricultural land and water assets have been robust this year. "The discount to net asset value remains excessive and in light of the material uplift in production volumes in recent years, we would see AAC as more leveraged than past cycles to firmer cattle and meat pricing," Bell Potter says. Its price target falls 2.5% to A$1.95/share. AAC ended last week at A$1.38. ([email protected]; @dwinningWSJ)

2148 GMT - The end of the luxury industry's multi-year boom and moves by brands to tighten distribution channels leave Citi analysts bearish on Australian retailer Cettire. Initiating coverage with a sell rating, Citi's analysts tell clients that luxury brands are trying to get greater control of distribution channels. This could hurt Cettire's business, which is based on offering lower prices. Waning China demand and the end of the post-Covid boom are leading to inventory buildup across the industry, they say. Growing competition could also weigh on Cettire's margins. Citi puts a A$1.30 target price on the stock, which is at A$1.485 ahead of the open. ([email protected])

2139 GMT - Costumer jewelry retailer Lovisa has a new bear in Citi, partly because the expansion of its store network is happening at a slower pace than expected. Fewer new stores impacts Lovisa's EPS growth, analyst Sam Teeger says. Also, Citi believes the competitive risk from Harli & Harper is greater than it thought with a second new store now open. Other reasons to turn bearish are heightened uncertainty as a result of Lovisa's CEO transition and concerns that the company has relaxed its site selection criteria in certain overseas markets. Citi downgrades Lovisa to sell, from neutral. ([email protected]; @dwinningWSJ)

(END) Dow Jones Newswires