0158 GMT - The revenue outlook for Appen is increasingly cloudy, Wilsons analysts say. They cite ongoing difficulty in forecasting end-customer demand for the Australian data-annotation company's services due to project-based revenues and variability in demand from a concentrated customer base. Global tech giants are still Appen's top five customers and contributed 82% of 2022 revenue, a dominance that the Wilsons analysts say in a note is likely to remain characteristic of Appen's business. Wilsons stays underweight on the stock and cuts its target price by 10% to A$2.11 to reflect lower spending by Appen's largest customers. Shares are down 1.3% at A$2.33. (stuart.condie@wsj.com; @StuartLCondie)
0138 GMT - Appen's warning of a soft start to 2023 and abandonment of its 2026 targets prompts Bell Potter analyst Chris Savage to slash his Ebitda forecasts for the current and next fiscal years. Savage cuts his revenue forecasts for 2023 and 2024 by 11%, resulting in downgrades to his underlying Ebitda projections of 53% and 48%, respectively. He tells clients in a note that the Australian data-annotation company's 2022 revenue was about 1.3% lower than he had anticipated, although Ebitda was in line with his expectations. Bell Potter keeps a hold rating on the stock but cuts the target price 25% to A$2.25. Shares are down 2.1% at A$2.31. (stuart.condie@wsj.com; @StuartLCondie)
0127 GMT - A debut briefing by Appen's new CEO has bolstered Macquarie analysts' confidence of a potential medium-term recovery. The analysts tell clients in a note that CEO Armughan Ahmad's announcement of a strategic reset and his plan for a methodical expansion of current capabilities into new areas could drive structural growth once near-term headwinds have abated. However, this will take time and require a successful execution, they point out. Macquarie maintains a neutral rating on the stock and cuts the target price by 7.4% to A$2.50. Shares are down 2.3% at A$2.305. (stuart.condie@wsj.com; @StuartLCondie)
0116 GMT - Yangzijiang Shipbuilding continues to be a buy for UOB Kay Hian analyst Adrian Loh on the expected performance of its main business of shipbuilding. In a research report, Loh notes that Yangzijiang's overall gross margins improved in 2022 as it secured favorable contract prices and locked in lower costs of steel used for shipbuilding, and that the company expects margins to improve further this year. So far in 2023, Yangzijiang has secured new orders for 14 vessels with a total contract size of US$910 million, prompting it to raise its new-order outlook to US$3 billion for the year, the analyst adds. UOB Kay Hian raises the stock's target price to S$1.58 from S$1.55. Shares are 1.5% lower at S$1.29. (ronnie.harui@wsj.com)
0116 GMT - Australian mortgage delinquency rates are likely to increase over 2023, as rising interest rates, cost-of-living pressures and a slowing economy weigh on borrowers' capacity to repay debt, Moody's Investors Service says in a note. However, it notes that the risk of mortgage delinquencies would have been far greater if loan quality, underwriting standards and lenders' likelihood to support borrowers hadn't improved since the financial crisis. "The Australian mortgage sector is in a stronger position in the current housing market downturn than it was during the 2008 financial crisis." Still, as rates increase, house prices fall and the economy weakens in the coming months, some borrowers will be more vulnerable than others and "we expect mortgage delinquencies to rise from current low levels." (alice.uribe@wsj.com)
0110 GMT - TPG Telecom's unhedged debt is a key concern for Macquarie analysts, who estimate the Australian telecommunications provider's net-interest expense will rise by almost 60% in 2023. The analysts tell clients in a note that rising interest rates support a 2023 net-interest expense forecast of A$294 million, compared with A$187 million reported in 2022. TPG's 2023 earnings guidance is 3% higher than Macquarie had anticipated but the analysts think that its balance sheet limits capacity to increase dividends. The stock looks fairly valued at best when compared with global peers, they say. Macquarie maintains a neutral rating and A$5.30 target price on the stock, which is up 0.2% at A$5.01. (stuart.condie@wsj.com; @StuartLCondie)
0110 GMT - Wealth management platform company Praemium's 1H FY 2023 result was solid despite weaker and volatile markets, says Shaw and Partners analyst Danny Younis in a note. He reckons that Praemium remains undervalued compared with rivals Hub24 and Netwealth. "Praemium is trading on a resounding discount to its peers and is in fact trading at half the original Netwealth bid price of A$1.50." Shaw and Partners has a buy recommendation on the stock. Praemium is up 0.6% at A$0.79/share. (alice.uribe@wsj.com)
2235 GMT - Woodside's management appears to be taking a more conservative approach to the balance sheet through lower dividend payments for the foreseeable future, and Citi is wondering why. "We do have two suspicions," analyst James Byrne says in a note. "On the positive side Woodside may be increasing dry powder if they're more sanguine on growth (Browse, Sunrise, M&A)." An alternative view is that Woodside may be bolstering balance-sheet capacity in case of onerous changes from government on the Petroleum Resource Rent Tax at the May budget, Citi says. (david.winning@wsj.com; @dwinningWSJ)
2201 GMT - Woodside's decision not to declare a special dividend after a year of elevated energy prices swelling its cash flow puzzles Barrenjoey analyst Dale Koenders. Woodside's final ordinary dividend of US$1.44/share was 30% below the bank's estimate, and also fell short of consensus expectations. "Woodside's balance sheet appears supportive of an 80% payout ratio indefinitely, but there is no value in the balance sheet if it is not used," Koenders says in a note. "Given Woodside also trades on a 10-20% premium to peer Enterprise Value-to-Ebitda multiples, we maintain our Underweight rating." (david.winning@wsj.com; @dwinningWSJ)
2156 GMT - Healius's balance sheet is increasingly a key consideration for investors, Barrenjoey says. The investment bank expects Healius's Ebitda to rise very modestly in 2H compared with 1H, as a recovery in its base business offsets the ongoing decline in revenue from providing Covid tests. This suggests Healius's net debt-to-Ebitda will get very close to the company's loan covenant of 3.5 times, even after it repays some debt with proceeds from the sale of the Day Hospitals business. "We note the bank covenant excludes share-based payments and there is the potential for Ebitda to come in ahead of our forecasts should base business recover more swiftly than expected," analyst Saul Hadassin says in a note. "We await further monthly Medicare data to assess this latter point." (david.winning@wsj.com; @dwinningWSJ)
2152 GMT - Regis Healthcare is lifted to buy from hold by Jefferies, which believes the aged-care provider is beginning to benefit from regulatory reform and a more normal operating environment. With pandemic lows in the past, Regis is now seeing stronger occupancy and increased revenue despite challenges getting staff, analyst Vanessa Thomson says in a note. Regis estimates a 1% increase in occupancy translates to around A$7.5M in additional revenue. "We expect occupancy to improve further into the medium term with additional support from new homes as construction restarts," Thomson says. (david.winning@wsj.com; @dwinningWSJ)
2141 GMT - Healius's 1H result highlighted cost issues, contributing to Jefferies downgrading the stock to underperform from hold. In a note, analyst David Stanton says lowering costs will be a key focus in 2H even as the company aims to grow its Pathology Collection Centres faster than the market as a whole. Stanton recalls how Pathology Collection Centres volumes rose at a compound annual rate of 14% between 2010 and 2016, while pathology volumes overall only increased by 4%, saddling the industry with large costs. "We worry about potential irrational industry competition," Stanton says. (david.winning@wsj.com; @dwinningWSJ)
2117 GMT - Global miners are confident the Inflation Reduction Act will drive up metals demand and are doing deals that target the supply shortfall. BHP Group is close to completing its biggest acquisition since 2011 with the more-than $6B bid for copper-and-gold miner OZ Minerals. Two months ago, Rio Tinto PLC bought out minority shareholders in Canada-listed Turquoise Hill Resources in a $3.1B deal to get more exposure to a giant copper deposit in Mongolia. The pivot partly reflects expectations within the mining industry that existing operations aren't producing enough copper, nickel and other commodities vital to the energy transition, including a rapid take-up of electric vehicles. It also highlights that miners are too reliant on commodities such as iron ore and coal, which won't experience the same increase in demand as the world decarbonizes. (patrick.sheridan@wsj.com)
0537 GMT - EML's latest intervention from the Central Bank of Ireland is a material setback for the Australia-listed payments firm, Wilsons analysts say in a note. The analysts tell clients that the CBI's proposal to stop EML growing its local business in response to poor efforts at remediating customers over known issues will probably have an even bigger impact on EML's FY24 than its current year. The summary of the CBI's views made public by EML constitutes a "very poor report card," they add. They think that growth and sales will both be hit, while EML will also have to use resources that could be directed toward its other businesses. Wilsons is reviewing its market-weight recommendation and A$0.58 target price. Shares closed 4.8% lower at A$0.50. (stuart.condie@wsj.com; @StuartLCondie)
0504 GMT - IDP Education's outlook is supported by market-share gains in a growing student-placement industry, but Morgans analyst Scott Murdoch is waiting on a pull-back before recommending sidelined investors get on board. Murdoch says in a note to clients that IDP's 1H profit was slightly lower than anticipated due to costs and currency moves but the Australian company's ability to grow share remains attractive. Morgans raises its target price 2.9% to A$31.65 but maintains a hold rating. Morgans says potential market volatility or temporary price weakness may yet offer a better entry point. Shares are down 2.2% at A$28.47. (stuart.condie@wsj.com; @StuartLCondie)
0453 GMT - Appen's abandonment of its longer-term revenue aspirations is an honest reflection of the data-annotation provider's poor 2022, Jefferies analyst John Campbell says. He tells clients that he sees CEO Armughan Ahmad's focus on improving revenue visibility and cost discipline as a positive, but that he is concerned by poor trading conditions, a weak global division performance and the new markets division's lack of contribution. He says that, with the short-term outlook so weak, investors' eyes will be on the 2023 guidance that Appen is scheduled to give at its tech day in May. Jefferies has a last-published hold rating and A$3.10 target price on the stock, which is down 15% at A$2.33. (stuart.condie@wsj.com; @StuartLCondie)
0350 GMT - The destocking efforts that Brambles expects to see from its customers can be looked at two ways in terms of its impact on the pallet supplier, Macquarie analysts say. On one hand, they say the trend could be positive as it would allow Brambles to redeploy pallets and to mitigate capital expenditure. Yet they also warn that redeployment could become less commercially attractive as supply dynamics change. There could also be higher costs associated with the maintenance of latent pallets that cannot be redeployed, they add. The Macquarie analysts anticipate net cash outflows until FY 2025. Macquarie stays neutral on the stock and lifts its target price by 9.3% to A$12.90. Shares are down 1.3% at A$12.80. (stuart.condie@wsj.com; @StuartLCondie)
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