0452 GMT - Sonova's FY23 result could imply a couple of negatives for sales growth at Australian hearing-implant supplier Cochlear, RBC Capital Markets analyst Craig Wong-Pan says. He tells clients in a note that Sonova cited supply shortages, hospital-staffing shortages and competitive pressures as contributing to slowing local-currency sales growth. This suggests potential headwinds for Cochlear's implant revenues, although Wong-Pan notes it is possible that Cochlear could be the reason Sonova is experiencing competitive pressure. He observes that Sonova's results also suggest that services sales growth may slow reasonably quickly after the launch of a new sound processor. RBC has a last-published sector perform rating and A$207.00 target price on Cochlear shares, which are down 1.0% at A$245.90. (stuart.condie@wsj.com; @StuartLCondie)
0208 GMT - Appen could still face balance-sheet risks in FY 2024 if major customer growth continues to falter, Jefferies analyst Wei Sim says in a research note. He sees growth potential for the Australian data-annotation provider beyond 2024 if major customer declines normalize and new market revenues grow amid Appen's diversification efforts. Nonetheless, the company has removed the most immediate overhang on its shares by raising A$60 million in equity and securing a new debt facility, he adds. Jefferies maintains a hold rating on the stock and cuts the target price by 25% to A$2.10. Shares are 4.3% lower at A$2.14. (stuart.condie@wsj.com; @StuartLCondie)
0158 GMT - Australian travel-services provider Helloworld is superbly positioned to benefit from a strong recovery in inbound tourism and travel activity, Shaw & Partners analysts say in a note. They cite a raft of data including April's 3.3% monthly rise--and 20% annual increase--in Melbourne airport traffic that looks positive for travel operators. They think that there is solid potential for Helloworld to upgrade its FY 2023 earnings guidance for a third time. Shaw & Partners has a buy rating and A$3.40 target price on the stock, which is up 0.35% at A$2.88. (stuart.condie@wsj.com; @StuartLCondie)
0142 GMT - Appen's cost cuts and A$60 million capital raise should alleviate the data-annotation company's balance-sheet concerns until FY26, Macquarie analysts say in a note. They tell clients that balance-sheet repair is a positive but soft revenue trends will continue to weigh on the company's share price. Macquarie raises its target price by 14% to A$1.35 to reflect the fact that the capital raise and a new US$20 million debt facility combined are significantly smaller in size than the analysts had anticipated. Macquarie keeps an underperform rating on the stock, which is down 3.4% at A$2.16. (stuart.condie@wsj.com; @StuartLCondie)
0117 GMT - Australian banks may be eyeing potential buybacks as they retain solid capital buffers, say Morgan Stanley analysts in a note. The major lenders have more than A$10 billion of capital buffers under the Australian regulator's new framework, MS notes, but says that it believes a conservative approach to capital management is warranted until the outlook for the economy and credit quality is clearer. The investment bank isn't forecasting new buybacks before the second half of 2024, but notes that NAB and Westpac both recently stated that they would consider new buybacks. For ANZ, MS thinks that its future capital-management decisions will likely depend on whether it gets approval for its proposed acquisition of Suncorp's bank. (alice.uribe@wsj.com)
0104 GMT - Australian banks face a crunch from inflationary pressures, with Macquarie analysts expecting earnings and returns to decline in FY 2024, meaning that the near-term outlook remains challenging. But they say that after an around 3%-9% consensus downgrade and rebased margin expectations, the earnings risk has moderated, with Macquarie only around 1%-4% below consensus in FY 2024. "While credit quality remains a potential swing factor, we see diminished justification for being underweight the sector as the sector appears more reasonably priced," they say in a note. It now has a neutral view on the Australian banking sector, up from underweight previously. (alice.uribe@wsj.com)
0055 GMT - Rio Tinto's ambition to play a bigger role in supplying metals essential to the energy transition has UBS pondering whether the miner could turn to M&A. In a note, analyst Lachlan Shaw says Rio Tinto's two lithium projects in its pipeline--Rincon in Argentina and Jadar in Serbia--are relatively high risk. "As a result, we see potential for Rio Tinto to grow in lithium through M&A (albeit M&A is not without risk either)," Shaw says. "This has become more likely over the last six months with lithium prices falling more than 60% from all-time highs (from $80/kg in December 2022 to $30/kg) and with the lithium industry consolidation accelerating." (david.winning@wsj.com; @dwinningWSJ)
0052 GMT - ASX's Australian electricity futures should provide a small tailwind over the medium term, say Macquarie analysts in a note. Australian electricity futures contract volumes have grown around 21% per annum since FY 2019, supported by the transition towards renewable energy, notes the investment bank. "We see the ongoing transition towards the Australian government's renewable energy target of 80% by 2030 as a medium-term tailwind for volume growth," says Macquarie. It forecasts Australian electricity futures contracts to grow at 13% per annum from FY 2023 to FY 2025, but reckons it is important for ASX to consider product innovation to get the benefits of demand. (alice.uribe@wsj.com)
0050 GMT - Rural services group Elders should be able to achieve its FY 2023 EBIT guidance, albeit at the bottom of the A$180 million-A$200 million range provided to investors this week, UBS says. In a note, UBS analyst Evan Karatzas says Elders' 2H EBIT should total A$99 million, up 20% on 1H. That forecast reflects an A$18 million cost benefit in 2H, an A$11 million increase in Rural & Wholesale Products earnings, and a A$3 million improvement in Agency earnings to account for improved cattle volumes through Elders sale yards. UBS says it now expects an annual EBIT of A$182 million, from a prior forecast of A$185 million. (david.winning@wsj.com; @dwinningWSJ)
0017 GMT - Sezzle's strong 1Q update drives meaningful upgrades to Ord Minnett's earnings forecasts and supports the view of its analysts that it is the pick of buy-now-pay-later stocks. The analysts tell clients in a note that Sezzle's achievement in lowering bad debts in a seasonally challenging period is outstanding, and hail its improved revenue and net transaction margin. Sezzle stands out as the only BNPL space to be generating positive cash flow, they say. Ord Minnett retains a buy rating on the stock and lifts the target price by 5.5% to A$48.10. Shares are down 4.8% at A$20.00. (stuart.condie@wsj.com; @StuartLCondie)
0018 GMT - AGL Energy can self-fund its growth ambitions through 2030, addressing a key concern of investors, says UBS analyst Tom Allen in a note. AGL has a more than A$3 billion development pipeline, which includes investment in batteries and renewable-energy technologies. UBS estimates AGL can achieve robust internal rates of returns in order of 7%-9% after tax, even if wholesale electricity prices fall. "AGL's plan to add more than 5GW of renewable and firming capacity by FY 2030 could improve its ESG profile over time and potentially attract a scarcity premium as one of the few Australian large-caps able to materially influence the country's energy transition journey," UBS says. (david.winning@wsj.com; @dwinningWSJ)
2338 GMT - Appen's A$60 million capital raise eases Wilsons analysts' concern over the data-annotation company's financial position, but does little to change their overall view of the stock. They welcome the additional clarity that Appen has provided over its cost-reduction program but maintain an underweight recommendation on the stock. They tell clients in a note that the initial annualized impact of the cost reductions is greater than they had anticipated, moving them to trim their FY 2023 earnings loss forecast to US$17.3 million from US$27.6 million. They cut target price by 6.8% to A$1.77 on the dilutive impact of the raise. Shares last traded at A$2.235. (stuart.condie@wsj.com; @StuartLCondie)
2317 GMT - Australia's pension funds are threatening to vote against the boards of that country's major companies if they have less than 30% female representation. In a new voting policy that takes effect from July and is an update of a previous policy focused on ASX200 companies, the Australian Council of Superannuation Investors said it will recommend that its pension fund members vote against the boards of ASX300 companies with "poor gender diversity," on a case-by-case basis. "Our recommendations will focus on the individual directors most accountable for board succession and composition," says ACSI. Chairmen and directors seeking re-election of ASX 300 companies are those that ACSI may consider voting against if they have below 30% female representation. ACSI says 97 ASX300 companies currently don't meet the at least 30% standard. (alice.uribe@wsj.com)
(END) Dow Jones Newswires