0402 GMT - Computershare looks increasingly likely to exit the U.S. mortgage-servicing business, Jarden analysts say. They reckon that the unit will return to profitability in 2H FY23 but that its return on invested capital will continue to fall well short of Computershare's long-held 12% minimum target. They point out in a note to clients that the Australian company's recent communications show that it has redesignated the unit as a managed--rather than core-- business. Sale conditions appear favorable and US$1 billion in redeployed capital could lift medium-term EPS by as much as 12%, they say. Jarden has an overweight rating and A$25.10 target price on the stock, which is down 0.6% at A$21.695. (stuart.condie@wsj.com; @StuartLCondie)
0351 GMT - Aristocrat Leisure will need to find about A$60 million of synergies to support the premium it is paying to acquire NeoGames, Citi analysts say in a research note. They tell clients that their initial analysis suggests that this is achievable in the context of robust industry growth forecasts. Synergies can come from leveraging existing relationships in North America, they say. The A$1.8 billion acquisition enables Australian gaming tech provider Aristocrat to market complete solutions to casino partners and makes strategic sense to Citi. It has an unchanged buy rating and A$42.80 target price on the stock, which is 0.25% higher at A$39.61. (stuart.condie@wsj.com; @StuartLCondie)
0320 GMT - Tyro's acknowledgement of moderating transaction volumes on its network drive Wilsons analysts to downgrade the stock to underweight from marketweight. The Australian payment-terminal provider's modest lowering of FY 2023 total transaction value guidance further suggests looming macro pressures from rising interest rates and inflation, the analysts say in a note. They cut their FY 2024 Ebitda forecasts by 9% to reflect increased conservatism on transaction volumes and a loss of operating leverage from Tyro's high fixed-cost base. They cut their target price by 14% to A$1.33. Shares are down 1.7% at A$1.485. (stuart.condie@wsj.com; @StuartLCondie)
0157 GMT - TPG Telecom's relatively large exposure to enterprise and government customers increasingly targeted by cloud-based software vendors represents a significant earnings headwind, Morgan Stanley analysts say in a note. They tell clients that TPG derived 13% of total 2022 revenue from its enterprise, government and wholesale unit. They point out that the ASX-listed company has already acknowledged likely margin compression at the unit. The MS analysts anticipate A$150 million of revenue erosion over the next three years, with Ebitda declining by A$60 million. MS cuts its target price by 27% to A$5.60 and lowers its recommendation to equal-weight from overweight. Shares are down 1.8% at A$5.50. (stuart.condie@wsj.com; @StuartLCondie)
0145 GMT - Telstra's latest mobile price rises prompt UBS analyst Lucy Huang to raise her annual revenue and earnings forecasts, although she cautions that it remains to be seen whether customers will tolerate further price growth. Huang says she remains subdued on mobile price growth assumptions beyond FY 2024 given increased competition including from virtual network operators. Rising cost-of-living pressures and signs of increased churn are also concerns, she says in a note. Increased migration can offset some of these headwinds in the short term, she adds. UBS raises target price by 4.5% to A$4.60 and stays neutral on the stock, which is down by 0.5% at A$4.33. (stuart.condie@wsj.com; @StuartLCondie)
0121 GMT - While Telstra's latest mobile price hikes are no surprise to Goldman Sachs analysts, they bolster confidence in their FY 2024 Ebitda forecasts for the Australian telecommunications provider. The GS analysts say in a note that their forecast of Ebitda growth of at least 5.6% is driven by Telstra's mobile division. The price rises show Telstra behaving like a rational incumbent, leading industry pricing higher and signaling to rivals that it is focused on improving returns. GS reiterates its buy rating on the stock and maintains a A$4.70 target price. Shares are down 0.3% at A$4.335. (stuart.condie@wsj.com; @StuartLCondie)
0113 GMT - Tyro Payments's third guidance upgrade of fiscal 2023 and the potential for acquirer interest prompt Macquarie analysts to upgrade the stock to outperform from neutral. They tell clients in a note that the payment-terminal provider's latest upgrade shows management delivering on its ambition to be more pro-active with pricing. While this increases the risk of customer churn, the market is looking more rational due to reduced start-up funding, they say. They also think that private-equity firm Potentia still looks keen to get a deal done for Tyro, and that an improved offer will be forthcoming. Macquarie lifts target price by 5.9% to A$1.80. Shares are 1.3% lower at A$1.49. (stuart.condie@wsj.com; @StuartLCondie)
0107 GMT - PointsBet looks materially undervalued following its agreement to offload its U.S. assets, Bell Potter analyst Chris Savage says. He cuts his target price on the stock by 31% to A$2.00 after the company said it had agreed to sell its U.S. business for US$150 million. Yet he notes that the current share price implies that the remaining Australian and Canadian assets are worth just A$100 million, which is about half the Australian business's potential sale price recently mooted by local media. Bell Potter maintains a buy rating on the stock, which is down 7.9% at A$1.34. (stuart.condie@wsj.com; @StuartLCondie)
0102 GMT - MA Financial's AGM update shows solid gross inflows for the first four months of FY 2023, but underlying net flows for FY 2023 may slow, say UBS analysts in a note. MA Financial saw continued strong gross inflows into Asset Management for the first four months of FY 2023 skewed to credit strategies, says the investment bank, but notes that net flows (ex-insto) are tracking slightly below UBS's forecasts. The investment bank makes some changes to forecasts, decreasing its FY 2023 underlying net inflow forecasts from A$1.3 billion to A$1.1 billion. UBS keeps its buy rating on the stock.(alice.uribe@wsj.com)
0058 GMT - There are plenty of tailwinds to keep Strike Energy's share price rising, says Bell Potter analyst Stuart Howe in a note. Strike's Walyering project is about to commence production at a time when Western Australia's domestic gas market is tightening, Bell Potter says. Also, Strike likely will make a final investment decision for its wholly owned South Erregulla gas-project in 2H 2023, ahead of a potential start to production from early 2025, the bank says. Meantime, Strike is progressing its West Erregulla project ahead of a potential final investment decision in mid-2024. Bell Potter raises its price target on Strike by 14% to A$0.58/share. Strike is up 2.3% at A$0.44.(david.winning@wsj.com; @dwinningWSJ)
0058 GMT - The scale Newmont will gain from its planned takeover of Newcrest Mining, Australia's largest listed gold producer, should make the U.S. company more relevant to global investors, according to Sprott Asset Management senior portfolio manager Douglas Groh. The acquisition will give Newmont a greater market cap, while diversifying its portfolio, adding more copper just "as a strong and long copper cycle is about to unfold," says Groh. It also "allows Newmont to build on Newcrest's bulk-mining skills and apply those to its assets-improving Newmont's current asset value," he adds. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)
0052 GMT - Woodside's decision to abandon a process to sell part of its 82% stake in the Sangomar oil field in Senegal now looks fortuitous to Macquarie, which recently took a look at the producer's floating production storage and offloading vessel that is under construction. Woodside looked to sell down its stake in Sangomar when facing a capex squeeze a few years ago, but its balance sheet then improved via its combination with BHP's petroleum unit and a jump in energy prices following Russia's invasion of Ukraine. In a note, Macquarie says it now sees less reason for Woodside to pursue a deal for Sangomar until the field has matured in 3-5 years' time. It expects Sangomar to contribute a net 22 million barrels of oil to Woodside's FY 2024 production and US$1 billion of EBIT. (david.winning@wsj.com; @dwinningWSJ)
0043 GMT - James Hardie's shares bounce 8% to their highest level since August after the building materials supplier forecast earnings for 1Q of FY 2024 well ahead of market expectations. In a note, Jefferies analyst Simon Thackray says guidance for adjusted net income of US$145 million-US$165 million was 34% better than he expected. It was also 30% higher than consensus forecasts. "We would use some caution extrapolating this run rate for the FY 2024 year," says Thackray, as volumes may decline sequentially as the U.S. pipeline of construction of residential construction continues to fall. James Hardie last traded at A$36.77. (david.winning@wsj.com; @dwinningWSJ)
0021 GMT - Rural services group Elders' 1H FY 2023 results were mixed, but showed that the company is making solid progress toward its eight-point plan targets, Goldman Sachs analysts Michael Peet and Xavier Harrison say in a note. GS reckons Elders has a clear strategy that should continue to be executed on upon the retirement of current CEO Mark Allison. "Structurally, Elders should be able to deliver further margin expansion through the cycle...the company also has ample opportunity to continue to grow its market share through bolt-on acquisitions and organic growth," says GS. For 1H, revenue and gross margin was above GS's estimates, but EBIT was 15% below the investment bank's expectations at A$82.8 million, with distribution costs up 15% year on year. (alice.uribe@wsj.com)
2339 GMT - Australian farmland maintained strong growth momentum in 2022, with demand likely to outstrip demand through 2023, says Rural Bank Head of Agribusiness Development Andrew Smith. A new report from Rural Bank on farmland values in Australia, supplemented by farmland sales data from Digital Agriculture Services, shows a 20% rise in growth for 2022, keeping pace with growth in 2021 and the first time in the last 28 years that growth of more than 15% was recorded across all states and territories. Still, Smith says while Rural Bank expects growth in farmland values in 2023, it's likely be at a slower rate than the previous two years. Rural Bank is a unit of Australian regional lender Bendigo and Adelaide Bank. (alice.uribe@wsj.com)
2304 GMT - Allianz Australia, the country's fourth-largest insurer, is likely the best peer from which to draw conclusions about Australian general insurers, as it has a very similar product mix, say Macquarie analysts in a note. As a result, AA's March quarter result is likely to provide a strong read through for Australian insurer rivals IAG and Suncorp. Of AA, Macquarie says despite a better-than-average natural catastrophe period in the March quarter, attritional margins continue to be under pressure. At the same time, Macquarie sees that competition for new business is likely to increase acquisition costs and pressure market share for incumbents. The investment bank reckons Suncorp's underlying insurance trading ratio margin improvement will be easier to achieve, reiterating its preference for that stock over IAG. (alice.uribe@wsj.com)
2249 GMT -- Rural services group Elders is dropped from Macquarie's buy list amid forecasts for an imminent return of the El Nino weather event. In a note, Macquarie highlights that Australia's Bureau of Meteorology is currently on El Nino watch, while U.S. forecasters see an 82% probability of El Nino in May-July. "Stock is relatively cheap on 10 times FY 2023 price to earnings," says Macquarie, moving to neutral from outperform. "However, it needs to deliver on 2H earnings/cash flow guidance and risk of El Nino adds uncertainty to FY 2024 earnings outlook." Macquarie drops its price target on Elders's stock by 46% to A$7.77/share. Elders ended Monday at A$7.20. (david.winning@wsj.com)
2244 GMT - Propel Funeral Partners's recent acquisitions in Sydney may push its metro share in that city to nearly 4%, say Bell Potter analyst Chami Ratnapala in a note. The investment bank sees that PFP has successfully grown its market share since making an entry into a number of regions, and expects similar success for metro Sydney. "We also see the market entry strategy with a focus on relatively less competitive suburban markets than other concentrated catchments as favorable," says BP. It raises its target price 3.5% to A$5.90/ share driven by BP's investment upgrades from FY 2024 onward. PFP was last down 0.5% to A$4.41. (alice.uribe@wsj.com)
2239 GMT - Tyro Payments still looks fundamentally expensive despite the Australian payment-terminal provider's improved FY23 profit and earnings guidance, Jefferies analysts say. They tell clients in a note that Tyro's upgraded gross profit guidance is about 1% ahead of market expectations, while Ebitda guidance is about 7% higher. Yet Tyro's lowered guidance for the value of transactions conducted on its network adds to the analysts' concerns about softening macro conditions and keeps them cautious on the stock. Jefferies has an underperform rating and A$1.25 target price on the stock, which last traded at A$1.51. (stuart.condie@wsj.com)
2240 GMT - Charter Hall gets a new bull in Citi, which says concerns weighing on the stock have dissipated in recent weeks. In a note, analyst Suraj Nebhani says recent transactions for offices have taken place at 10-15% discount to book values, meaning asset pricing is potentially better than feared. Also, consensus expectations for FY 2024 earnings have already come down by some 7% since February and transaction activity is rebounding, Citi says. "From current levels, we believe better-than-expected outcomes on asset values, rising CPI (20% of platform income CPI-linked), and a further recovery in transaction activity are likely to support FY 2024 consensus earnings," Citi says. Moreover, the bank's FY 2025 forecast is 19% ahead of consensus, driven by performance fees. (david.winning@wsj.com)
(END) Dow Jones Newswires