Forum Topics News Summary DJ Australian Equities Roundup -- Market Talk 20 Apr 2023 15:00:07
one year ago

0455 GMT - The slow growth of AMP's bank suggests potential funding issues, Citi analyst Nigel Pittaway says in a note. The Australian wealth manager's bank looks like it might be heavily reliant on high-interest deposit funding, given its minimal transaction accounts, he says. But Citi also sees a possible salve in a residential mortgage-backed securities deal the bank made in March, which raised A$750 million. This could alleviate some of the pressure it is under, and open the path to a resumption in growth, Citi says. Still, it will likely be hard for the bank to hit AMP's target of above-system loan growth in FY 2023, Citi says, noting that 1Q residential-loan growth was low. (

0310 GMT - Rio Tinto has notched a solid start for the year in its most lucrative business, iron ore, Jefferies analysts say in a note. "Could this be a year in which Rio beats its production guidance in iron ore?" the analysts say. Rio Tinto's record 1Q Pilbara iron-ore shipments came despite some plant reliability issues, aided by broad operational improvements and the ongoing ramp up of the Gudai-Darri mine, they say. It will help "as well that iron-ore prices increased by 27% from 4Q22 to 1Q23 and continue to be relatively high compared to 4Q levels," the analysts add. Rio Tinto, which downgraded its FY copper guidance and recorded challenges in its bauxite unit, is down 2.6% at A$119.96. (; @RhiannonHoyle)

0236 GMT - Corporate Travel Management's latest U.K. government contract significantly increases the likelihood that the Australian travel-services provider will hit its FY 2024 earnings target, Morgan Stanley analysts say. They estimate that the U.K. Home Office contract could contribute between A$40 million and A$60 million to FY 2024 Ebitda. This moves them to lift their FY 2024 EPS forecast by 5%. The MS analysts tell clients in a note that the size of the contract dramatically reduces the company's reliance on the cyclical rebound in travel demand. MS lifts target price by 2.1% to A$28.60 and keeps an overweight rating on the stock, which is down by 0.2% at A$21.205. (; @StuartLCondie)

0224 GMT - Latitude's shares have yet to reflect the full impact of the Australian credit provider's cyber breach, Citi analysts say as they downgrade the stock to sell from neutral. They tell clients in a note that the breach will likely require a material upgrade to Latitude's technology on top of potential civil penalties from regulators. They estimate a total outlay of about A$95 million, while stressing that it is too early to accurately forecast the cost. They think that this cost plus a loss of momentum will increase focus on Latitude's balance sheet, which some analysts have already noted looks stretched. Citi cuts its target price on the stock by 15% to A$1.10. Shares are up 0.8% at A$1.30. (; @StuartLCondie)

0222 GMT - Questions about the performance of gold miner Evolution's Red Lake operation will remain after a 15% downgrade in FY 2024 production guidance there, RBC Capital Markets analyst Alex Barkley says in a note. "EVN commentary largely suggests Q2 and now Q3 weakness was in site culture and operating practices, which the company has moved quickly to remedy" but "the FY24 downgrade suggests EVN expects issues will persist at least in the near term," Barkley says. A potential delay to an expansion of milling capacity there could also affect the broker's production forecasts and valuation for that site, he adds. Barkley says Evolution's 3Q production result was otherwise mostly uneventful, given a number of figures had been released earlier by the company. Evolution is down y 1.6% at A$3.495. (; @RhiannonHoyle)

0215 GMT - REA Group could cut about A$11 million from its annual cost base if the Australian real-estate advertiser can persuade staff to take vacations, Macquarie analysts say in a note. They tell clients that this would be equivalent to about a 2% lift in FY 2023 EPS, assuming that all 3,000 or so staff take their full leave allowance. REA asked staff to book their full FY 2023 leave allowance plus two days from FY 2024 in order for the company to reduce costs, according to a report in The Australian Financial Review newspaper. Macquarie raises its FY 2023 EPS forecast by 5% on the prospect of lower costs. It lifts the target price 7% to A$93.00 and keeps an underperform recommendation on the stock, which is flat at A$140.90. REA is 61% owned by News Corp., which owns Dow Jones & Co., publisher of this newswire and The Wall Street Journal. (; @StuartLCondie)

0207 GMT - REA Group still looks expensive to Macquarie analysts despite the prospect of the Australian real-estate advertiser pushing through 10-12% price rises in FY 2024. The analysts tell clients in a note that listings volumes remain soft amid lower property prices. They expect REA to report a 23% volume decline for 2H FY 2023. This compares with the average analyst forecast of about a 20% decline. Macquarie raises its FY 2023 and FY 2024 EPS forecasts by 5% and 8%, respectively, on the prospect of a lower cost base, but lowers subsequent forecasts to reflect medium-term listings conditions. It lifts the target price 7% to A$93.00 but maintains an underperform rating on the stock, which is flat at A$140.95. REA is 61% owned by News Corp., which owns Dow Jones & Co., publisher of this newswire and The Wall Street Journal. (; @StuartLCondie)

0142 GMT - Rio Tinto's 1Q production result was weaker than expected, with the downgrade in 2023 mined-copper volumes the biggest disappointment, RBC Capital Markets analyst Kaan Peker says in a note. "While we had expected 1Q production to be impacted by seasonal factors such as maintenance [after a strong December quarter] and wet weather, it was worse than expected, particularly with bauxite and alumina," Peker says. Iron ore was the bright spot, with volumes in line with expectations and tracking toward the top end of annual company guidance, he says. Rio Tinto is down by 2.4% in Sydney at A$120.26. (; @RhiannonHoyle)

0018 GMT - Turmoil in the banking sector has led to a further tightening in credit availability and costs that will weigh on economic activity "across the board," says Rio Tinto, the world's second-biggest miner. In a quarterly report, the producer of commodities including iron ore and copper cautions inflation is still "persistently high in the western world, and the risk of further rate hikes on the global economy remains." The global economy has so far been resilient--providing support to commodity prices--in big part due to an improved economic outlook in China, strong labor markets and spending in the U.S., and falling gas prices in Europe, says Rio Tinto. In China, "consumption is expected to normalize and recover further with household incomes supported by job creation amid government efforts to boost business," it says. (; @RhiannonHoyle)

2356 GMT - Australian specialist wealth management platform company Hub24's retail flows are showing signs of weakness amid a subdued start to 3Q FY23 due to the timing of Easter, say Macquarie analysts in a note.The investment bank reckons that in the short term, this places a lot of reliance on the potential for recovery in the seasonally strong months of May and June. Macquarie says it continues to prefer Hub24 rival Netwealth with 25% three-year EPS CAGR versus Hub24 at 20%. Macquarie adds that key risks for Hub24 include the possibility for weaker net flows, and an elevated expense outlook. (

2304 GMT - AMP's 1Q FY 2023 update was one of the better ones for the Australian wealth management company over recent time, says Jefferies analyst Simon Fitzgerald in a note. All business divisions reported improvements in growth markers, he says, with AMP reporting the smallest net outflow number in 18 quarters. The Australian Wealth Management unit's assets under management increased to A$126.2 billion, up 1.6% from A$124.2 billion in 4Q FY 2022, which Jefferies attributes largely to positive market movements. The investment bank reaffirms its buy rating, and keeps its target price unchanged at A$1.35/ share. AMP was last up 3.7% to A$1.14/share. (

2220 GMT - Casino operator Star Entertainment's new profit guidance is hard to reconcile, Jefferies analyst Simon Thackray says in a note. Star now expects annual Ebitda of A$280 million-A$310 million, having already reported A$200 million in 1H. That's despite borders reopening and tourists flooding back to Queensland. "What seems surprising to us in today's messaging is that with gambling generally regarded as less volatile in a downturn, Star Group is somehow now experiencing earnings conditions that (ex-Covid) are unprecedented in its history," Jefferies says. The bank retains a hold call and A$1.55/share price target on the stock. Star ended Wednesday at A$1.26, down 7.4% for the session. (

0511 GMT - AMP's wealth flows are staying soft and its banking unit's loan growth has shown no signs of speeding up, say UBS analysts in a note. "Whilst Australian Wealth Management outflows have narrowed versus the previous corresponding period, the overall 1Q FY 2023 performance in both AWM?and Bank was behind our 1H FY 2023 forecasts," says the investment bank. UBS notes that AMP Bank's loan growth in 1Q slowed sharply to 0.6% on quarter, compared with UBS's forecast of 1.9%, and deposits fell 1.5% on quarter. UBS reckons that AMP prioritized margin over volume in a very competitive marketplace. UBS keeps its sell rating.(

(END) Dow Jones Newswires