DJ Australian Equities Roundup -- Market Talk28 Mar 2025 15:00:071 View 0 comments

0342 GMT - The growth strategy outlined at Catapult Group International's investor day impresses its bulls at Canaccord Genuity, who see the sports-tech provider doubling its annualized contract value by 2028. Canaccord's analysts tell clients in a note that Catapult's growth in ACV, which is seen by the company as its key leading indicator of revenue, will generate high incremental margins. They anticipate 2028 Ebitda of US$30 million against a backdrop of continued best-in-class customer retention ratios. Canaccord Genuity raises its target price by 20% to A$4.20 and keeps a buy rating on the stock, which is up 1.3% at A$3.495. ([email protected])

0008 GMT - Forsyth Barr is more confident in the earnings trajectory of KMD Brands following the outdoor clothing retailer's 1H result. Analyst Paul Laxton Koraua says the cycle of sales downgrades is close to ending. "We believe KMD can return to our estimated mid-cycle earnings of NZ$0.08/share by FY 2028," Forsyth Barr says. Bolstering that view is the assumption that KMD's Kathmandu brand gets back to sales of some NZ$2.5 million per store, with Ebitda margins recovering to around 14%. It also assumes Rip Curl's Ebitda margins return to approximately 10%, in line with its pre-Covid average. Finally, Forsyth Barr says an improved wholesale channel can lift Oboz's Ebitda margins to around 10%. It retains an outperform call on KMD's stock. ([email protected]; @dwinningWSJ)

2354 GMT - Slot-machine maker Aristocrat Leisure keeps its bull at Macquarie despite the threat to U.S. earnings from slowing casino gaming revenues. Macquarie analysts warn that 40% of Aristocrat's earnings could be at risk if a slowdown in consumer spending hits slots play. That said, they say that U.S. casino gaming revenues appear to be somewhat insulated from economic slowdowns, showing a low correlation to U.S. GDP. They tell clients in a note that Aristocrat has diverse earnings across regions and products, most of which are defensive. Macquarie cuts its target price 6.25% to A$75.00 and keeps an outperform rating on the stock. Shares are down 1.2% at A$64.67. ([email protected])

2342 GMT - Reliance Worldwide's share-price drop since mid-February helps the Australian plumbing supplies company keep its bull at Goldman Sachs despite uncertain demand and potential tariff impacts. GS analysts tell clients that they see Reliance's U.S. end-market exposure as relatively defensive, with 60% of sales going to non-discretionary repair work. They also see signs that the U.K. market may be at or near a bottom. They incorporate risks from copper prices and tariffs into their forecasts but maintain a buy rating on the stock. GS has a target price of A$6.00 on the stock, which is down 0.7% at A$4.53. ([email protected])

2309 GMT - Wesfarmers' focus on driving space productivity from its Bunnings hardware stores helps support the stock's continued buy rating at Goldman Sachs. Goldman analysts are positive on management's expansion into categories including pets and automotive, which are accretive in terms of sales and gross profit per square foot of floor space. They tell clients in a note that Bunnings management are cognizant of the fact that sales at U.S. hardware peers are between 1.5 and 2.1 times higher on a per square foot basis. Management thinks that this represents a double-digit growth opportunity, they add. Goldman has a target price of A$80.40 on the stock, which is at A$72.12 ahead of the open. ([email protected])

2304 GMT - The material long-term opportunities in front of Australian hardware chain Bunnings are already largely reflected in its owner's share price, Macquarie analysts say. They tell clients in a note that Wesfarmers' price-to-earnings ratio is already above its long-run average, keeping them neutral on the stock. Even so, they see multiple opportunities for Bunnings to grow sales and earnings. They point to its expansion into auto goods and solar systems, its retail-media initiative, and supply chain simplification. Macquarie trims its target price 7.4% to A$75.00 to reflect changes to peer valuation multiples. Shares are at A$72.12 ahead of the open. ([email protected])

2243 GMT - Consensus expectations for Mainfreight's pretax profit to rise 15% in FY 2026 look optimistic to Forsyth Barr. Mainfreight's share price has fallen 8.3% this month so far, which reflects two big concerns of investors, it says. Tariff action has worsened the near-term economic outlook, while sea and air freight rates have both declined. "This backdrop suggests earnings growth in FY 2026 will be harder to achieve than current market expectations imply," analyst Andy Bowley says. Forsyth Barr expects Mainfreight's pretax profit to increase by 6% that year. ([email protected]; @dwinningWSJ)

2232 GMT - Wesfarmers's push to stock more auto products in its Bunnings home-improvement stores poses a modest threat to Super Retail Group, which owns the Supercheap Auto retail network, Jefferies says. It estimates Wesfarmers's expansion into the auto category increases Bunnings's total addressable market by some A$1.5 billion. Bunnings will sell more than 300 new products in at least 300 stores in 2025. Still, analyst Michael Simotas says the range at Bunnings is vastly inferior to specialists, noting it sells oil but no filters, and key brands such as Castrol and Penrite aren't available. That suggests Bunnings is targeting a different customer to Supercheap Auto. "However, if key brands are eventually attracted, threat would escalate," Jefferies says. ([email protected]; @dwinningWSJ)

2223 GMT - Pathology services provider Healius's target of a high-single-digit Ebit margin by FY 2027 looks ambitious to Jefferies. Healius expects to reach this goal through a mix of revenue and cost initiatives. However, analyst David Stanton forecasts Healius achieving a 4.4% margin in FY 2028. "Growth in Ebit margin is not expected to be linear in the timeframe--we believe it is likely to be back-ended," Jefferies says. "We estimate that low-end to high-end targets imply FY 2028 Pathology Ebit margins of 7.0% to 8.6%." ([email protected]; @dwinningWSJ)

2212 GMT - Pathology services provider Healius is in the recovery room, but Barrenjoey is skeptical that the company can reach performance targets laid out at its investor day yesterday. Healius wants to grow revenue at 6% and make a high-single-digit Ebit margin by FY 2027. Analyst Saul Hadassin says this implies Ebit growing at a compound annual rate of 120% from FY 2025-FY 2027. "While we anticipate an improvement in operating performance, this target looks difficult to deliver, particularly in light of looming cuts to VitB12/mid-stream urine tests," Barrenjoey says. ([email protected]; @dwinningWSJ)

2208 GMT - Dollarama's A$259 million takeover offer for The Reject Shop values the Australian company at a significant premium to its retail peers, says Ord Minnett. The Reject Shop's directors have unanimously recommended that shareholders vote in favor of the cash offer of A$6.68/share, which represents a 112% premium to its closing share price of A$3.15 on Wednesday. "Overall, we view the acquisition price as a significant positive for shareholders, given the premium to its 'last close', the premium to its historical trading range, and the premium to its peer group valuation," analyst James Casey says. The Reject Shop ended Thursday at A$6.60. ([email protected]; @dwinningWSJ)

1531 GMT - Dollarama's acquisition of the Reject Shop could be a stepping stone to a greater push into Asia. Scotiabank's John Zamparo says the company still has about three-to-four years before fully integrating supply chains and distribution networks in Australia, but after it optimizes the business there it could look to Asia for further expansion. "One intriguing long-term angle to this deal is the potential for eventually using the Australian business as a platform to operate in parts of Asia," he says. ([email protected])

1112 GMT - Dollarama is taking its proven and portable model to Australia with the acquisition of The Reject Shop, the country's largest discount dealer. TD Cowen's Brian Morrison says in a report that the roughly C$233 million acquisition is "another notable mid-term growth opportunity in a market with no direct competition." The analyst says that the likely move is for Dollarama to implement its own business model across the 390 stores in Australia, bringing its supply chain, and introducing its operational best practices. Morrison says there will be a period of transition, perhaps as long as several years, but that Dollarama will likely be able to replicate its Canadian success in Australia as well. ([email protected])

(END) Dow Jones Newswires