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DJ Australian Equities Roundup -- Market Talk

23 Aug 2021 15:36:33

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0313 GMT -- Appen's 1H Ebitda will likely miss the average analyst's forecast due to a slower recovery in demand, lower margins and higher costs, Citi says. The investment bank anticipates Ebitda for the six months through June of US$27 million, which it says is about 22% lower than the average forecast. It thinks that lower margins will more than offset a 5% rise in revenue for the data annotation company. Citi will be looking for updates on annual contract value and on Appen's aim to expand into enterprise and government sectors. Citi has a buy rating and A$18.80 target price on the stock, which is up 6.1% at A$12.72. (stuart.condie@wsj.com; @StuartLCondie)

0308 GMT -- Cochlear's current share price implies an unlikely mid-term EPS growth rate of about 12%, Citi says. The investment bank points out that Citi's EPS was subject to a compound annual growth rate of about 7.5% over the decade leading up to the Covid-19 pandemic. Citi thinks Cochlear can add to its 60% share of the hearing-implant market and sees 10% mid-term growth as more achievable. Citi's forecast for FY 2020 net profit of A$285 million is at the top end of the company's guidance range. Citi maintains its sell rating, but lifts its target price by 10% to A$220.00. Shares are up 1.4% at A$240.36. (stuart.condie@wsj.com; @StuartLCondie)

0256 GMT -- ANZ is likely experiencing headwinds in housing loan growth, which although unlikely to be permanent, could mean more muted revenue and some expense growth, Credit Suisse says. The investment bank lowers its housing growth assumptions for ANZ, with flat growth in 2H FY 2021, and then growing half of system in 1H 2022, before returning to system after that. This is as ANZ takes action to improve things like loan processing turnaround times which are contributing to low and negative growth, CS says. It upgrades ANZ's FY 2021-FY 2022 earnings by 1%, driven by lower bad debts and continues to forecast a A$5 billion on-market buyback across FY 2022-FY 2023.(alice.uribe@wsj.com)

0214 GMT -- Hearing tech firm Cochlear still faces uncertainty in implant sales due to the ongoing Covid pandemic, Morgan Stanley says. The investment bank assumes improvement in implant sales from 1H of FY 2022 but anticipates emerging markets recovering at a slower rate than developed markets, a trend in line with what Cochlear reported at last week's FY 2021 result. Morgan Stanley says Cochlear's FY 2022 guidance was softer than it had anticipated and trims its target price on the stock by 7.1% to A$220.00. Shares are 0.4% higher at A$237.98. (stuart.condie@wsj.com; @StuartLCondie)

0154 GMT -- Pushpay's acquisition of Resi Media for US$150 million makes sense to RBC Capital Markets, but it thinks the US$110 million cash component is very high. The deal is logical because churches are utilizing digital streaming as a critical way of engaging with their communities, and acquiring Resi Media will help Pushpay capture that shift toward more remote sermons and video streaming in the wake of the pandemic. "We have questions about the mix of consideration with US$110 million cash upfront, which is almost 75% of the total consideration," RBC says. The remaining US$40 million, comprising Pushpay shares, requires the vendors to remain employed at the company for the next two years. Pushpay is up 0.6% at NZ$1.66. (david.winning@wsj.com; @dwinningWSJ)

0107 GMT -- Plumbing-fittings supplier Reliance Worldwide's growth rates may be hard to sustain, Jefferies says. Reliance Worldwide says net sales in July rose 6% after stripping out the impact of currency swings, with Asia-Pacific growth rates maintained in contrast to a moderation in the U.S. and Europe, Middle East and Africa, where it had a high revenue bar to clear. "We suspect growth rates will be challenged with Reliance Worldwide outlining US$42 million benefit in 2H of FY 2021 due to the freeze event and slowdown in DIY activity from big box retail in the U.S.," says Jefferies, which rates the stock a hold. Reliance falls 1.7% to A$5.84 on Monday. (david.winning@wsj.com; @dwinningWSJ)

0106 GMT -- Any monetization of TPG Telecom's mobile tower infrastructure assets would be a positive catalyst for the stock given the precedent set by larger rival Telstra, Macquarie says. Telstra surprised analysts to the upside with the value extracted from its tower assets and Macquarie thinks any proceeds TPG generates from a similar move could result in capital management. The investment bank says TPG's earnings will bottom within 6-12 months as headwinds from the Australian government's national broadband network and the Covid pandemic fade. It maintains an outperform rating and trims target price 6.1% to A$7.70. The stock is 6.4% lower at A$6.16. (stuart.condie@wsj.com; @StuartLCondie)

0102 GMT -- Charter Hall's operating earnings per security exceeded upgraded guidance in FY 2021, and Jefferies expects another beat in the new fiscal year. Charter Hall on Monday reported operating EPS of 61.0 Australian cents in FY 2021, compared with guidance of at least 57 cents and consensus expectations for 58.3 cents. Also, Charter Hall said it expects operating EPS of more than 75 cents in FY 2022, again above consensus. "We expect Charter Hall to beat its initial FY 2022 guidance," says Jefferies, which rates the stock a buy. Charter Hall is up 4% at A$17.94. (david.winning@wsj.com; @dwinningWSJ)

2337 GMT -- With a lockdown in Sydney extended to at least end-September, analysts at JPMorgan are further delaying their forecast for a recovery in passenger numbers at Sydney Airport. Analysts now expect that 2019 levels of domestic passengers won't be reached until 2H 2022. The international recovery will take even longer and is still contingent on the global rollout of vaccines, with 2019 levels not expected until 2024. JPMorgan says it expects Sydney Airport to reinstate its distribution in 2022, noting that management was recently upbeat on the prospect of recovery as Australia is on track to vaccinate most of its population by December. The investment bank maintains a neutral rating on Sydney Airport shares. (mike.cherney@wsj.com; @Mike_Cherney)

2202 GMT -- Stockland's FY 2022 earnings and distribution guidance looks conservative to Jefferies, which identifies several tailwinds behind the property company. Stockland expects funds from operations per security of 34.6-35.6 Australian cents in FY 2022. "Guidance assumes 6,400 residential settlements at 18% margin with 65% 2H skew; 300 land lease settlements; and recent rent collection trends returning by end of 2021," Jefferies says. It notes that Stockland will benefit from A$75 million of additional income in FY 2022. That includes a one-off A$30 million retirement disposal profit and slightly higher residential volumes and 10% higher prices, although A$40 million of Covid-19 impacts in 1H will drag. Jefferies rates Stockland a buy with a A$5.20/share price target. Stockland ended last week at A$4.52. (david.winning@wsj.com; @dwinningWSJ)

2152 GMT -- After a record 12 months of sales growth and margin expansion, FY 2022 is likely be a year of moderation for bed linen retailer Adairs, says Ord Minnett. It expects 1H sales to decline due to lockdowns in major cities including Sydney and Melbourne. "Operating margins will also moderate given rising supplier costs, higher freight charges and further reinvestment into the business," says Ord Minnett, which rates the stock a hold. The bank's price target falls 7.9% to A$4.10/share, compared to Adairs's closing price of A$3.76 on Friday. (david.winning@wsj.com; @dwinningWSJ)

(END) Dow Jones Newswires