0349 GMT - Westpac wants to remain competitive in Australia's mortgage market, despite having a softer first half in fiscal 2023, says CEO Peter King. Speaking on an investor call after the major lender's FY 2023 results, he says that one of the challenges for Westpac was being consistent, having been "a little bit in and out of the market." For the 2H FY 2023, King notes that the intense competition for mortgage eased, and into the future, Westpac wants to continue to "reduce the time to yes." "Think the word we use is consistent. So we want to consistently serve, get consistent service and look to grow," he says. (alice.uribe@wsj.com)

0327 GMT - Westpac will undertake a period of sustained investment over the next four years as it looks to focus on growth and productivity measures, CEO Peter King told an analyst call after handing down the Australian lender's FY 2023 results. The bank is looking to modestly increase its investment "envelope" to around A$2 billion per year, he says. "To put this into context, in the five years to FY 2019, we invested approximately A$1.3 billion per annum," he says, adding that this increased to around A$1.9 billion in the last four years. While almost two-thirds of this was allocated to risk and regulation, King hopes to redirect this towards measures spurring growth and productivity, like reducing its technology stack by two-thirds. (alice.uribe@wsj.com)

0139 GMT - Westpac's credit profile will stay strong despite its A$1.5 billion share buyback, says S&P Global Ratings in a note. As of Sept. 30, Westpac's common equity Tier 1 ratio stood at 12.4%, notes S&P, and the bank will manage its CET1 ratio above 11%, well above Australian Prudential Regulation Authority's regulatory capital requirement of 10.25%. "Credit losses over the next two years should remain low; that is, at about pre-pandemic levels of 15 basis points," says S&P. "We believe that low unemployment levels, modest economic growth, and a change in spending patterns should shield borrowers against the rising interest burden and prices." (alice.uribe@wsj.com)

0138 GMT - Forecasting near-term earnings for Macquarie Group is becoming an increasingly fraught exercise, say Citi analysts in a note. They observe that Citi had an around 12% miss to its forecasts in 1H FY 2024, but have still made only minor 2H FY 2024 revisions to see its FY 2024 forecasts revised down 6%. Citi sees that the market could be prepared to look through a near-term earnings lull, back towards A$4 billion of earnings on a normalized around 15 times price-to-earnings ratio in FY 2025. Citi keeps its neutral call but cuts its target price 8% to A$161.00. The stock is down 0.2% at A$162.88. (alice.uribe@wsj.com)

0121 GMT - Macquarie Group's stock appears cheap, but needs catalysts like a capital markets recovery or more evidence of structural growth in infrastructure and green energy, says Morgan Stanley analysts in a note. They reckon that these are likely to emerge in FY 2025 when MS expects 21% earnings per share growth on normalizing performance fees and gains on sale, plus a pick-up in base fee growth. Following the Australian financial company's 1H FY 2024 results, MS cuts its 2H FY 2024 and FY 2025 forecasts by just around 4% as it expects many of Macquarie's cost headwinds to improve.(alice.uribe@wsj.com)

0109 GMT - Regal Partners' 3Q update, as well as its announcement that it had purchased 50% of Taurus, a specialist provider of financing solutions to global mid-tier and junior mining companies, were both good announcements, says Bell Potter analyst Marcus Barnard in a note. With reference to the 3Q update, BP says it shows Regal's resilience and non-correlated returns in a volatile quarter, while the Taurus announcement will add to its funds under management. A recent selloff in Regal shares is likely to be disconnected to any measure of value, says BP, seeing this as a good entry. BP keeps its buy rating on the stock and raises its target price 1.5% to A$3.40. Regal falls 1.3% to A$1.90. (alice.uribe@wsj.com)

0105 GMT - Lendlease keeps its bull at Citi despite the early end of the Australian real-estate company's development agreement with Google. Citi's analysts acknowledge that a smaller development pipeline is negative for Lendlease, but point out in a note to clients that the stock's current earnings multiple implies little or any upside from the development pipeline. They see investor concerns about owning a development-based business in a higher interest-rate environment as understandable, but stress that the stock is trading at just 8X fiscal 2024 earnings and offers good value. Citi has a buy rating and A$9.50 target price on the stock, which is up 1.2% at A$6.455. (stuart.condie@wsj.com)

0101 GMT - Westpac's costs remain a key focus for investors, with some costs in its FY 2023 results higher than what the market expected, UBS analysts say in a note. They point out that overall headcount has reduced by 6%, with a 34% reduction in temporary employees, but technology expenses were up 15% half-on-half (ex notables). More generally, UBS says Westpac's FY result was roughly in line with UBS and Visible Alpha consensus, and the A$1.5 billion buyback is a positive, although some watchers had expected A$2 billion. (alice.uribe@wsj.com)

0057 GMT - Lovisa and Universal Store Holdings are Wilsons' analysts key picks in Australian retail heading into the crucial holiday trading period. They say in a note that inflation-adjusted retail sales growth of 3.2% for September could reflect increased promotional activity, increased migration and warmer weather, observing that clothing sales in NSW, Australia's most populous state, were up 8.6% on-year. With furniture, electronics and household goods shaping up as the worst-performing categories amid increased consumer caution, the Wilsons analysts see appeal in retailers selling cheaper items. Fashion jeweler Lovisa and casual-wear retailer Universal Store fit the bill. (stuart.condie@wsj.com)

0043 GMT - Shares in Xero could significantly re-rate if the cloud-accounting software provider accelerates toward the so-called Rule of 40 benchmark with further cost reductions, Morgan Stanley analysts say. Writing in a note to clients, they estimate that Xero--which this year is cut staffing by 15%--is trading at about 10X sales. Companies achieving the Rule of 40--that is whose combined revenue growth and profit margin exceeds 40%--commonly trade at 12X-14X sales, they say. Xero's revenue growth and profit margin combine to about 33%, they add. They also point out that most of Xero's U.S. software peers to have made cost cuts have gone on to announce subsequent reductions. MS has an overweight recommendation and A$125.00 target price on the stock, which is up 0.9% at A$113.28. (stuart.condie@wsj.com)

0028 GMT - The potential for improvement in Dicker Data's earnings is largely priced in at current levels, Goldman Sachs analyst Chris Gawler tells clients. He writes in a note that the computer hardware provider is executing well in a tough environment, and sees a chance that the Australian company could beat his fiscal 2024 forecasts if its margin improvement continues or demand recovers faster than anticipated. Yet the stock's earnings multiple already looks expensive compared with peers and there is limited scope for it to re-rate with the market, he says. GS raises the stock's target price 9.1% to A$10.20 and stays neutral. Shares are up 1.3% at A$11.20. (stuart.condie@wsj.com)

0017 GMT - Macquarie analysts lower their earnings forecasts for Healius in recognition of the forces that shaped imaging rival Integral Diagnostics's 1Q trading update. They highlight staff shortages and cost inflation on Integral Diagnostics, the impact of which implies a lower-than-expected 1H Ebitda margin. Cost impacts could be offsetting improved volumes and fee indexation, they add. Macquarie's lower EPS forecast for Healius by 33% for fiscal 2024, and by 18% and 16%, respectively, for the subsequent two fiscal years. Macquarie cuts target price 15% to A$2.90 but maintains an outperform rating on the stock, which is up 1.1% at A$1.915. (stuart.condie@wsj.com)

2355 GMT - Domino's Pizza Enterprises' sales in Japan could come under further pressure as restaurants and other food services recover from the hit of the Covid-19 pandemic, Goldman Sachs analysts write in a note to clients. The Australian fast-food franchiser's Asia sales were down 6.8% at the start of its fiscal 2024 and the GS analysts think that there is potential for further downside risk as the intensity of competition increases. They point out that Domino's Pizza Enterprises had enjoyed strong market-share gains during the pandemic as the Japanese fast-food industry benefited from significant store closures among other food services. GS reiterates its sell rating and A$40.30 target price on the stock, which is up 1.4% at A$52.67. (stuart.condie@wsj.com)

2342 GMT - The apparent slowdown at Computershare's U.S. mortgage-servicing business is seen by Macquarie analysts as an indication of factors including decade-low levels of refinancing. They write in a note to clients that the pending sale of the business is probably also a factor in sluggish growth in unpaid principal balances. Citing data published by Inside Mortgage Finance, the Macquarie analysts point out that 0.1% first-quarter growth in unpaid principal balances at Computershare's U.S. mortgage-servicing unit compares with 0.7% across the industry. They maintain their forecast for Computershare's unpaid principal balance to decline by 5.9% in FY 2024. Macquarie keeps an outperform rating and A$28.00 target price on the stock, which is down 1.7% at A$24.71. (stuart.condie@wsj.com)

2334 GMT - There may be clear headwinds on costs for Westpac in FY 2024, but the lender hasn't provided clear quantified guardrails for market expectations, Citi analysts say in a note. Looking at Westpac's FY 2023 results, Citi sees that management achieved a good result in cost reset benefits, yet the expensed investment spend declined over the year. Considering the FY result overall, Citi sees that Westpac's balance sheet remains strong and asset quality benign, with incremental capital management news (a A$1.5 billion buyback) potentially providing some level of support to the stock. Westpac shares are up 1.5% at A$21.82. (alice.uribe@wsj.com)

2306 GMT - Westpac's FY 2023 result was broadly in line with consensus, but was messy with restatements, notable items and no cash earnings measure, says E&P analyst Azib Khan in a note. For FY 2024 consensus, E&P now reckons there aren't likely to be changes to net interest margin, but does expect consensus net profit forecasts to be downgraded by 2%. "From a share price perspective, we believe investor disappointment may now have peaked," says E&P, which adds there are signs of improving franchise momentum at the margin, with a pickup in home loan growth and business lending growth. (alice.uribe@wsj.com)

2305 GMT - Citi upgrades Woodside to neutral, from sell, but says investors should be wary of it repeating past issues on capital allocation. "History tells us that Woodside's DNA is operating its producing assets at a world class level, but less so its ability to grow the business," analyst James Byrne says. That's significant because Woodside is increasing its exploration footprint again, spending billions on growth projects, and actively pursuing M&A. For now, the market seems intent to position into Woodside given it's a low cost operator paying out 80% of net profit as dividends, Citi says. "The continuation of both of those factors is entirely dependent on management not repeating the issues of the past with respect to capital allocation, so that the business can not only offset North West Shelf and Pluto decline, but grow too," Citi says. (david.winning@wsj.com; @dwinningWSJ)

2256 GMT - Australian pipeline operator APA's cost of debt and equity has risen materially due to increased sovereign yields, Morgans analyst Nathan Lead writes in a note. APA recently raised A$1.25 billion in tranches priced at 6.75% and 7.18% annually, which Lead compares with a 2022 raise of A$1 billion at 4.9%. APA's financial metrics are also being impacted on a per-share basis by dilution from the funding within its capital structure, such as the recent issue of 23.7 million new securities in an upsized share-purchase plan. Morgans cuts its target price by 14% to A$7.56 and keeps a hold rating on the stock, which is at A$8.37 ahead of the open. (stuart.condie@wsj.com)

2252 GMT - The growth potential of Carsales.com's U.S. recreational-vehicle platform is potentially being underestimated by investors, UBS analyst Lucy Huang says. She writes in a note that her analysis of the Trader Interactive business suggests long-term growth opportunities available from volume penetration and yields. Huang raises her fiscal 2026 forecasts for the unit to reflect her confidence in Trader Interactive's appeal to dealers, as well as volume growth among private sellers. UBS lifts its target price by 9% to A$32.40 and maintains a buy rating on the stock, which is at A$28.81 before the open. (stuart.condie@wsj.com)

2251 GMT - Macquarie's 1H was soft, says Morgans. In a note, analyst Richard Coles says 1H earnings were well below market expectations, although he reckons it was a normalization in the Australian financial company's operating environment that was the key driver. "Clearly cycling an extremely strong FY 2023 result is proving difficult for Macquarie, but we remain confident in the medium-term outlook for the franchise," as the company is well exposed to structural growth areas, says Morgans. The broker cuts its target price 6.0% to A$182.80, but keeps its add rating. Macquarie ended last week at A$163.24. (alice.uribe@wsj.com)

(END) Dow Jones Newswires

November 05, 2023 23:00 ET (04:00 GMT)