Forum Topics News Summary DJ Australian Equities Roundup -- Market Talk 24 Apr 2023 15:00:06
one year ago

0358 GMT - A recent spate of mining M&A proposals won't do much to add to the overall global supply of copper, a metal needed for the energy transition, says Richard Gannon, a mining-industry adviser and former investment banker. "This is consolidation," he tells WSJ. "It serves the interests of the miners" but "it's not pouring capital into new capacity, which is what the world wants." (; @RhiannonHoyle)

0355 GMT - A recent spate of deal-making in the mining industry looks much more conservative than the sort of debt-fueled megadeals announced at a commodities market peak a decade or so ago, says Richard Gannon, a mining-industry adviser and former investment banker. "There's a red line that none of these deals cross," he tells WSJ. "These are not the pure 100% cash deals of the past. You are not putting unreasonable debt onto your balance sheet, which I think is completely different to how some of those deals were being done 10 years ago." Importantly, miners don't appear to be risking dividends, a yield that is "ferociously protected" by institutional investors, Gannon says. (; @RhiannonHoyle)

0355 GMT - BHP's imminent takeover of Oz Minerals has long been a logical deal but required the world's top miner, which overpaid for some other assets at a market peak roughly a decade ago, to regain shareholders' trust, says Richard Gannon, a mining-industry adviser and former investment banker. "I do think it would have been a much more difficult sell for them a few years ago," Gannon tells WSJ. "Whereas now, with that trust, I think the shareholder base is prepared to be very accepting of the price paid and the strategy...rather than BHP having to defend the price to its own shareholder base too vociferously from day one." (; @RhiannonHoyle)

0139 GMT - Woolworths's 3Q sales likely benefited from consumers trading down to its discount department-store chain in response to cost-of-living pressures, UBS analysts say. They tell clients in a note that the Big W chain likely generated A$1.1 billion in March quarter sales, beating the average analyst forecast of A$993 million. This helps support UBS's forecast of A$16.4 billion in 3Q group sales, or 8.5% on-year growth. Woolworths is scheduled to report its 3Q sales on May 2. UBS keeps a neutral rating on the stock and raises target price by 3.4% to A$38.25. Shares are 0.5% higher at A$38.90. (; @StuartLCondie)

0121 GMT - Coles's total sales should exceed market expectations when the Australian supermarket chain reports its 3Q performance next week, UBS analysts say. They tell clients in a note that they anticipate total sales of A$9.8 billion, up 7.5% on year. That compares with the average analyst forecast of A$9.6 billion, they say. The driver is their forecast of 7.9% supermarket sales growth on inflation and modest volume growth, or 7.8% on a like-for-like basis. Keeping UBS cautious is an expectation that cost-of-living increases will help discount retailer Aldi regain some market share it lost to Coles during the Covid-19 pandemic. UBS lifts its target price on the stock 2.8% to A$18.50 and stays neutral on the stock, which is up 0.9% at A$18.37. (; @StuartLCondie)

0108 GMT - Expectations for strong demand from electric vehicle makers and the renewable energy industry, coupled with a lack of quality growth projects, have put copper at the heart of a rise in mining M&A proposals, Jefferies analyst Christopher LaFemina tells the WSJ. LaFemina says the industry's increased dealmaking has been "sensible" so far and the market has generally liked the deals, which includes a Newmont bid to buy Newcrest and BHP's purchase of Oz Minerals. Glencore is seeking to combine with Teck--a proposal that's been rejected by the Canadian miner. "We haven't seen miners base M&A decisions on overly optimistic expectations in these recent deals," which have "included synergies and/or strong strategic rationale," LaFemina says. (; @RhiannonHoyle)

0105 GMT - Gold Road Resources' big 1Q cost beat may not mean it will exceed guidance for the year as a whole, Ord Minnett analyst Tim Elder suggests in a note. Gold Road reported all-in sustaining costs of A$1,399/oz for 1Q, representing a 16% beat to Ord Minnett's A$1,661/oz forecast. That was driven by lower sustaining expenditure. Ord Minnett expects sustaining spend to rise as construction of Gold Road's third pebble crusher and scheduled tailings dam lift are completed and the volume of capitalized waste mining increases. "This should see AISC increasing to meet 2023 guidance (A$1,540-1,660/oz) despite this better quarterly and anticipated production uplift (higher grades) through the remainder of 2023," the bank says. (; @dwinningWSJ)

0034 GMT - South32's 3Q production was weaker-than-expected, says RBC Capital Markets analyst Kaan Peker, after the miner downgraded FY output guidance for multiple operations. The company's alumina, aluminum, manganese and copper volumes missed RBC's expectations, Peker says in a note. "We had expected flat QoQ copper equivalent, S32 reported -5%," he says, adding that cash generation also missed due to the weaker-than-anticipated production. South32 is down by 9.6% in Sydney at A$4.025/share. (; @RhiannonHoyle)

0023 GMT - Retail Food Group's network looks to be in the best shape it has been in many years, with all brands showing positive 1H earnings, Shaw & Partners analysts say in a note. The analysts tell clients that RFG's management is continuing to execute the group's turnaround well and the Australian company appears well-placed and sufficiently funded to pursue strong organic growth opportunities. They anticipate a material improvement in cashflow in FY 2024 and think that the stock remains significantly undervalued relative to peers. Shaw reiterates its buy rating and A$0.15 target price on the stock, which is down 1.6% at A$0.062. (; @StuartLCondie)

0012 GMT - Next Science's Xperience wound-cleaning treatment hasn't been embraced by customers as enthusiastically as Wilsons analysts had hoped. The Wilsons analysts say in a note to clients that Next Science's 1Q revenue of US$4.4 million missed their forecast by about US$300,000, which they think reflects lower Xperience sales to partners including Zimmer. They say that Zimmer appears ill-equipped to sell Xperience due to a lack of understanding over the product's prophylactic value. Wilsons cuts its revenue forecasts for Next Science and lowers the stock's target price by 6.7% to A$0.70. It maintains a market-weight rating on the stock, which last traded at A$0.71. (; @StuartLCondie)

2326 GMT - Bank of Queensland's margin outlook commentary looks concerning to Macquarie. In a note, the bank's analysts say they reckon that mortgage competition is set to drive margin competition for the Australian regional lender, but that there is a larger risk of persistent margin decay from deposit competition, particularly in the savings account category. "With legacy BOQ savings products appearing to drive the bulk of at-call margin benefits, we see increasing risk of deposit switching to the new my BOQ savings products, which appear to be around 235-295 basis points more expensive," says Macquarie. At the same time, the investment bank sees that BOQ's 1H expense growth was disappointing, and with increasing capitalized balances driving rising amortization expenses, as well as ongoing inflation, Macquarie reckons expenses will continue to disappoint. (

2256 GMT - Citi retains a bearish call on Woodside Energy despite a 1Q report that contained no surprises on new projects. The bank calls out future risks, including to the Scarbrough natural-gas development and possible changes to Australia's Petroleum Resource Rent Tax that would affect Woodside's dividends. "We think the market is yet to price these risks into the cost of equity," analyst James Byrne says in a note. He highlights that Woodside successfully bid on exploration licenses in the U.S., Mexico, Egypt and Namibia in 1Q. "Perhaps, then, we should follow management's lead and invest in companies with less Australia exposure?" says Byrne. Citi likes Worley for its exposure to the Inflation Reduction Act in the U.S., and Santos's strong foothold in Papua New Guinea. (; @dwinningWSJ)

2211 GMT - Although Whitehaven Coal has stumbled of late, its outlook beyond FY 2025 has improved, says Ord Minnett in a note. Whitehaven has decided to push ahead with a small-scale development of the Vickery coal deposit in New South Wales state for A$150 million. First coal is expected around mid-2024 before ramping up to 1.2 million-1.3 million tons/year of coal. "We are yet to integrate this into our numbers, but the project should help to increase production/retain staff post closure of Werris Creek," likely in the middle of FY 2025, analyst Tim Elder says in a note. Ord Minnett has a buy call on Whitehaven's stock. (; @dwinningWSJ)

(END) Dow Jones Newswires