0130 GMT - Woodside will progressively be seen as requiring M&A unless oil stays at more than US$80/bbl, Citi says in the wake of talks starting over a merger with Santos. "Our view is that Woodside needs an US$80/bbl oil price environment to meet market expectations for dividend yield, spend capex to maintain flat production, and meet its New Energy target," analyst James Byrne says in a note. However, Woodside's "growth hopper" is empty beyond the Calypso natural-gas project in Trinidad and Tobago, so it needs to do deals if it wants to grow, Citi says. "With a history of overpaying for M&A, this realization could reduce marginal buyers for Woodside," Citi says.(david.winning@wsj.com; @dwinningWSJ)

0120 GMT - Lendlease's sale of a dozen masterplanned communities to Stockland and Supalai for A$1.3 billion is a mild positive, but the company's cash burn appears high, Morgan Stanley says. In a note, analyst Simon Chan highlights that Lendlease's gearing was last reported to be 14.8%, so roughly at the midpoint of the company's 10%-20% target range. "But here lies the problem, the company is set to receive circa A$900 million of cash from One Sydney Harbour settlement in 2H24, plus circa A$660 million for resi Communities sale, yet it is still expecting June 2024 gearing to be at mid-point of 10-20% target," Morgan Stanley says. It retains an equal-weight call on Lendlease's stock. (david.winning@wsj.com; @dwinningWSJ)

0113 GMT - Iress may find it challenging to significantly grow revenue at its core businesses due to their maturity and dominant positions in key segments, Jefferies analysts say. Initiating coverage of the financial-software provider with a hold rating, the analysts are broadly supportive of moves to divest underperforming offshore businesses but think that revenue growth at core businesses is likely to be at the low end of Iress's 5%-7% target. They write in a note that Iress could achieve asset sales of about A$400 million by separating components for individual sale, but selling its U.K. wealth business looks like a tough task. Jefferies places an A$8.64 target price on the stock, which is down 1.2% at A$7.97. (stuart.condie@wsj.com)

0049 GMT - Domino's Pizza Enterprises' new menu item doesn't shift the dial on the Australian fast-food franchiser's earnings but does show innovation and consistency in strategy, Citi analyst Sam Teeger says. He tells clients in a note that the so-called Meltzz looks akin to a toasted sandwich, which could cater to the solo-diner and snack segments in which the company has historically underperformed. The move shows that the ASX-listed company has improved its approach to inflation compared with its earlier unpopular delivery surcharge, he adds. Citi has a buy rating and A$61.10 target price on the stock, which is up 0.9% at A$57.13. (stuart.condie@wsj.com)

0038 GMT - AGL Energy's future earnings from its Liddell battery are effectively de-risked by its long-term energy service agreement with Australia's NSW state government, RBC Capital Markets analyst Gordon Ramsay writes in a note. He thinks that the agreement will likely provide AGL with 10 one-year options to access an annuity payment that tops up operational revenues. The government may be able to recoup some payments if AGL's revenues then pass a certain threshold, he adds. RBC has a neutral rating and A$9.75 target price on the stock, which is down 0.2% at A$9.07. (stuart.condie@wsj.com)

0033 GMT - Ridley likely has several avenues to pursue synergies with its A$53 million acquisition of Oceania Meat Processors NZ, says UBS analyst Apoorv Sehgal. He tells clients in a note that the ASX-listed animal-feed producer could leverage OPM's U.S. supply chain to bypass intermediaries, while there are also opportunities in transport costs and raw-material procurement. On a strategic basis, Sehgal thinks that the acquisition makes sense for Ridley since it adds a premium capability to its high-margin ingredients recovery business. UBS lifts target price 7.8% to A$2.80 and keeps a buy rating on the stock, which is up 4.7% at A$2.555. (stuart.condie@wsj.com)

0023 GMT - The recent surge in Tabcorp's shares that followed the announcement of a new Victoria state license is partly down to relief that the wagering company didn't come off worse in negotiations, UBS analyst Andre Fromyhr writes in a note. He cites lower returns or a loss of exclusivity as outcomes that Tabcorp dodged. He makes only modest changes to his EPS forecasts and keeps a neutral rating on the stock, which is trading at about 16 times FY 2025 earnings. This isn't particularly cheap given Tabcorp's exposure to consumer sentiment, he adds. UBS keeps a A$1.02 target price on the stock, which is down 3.3% at A$0.875. (stuart.condie@wsj.com)

2303 GMT -- Iluka's higher-than-anticipated capex estimate for the Eneabba rare-earths refinery project disappoints Macquarie analysts, but they retain an outperform rating on the miner. "The non-recourse loan from the Australian Government de-risks the phase 3 project while there is value upside for ILU with feedstock from the Wimmera deposit and third parties," they say in a note. The analysts also highlight Iluka's strong balance sheet, with A$372 million in net debt at the end of September. They trim their target on Iluka by 4%, to A$8.90/share, due to the effect on estimates for future earnings. Iluka last traded at A$6.77. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

2158 GMT - Lendlease didn't upgrade its FY 2024 earnings guidance, despite anticipating a A$130 million-A$160 million profit from the sale of a dozen communities to Stockland and Supalai. The company also recently stood pat on guidance after terminating a development agreement with Google. "We see this as signs of potential pressure in the core earnings from the business," Citi analyst Suraj Nebhani says in a note. Citi retains a buy call on Lendlease, given the gap between its A$9.50/share price target and the stock's closing price of A$7.42 on Monday. "However, we are increasingly cautious on the earnings outlook given large one-offs in earnings have risen," Citi says. (david.winning@wsj.com; @dwinningWSJ)

2145 GMT - Jefferies raises its price target on Neuren Pharmaceuticals by 33% to A$27.10/share following Phase 2 trial results for NNZ-2591 to treat Phelan-McDermid Syndrome. Neuren reported significant improvement in children with PMS and said NNZ-2591 will now be the focus of a Phase 3 trial. In a note, analyst David Stanton says NNZ-2591 is Neuren's largest opportunity, representing about five times the size of the potential market from treating Retts Syndrome, the focus of its trofinetide drug. That's because NZ-2591 could treat a range of genetic disorders, including Angelman Syndrome, Pitt-Hopkins Syndrome and Prader-Willi Syndrome. "Our risk-weighted valuation for NNZ-2591 moves to A$9.77 per share (from A$3.42)," Jefferies says. Neuren ended Monday at A$22.20. (david.winning@wsj.com; @dwinningWSJ)

2134 GMT -- Stockland's acquisition of 12 masterplanned communities from Lendlease in partnership with Supalai has strong strategic rationale and returns, says Jefferies. The transaction leverages Stockland's existing platform, with increased economies of scale and no incremental corporate overheads, analyst Sholto Maconochie says in a note. Also, it generates positive cashflow for Stockland from FY 2025, given the assets are actively trading. "Whilst gearing increases by 1.9%, we estimate FY 2025-2026 funds from operations accretion of 4.9% and 4.5%," Maconochie says. Jefferies lifts its price target on Stockland by 2.9%, to A$4.24/share. Stockland ended Monday at A$4.35. (david.winning@wsj.com; @dwinningWSJ)

(END) Dow Jones Newswires

December 18, 2023 22:56 ET (03:56 GMT)