0255 GMT - Australia's broadband providers have been warned by the country's consumer watchdog not to use wholesale pricing changes to push consumers toward more expensive plans. The Australian Competition and Consumer Commission has told retailers they "should not be pushing households towards more expensive offers with speed inclusions that are higher than they need." Price changes from December 2023 mean that retailers could potentially improve margins if users switch to higher-speed plans. The government-owned National Broadband Network is cutting prices retailers pay for higher- and lower-speed access, and increasing the price of mid-tier access. Misrepresenting or deliberately mis-selling products could expose retailers to legal action. AGL Energy, Aussie Broadband, Telstra and TPG Telecom are among the companies reselling NBN access. (stuart.condie@wsj.com)
2359 GMT - Domino's Pizza Enterprises' strong sales growth in Germany and the Benelux region suggest that the Australian fast-food company's new strategies are taking longer to resonate with franchisees in France, Citi analysts say in a note. They also see a further challenge to 1H European sales growth due to the historic lift generated by the men's soccer World Cup in November and December 2022. However, they think that French sales will ultimately follow those in neighboring countries and are also positive about the prospect of improvement in Asia. Citi lifts target price 4% to A$61.10 and maintains a buy rating on the stock, which is down 0.5% at A$51.74. (stuart.condie@wsj.com)
2346 GMT - Xero's U.K. unit will be a key focus for Goldman Sachs analysts when the New Zealand-based accounting software provider reports its 1H results on Nov. 9. The GS analysts are looking for 55,000 new U.K. subscribers over the six months through September, hoping to see Xero carry its improved growth trajectory from 2H of fiscal 2023 into fiscal 2024. They write in a note that they are also keen for some commentary around average revenue per user and operating-expense trends into the second half. Significant recent price rises should be able to support strong average revenue growth, they reckon. GS lifts target price 1% to A$148.00 and keeps a buy rating on the stock, which is up 2.0% at A$109.19. (stuart.condie@wsj.com)
2342 GMT - Coles's rollout of anti-theft technology across about 30% of its stores could lift 2H gross margin at its Australian supermarkets by 40 basis points, Citi analyst Adrian Lemme says. He writes in a note that Citi's analysis of retail theft data suggests that the technology should address about 70% of Coles's theft exposure since it will be installed in the retailer's worst affected stores. Other costs should fall as Coles removes security guards and other temporary measures, he adds. Citi has a buy rating and A$17.50 target price on the stock, which is at A$15.33 ahead of the open.(stuart.condie@wsj.com)
2339 GMT - Australian banks appear to have potential for limited earnings growth over the next two years, Wilsons Advisory analysts say in a note. Rising interest rates have been a tailwind for net interest margins and earnings, but Wilsons expects these trends to slow into FY 2024 and beyond. Wilsons' portfolio is underweight the Australian bank sector and has positioned it toward the cheaper end of the sector where it sees most value, calling out NAB, ANZ and Westpac. On CBA, Wilsons reckons it's a quality bank but it's unlikely to outperform at current valuations and could exhibit low growth over the next two years. (alice.uribe@wsj.com)
2332 GMT - Indonesia's proposal of a limited free-trade pact with the U.S. focused on the export of critical minerals essential to electric-vehicle production adds a new wrinkle to Chalice Mining's hopes of developing its Gonneville project in Australia. "The access to low-cost nickel-cobalt would be detrimental to higher-cost global nickel-cobalt projects," such as Gonneville, Jefferies analyst Mitch Ryan says in a note. A successful agreement would enable Indonesian nickel to be eligible for tax credits in the U.S., worth US$7,500 per electric vehicle, Ryan says. Chalice is seeking a strategic partner for Gonneville. "Absent a strategic partner, project capex of A$1.6 billion-A$2.3 billion appears prohibitive for funding options," Jefferies says. (david.winning@wsj.com; @dwinningWSJ)
2317 GMT - Treasury Wine Estates' deal to lead the U.S. luxury wine market has merit, but it comes with risk and may limit the stock's ability to rerate in the near term, Jarden says. Treasury Wine's purchase of DAOU should boost earnings and offers additional exposure to the US$2.6 billion luxury wine market, analyst Ben Gilbert says in a note. "Our concern is heightened execution risk at a time when Penfolds was poised to rerate Treasury Wine via a potential easing in China tariffs," Jarden says. "We remain positive but see scope for a near-term rerate as less likely." Jarden retains an overweight call on Treasury Wine's stock. (david.winning@wsj.com; @dwinningWSJ)
2258 GMT - CBA could be gearing up to return to the Australian mortgage market after consciously stepping back over the last few months, Citi analysts say in a note. In an analysis of regulator data, Citi sees that mortgage run-off has decelerated and business book has regained growth, adding that CBA's mortgage book could potentially return to growth as early as October/November. Even so, Citi reckons that it's likelyto continue to grow below the wider system as funding constraints remain. Westpac is experiencing proportional moderation in growth, which doesn't surprise Citi as it was a beneficiary of CBA's pullback. Into the future, Citi sees mortgages will likely remain concentrated among a few banks, naming ANZ and Macquarie, with mortgage growth in general staying resilient. (alice.uribe@wsj.com)
2236 GMT - Macro headwinds keep Citi analysts cautious on Elders despite the Australian agribusiness's latest acquisition. They tell clients that, while the acquisition of Charles Stewart Group is expected to contribute A$5 million in annualized Ebit, they remain wary about the potential prolonged impact of higher interest rates and tough seasonal agricultural conditions. They write in a note that some Australian saleyards have seen a rise in livestock transaction volumes, which the Citi analysts reckon is due to farmers reducing herds in response to soft prices. Citi has a sell rating and A$6 target price on the stock, which is at A$5.98 ahead of the open. (stuart.condie@wsj.com)
2232 GMT - The latest snapshot of trading by Domino's Pizza Enterprises deepens Jefferies's view that the company's 1H net profit will decline. Same-store sales growth doesn't appear to have improved over the past 10 weeks, with an improvement in Australia and New Zealand offset by a deteriorating performance in Europe and continued declines in Asia. "While 2H should return to growth due to restructuring and cycling an undemanding base, consensus estimates for circa 22% FY 2024 net profit growth are far too optimistic and would require >50% growth in 2H," analyst Michael Simotas says in a note. "At 34 times price-to-earnings, with balance sheet risk, we remain cautious." (david.winning@wsj.com; @dwinningWSJ)
2228 GMT - Vicinity Centres' 1Q update was better than Jefferies expected, but it wasn't enough for the bank to turn bullish on the Australian mall owner's stock. Sales growth moderated to 2.7% in 1Q, but that was a resilient outcome given high interest rates are squeezing consumer budgets. Vicinity's 1Q was supported by a boost in sales at its city-center malls. Other operating metrics impressed with occupancy improving to 98.9% and leasing spreads accelerating to 4.5%. "FY 2024 guidance was reaffirmed, but lack of growth, slowing discretionary spending and consumer concerns keep us at Hold," analyst Sholto Maconochie says in a note. (david.winning@wsj.com; @dwinningWSJ)
(END) Dow Jones Newswires
November 02, 2023 00:03 ET (04:03 GMT)