0126 GMT - Adacel Technologies' new contract with the U.S. Federal Aviation Administration could herald another agreement with the same agency, Bell Potter analyst Chris Savage suggests. He points out that the Australian air-traffic services provider's US$59 million contract with the FAA relates only to hardware. Savage understands that the systems in question have not been updated for most of the six years since Adacel previously lost the contract. He therefore reckons that a software-upgrade contract is possible, while assuming that any software component would be much smaller. Bell Potter raises target price 6.7% to A$0.80 and keeps a buy rating on the stock, which is up 7.8% at A$0.76. (stuart.condie@wsj.com)

0054 GMT - Elders still stands out as a buy to Bell Potter analyst Jonathan Snape despite a near-term headwind from lower cattle prices. Snape tells clients in a note that the pace and extent of the deterioration in cattle prices have been faster and stronger than in previous cycles, and could present a material on-year fiscal 2024 headwind that would be difficult for the agricultural services company to absorb. Yet cattle prices look materially dislocated relative to export meat pricing and Elders offers value ahead of a recovery, he reckons. Bell Potter cuts target price 9.1% to A$6.70 and keeps a buy rating on the stock, which is down 0.45% at A$5.485. (stuart.condie@wsj.com)

0006 GMT - Australian vehicle sales look broadly positive for the country's car-related stocks, Wilsons analysts write in a report. They tell clients that record September vehicle sales are a positive for dealer chain Eagers Automotive. Parts suppliers and retailers GUD and ARB should also enjoy support from rolling three-month sales of four-wheel drive vehicles sitting broadly in line with all-time highs, they add. The analysts' channel checks show that new vehicle supply is improving but remains inconsistent across makes and models. They also suggest that used-vehicle prices are down 20% from their peaks but need to fall by another 20% to reach fair value. (stuart.condie@wsj.com)

2324 GMT - Computershare keeps its bull at Macquarie following its agreement to sell its U.S. mortgage servicing business. The Australian share-registry operator says there will be no material EPS impact from the sale, and the Macquarie analysts concur. They forecast a positive EPS impact of 0.5% and 1.9% for fiscal 2024 and fiscal 2025, respectively. More impactful is a 6.0% uplift to Macquarie's fiscal 2025 EPS forecast to reflect mark-to-markets assumptions. With most forward curves having increased since Computershare's fiscal 2023 result announcement in August, Macquarie lifts target price 7.7% to A$28.00 and maintains an outperform rating on the stock. Shares are down 0.1% at A$25.84. (stuart.condie@wsj.com)

2254 GMT - UBS's more bullish view of oil prices prompts the bank to raise price targets on Australia's largest energy companies. UBS expects Brent crude in 4Q to average US$92/bbl, versus a forecast US$85/bbl before. It also expects Brent to average US$87/bbl in 2024, up from US$80/bbl. This reflects a forecast supply deficit until 2Q 2024, supported by large inventory draws and Saudi Arabia's voluntary 1 million b/d production cut. Woodside has the most leverage to changes in oil prices, and UBS raises its price target by 1.1% to A$35.40/share. Woodside ended Wednesday at A$34.58. UBS also raises its price targets for Santos and Beach Energy by 1.7% and 2.8%, respectively. (david.winning@wsj.com)

2238 GMT - A 23% fall in the value of Charter Hall's stock so far this year isn't enough for Morgan Stanley to turn bullish on the real-estate asset manager. "Our work highlights there is potential value at Charter Hall's funds management platform for investors to explore, but picking the bottom is made challenging by how macro-driven the stock has been," analyst Simon Chan says in a note. Morgan Stanley calls out bond yields as a major headwind. It retains an equal-weight call on Charter Hall and A$13.95/share price target. Charter Hall ended Wednesday at A$9.17. (david.winning@wsj.com)

2213 GMT - Red 5's strong September quarter will ease investor concerns about its balance sheet, says Ord Minnett analyst Paul Kaner. Gold output of 55,009 oz beat Ord Minnett's forecast by 19%, driven by higher grades. Net debt of A$68.2 million at end-September represented a fall of A$13.7 million compared to the prior quarter. "Red 5 had cash of A$44.6 million at September 30, which was significantly higher than we expected due to increased production and higher realized pricing," Ord Minnett says. It had forecast A$26 million of cash at the end of the quarter. (david.winning@wsj.com)

2124 GMT - Plumbing fittings supplier Reliance Worldwide's return on invested capital appears to have fallen over the past three years, and Ord Minnett isn't betting on an improvement any time soon. In a note, analyst James Casey says Reliance's ROIC fell to 10% in FY2023, well below the 12.1% return achieved in FY2021. This decline was driven by a combination of lower asset turnover and lower operating margins. "We forecast a further decline in returns in the short term with returns to be largely in line with its cost of capital," says Ord Minnett. "Cost-saving initiatives, lower working capital requirements and an eventual upswing in activity should improve Reliance's returns profile going forward." (david.winning@wsj.com; @dwinningWSJ)

(END) Dow Jones Newswires

October 05, 2023 00:03 ET (04:03 GMT)