0124 GMT - Macquarie's 1Q update likely reads worse than the market was anticipating, says UBS analyst John Storey in a note. Visible Alpha consensus was expecting 1H net profit of around A$2.2 billion, down around 7% on year. UBS says divisional commentary outside of banking and financial services reads poorly, calling out the commodities and global markets unit, with its result significantly down on year, driven partly by lack of activity and less volatility. "Overall, the outlook remains uncertain and Macquarie are cautious in their views but they appear confident 2H FY 2024? should be stronger than 1H FY 2024," says UBS. (alice.uribe@wsj.com)
0113 GMT - Fortescue has capped off a strong fiscal year with another solid quarter of production, Citi analyst Paul McTaggart says in a note. "There's no doubting FMG's strong operational performance at its core Pilbara iron ore ops," McTaggart says. He highlights a fall in net debt and production costs that are the lowest in Australia's iron-rich Pilbara. Still, Citi keeps a sell rating on Fortescue and a A$19.40/share target. "We are still waiting on FFI project investment details/confirmation," McTaggart says. Fortescue is down 0.9% at A$23.52/share. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)
0100 GMT - Macquarie's 1Q FY 2024 update looks soft and is likely to drive negative consensus earnings revisions, Citi analysts say in a note. "While early in the year, it is clear that observable lower commodity volatility and deal flow are weighing on earnings," the investment bank says. It reckons that the challenge for investors is working out how long these low levels of volatility and transaction volumes will persist. Citi thinks it is too early to be certain on how commodity volatility will evolve in the coming Northern Hemisphere winter, but think it's clear that higher cash rates globally is slowing economic activity. (alice.uribe@wsj.com)
0047 GMT - Has the ammonia price found a floor? That's the question posed by Jefferies after the benchmark Tampa price for August rose to $295/ton, up $10/ton on month. In a note, analyst Richard Johnson says rising cash costs are finally feeding through to end product prices and the global market balance is being supported by supply shortages in Asia. This is a positive signal for Incitec Pivot investors. Johnson says ammonia price has dropped 75% in Incitec's FY 2023 so far. "The down cycle this year has been due to lower gas prices in Europe, weak demand as seasonal conditions ease and capacity restarts," Johnson says. "However, gas prices have stabilized and production costs have started to drift back up with the cost of ammonia production for European producers at around $400/ton." (david.winning@wsj.com; @dwinningWSJ)
0039 GMT - Lab-testing specialist ALS's 1H net profit guidance of A$150 million-A$155 million suggests to Jefferies that consensus expectations for FY 2024 earnings are too high. In a note, analyst Nicholas Rawlinson says consensus net-profit forecasts of A$322 million for FY 2024 "should come down by at least 5% and there may be further downside risk depending on the commodities cycle." Over the medium term, ALS looks well-positioned to benefit from structural commodity demand as the market leader in geochemistry testing, Rawlinson says. "However, we remain on the sidelines given the threat that operating de-leverage presents to estimates," he says, reaffirming a hold call on the stock. (david.winning@wsj.com; @dwinningWSJ)
2337 GMT - ASX is unlikely to see EPS growth until FY 2025, say Morgan Stanley analysts in a note. It cites likely weaker markets in 2H FY 2024 and ASX's potentially higher costs. While ASX retains a near-monopoly position due to its vertically-integrated business, CBOE could be a more focused competitor, says MS. "The proposed Competition in Clearing and Settlement Bill 2023 sets to empower ASIC and ACCC to enforce greater competition in clearing and settlement, and potentially also in cash equities in the future," says the investment bank, noting this could give CBOE the best opportunity in many years to take share. MS cuts its target price 11% to A$55.55/share and cuts its rating to underweight from equal-weight. ASX was last down 0.3% at A$61.25/share.(alice.uribe@wsj.com)
2319 GMT -- Investors appear to be moving to accept that the worst is behind Beach Energy, Morgans analyst Max Vickerson says in a note. Beach's 4Q production was stronger than Morgans expected, driven by gas volumes from the Otway project in southeastern Australia and oil output from the Western Flank operation in central Australia. "We lift our production forecast for next year and our expectations for gas prices given the strong performance last quarter," Morgans says. "We think the market is beginning to recognize Beach's potential but we still see compelling upside potential and maintain our Add rating." (david.winning@wsj.com; @dwinningWSJ)
2314 GMT -- Corporate Travel Management's FY 2024 Ebitda is likely to beat consensus expectations, says Citi analyst Samuel Seow in a note. Corporate Travel reported average Ebitda of A$20 million a month in FY 2023, which annualizes at A$240 million. This compares to a FY 2024 consensus forecast of A$260 million, or 8%-9% growth on year. Citi offers three reasons why this may be conservative. Firstly, North America revenue in 1H was 73% of proforma FY 2019 levels, but more than 80% since March. "This implies 10% growth, despite a stalled domestic corporate market," Citi says. Asian Ebitda has surpassed FY 2019 levels despite cross-border activity being materially lower. Meanwhile, Europe will get a full-year annualization of the Bridging Accommodation and Travel Services contract, which landed relatively late in FY 2023, Citi says. (david.winning@wsj.com; @dwinningWSJ)
2308 GMT -- Beach Energy loses a bull in Citi, which sees the company's Waitsia natural-gas project costing more to complete. In a note, analyst James Byrne says Waitsia capex is now likely to total A$550 million, up from a prior A$480 million forecast. "Despite Citi's house view on the oil price appreciating further in the September quarter, and Beach's strong 4Q gas price now reflected in our future period forecasts, the recent share price rally sees much of the value in Beach now captured and we downgrade to neutral," from buy, Citi says. (david.winning@wsj.com; @dwinningWSJ)
2305 GMT -- Australia and New Zealand-domiciled sustainable funds experienced notable net withdrawals in Q2 2023, says Morningstar's latest Global Sustainable Fund Flows report. The fund saw US$1.7 billion pulled out, but Morningstar notes that these large outflows were entirely attributed to one institutional client at Vanguard Australia that pulled its investment from the firm's ethically conscious funds. At the same time, flows into Australasian active sustainable funds, while positive, were muted in 2Q, with US$173 million in net new money. For the same time period, Global sustainable funds attracted US$18 billion of net new money, which was down 42% from US$31 billion in Q1, says Morningstar which attributes this to investors weighing sticky inflation, rising interest rates, and recession fears. (alice.uribe@wsj.com)
(END) Dow Jones Newswires