0315 GMT - South32 is unlikely to splash much cash on dividends this earnings season as the miner grapples with softer commodity prices and higher costs, Macquarie analysts reckon. In a note, they forecast a US$0.004 interim dividend for 1H FY 2024, representing an estimated 40% payout ratio but sharply lower than the US$0.049 the company paid a year earlier. "S32 has historically paid out special dividends at its half-year results; however, we see limited scope for dividends upside in 1HFY24 due to underlying earnings results," the analysts say. Their forecast is in line with South32's minimum payout policy, but the analysts say "it could go lower and shift distributions to 2HFY24." South32 is down 2.5% in Sydney at A$3.15. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

0211 GMT - Cochlear's revenue could be hit if a vaccine against a deafness-causing virus is successfully introduced to the market, UBS analysts say in a note. They say their conversations with various experts indicate that the vaccine that Moderna is developing against CMV--the in-utero virus that causes about 20% of childhood deafness--stands a good chance of passing Phase 3 trials. UBS thinks there is a 75% chance the vaccine will be launched, which is sufficient to turn its analysts bearish on the hearing-implant manufacturer. UBS cuts its target price by 7.7% to A$240.00 and lowers its recommendation to sell from neutral. Shares are down 5.6% at A$291.13. (stuart.condie@wsj.com)

0052 GMT - Investors remain cautious about Magellan's ability to grow funds under management in the near term, say Citi analysts in a note. They expect the Australian fund manager to continue its trend of relative underperformance and see continued outflows. The FUM disclosure Magellan made in January showed A$0.4 billion in net outflows, Citi notes. "We expect the relative underperformance seen in December is likely to have driven this month's outflows," it says. "While we are yet to see January performance numbers, we expect there may be a slight improvement over December performance." Still, it keeps a sell call and A$8.10 target on the stock, which falls 1.0% to A$8.85. (alice.uribe@wsj.com)

0029 GMT - How well Bendigo & Adelaide Bank has done developing its digital channel will be a focus at the Australian regional lender's coming 1H FY 2024 results, say Goldman Sachs analysts Andrew Lyons and John Li in a note. GS notes that the bank had shifted focus towards its digital channels as distribution and processing costs are cheaper. "We will be keen to get an update on how far BEN has progressed in terms of its digital channel optimization and for commentary around what they are seeing from competitors," GS says. GS expects Bendigo's 1H net interest margin to fall 12 basis points half-on-half to 1.86%. The bank's results are due on Feb. 19. (alice.uribe@wsj.com)

2341 GMT - Thin steelmaking margins in China are likely to keep prices for low-grade iron ore supported, according to Citi analysts. That will benefit earnings for producers of low-grade products, such as Australia's Fortescue. In a note, Citi analysts say "steel mills in China are likely to prefer using more lower grade fines in their sinter feed to manage yield and margins," which are negative for some steel products. As a result, "discounts on lower grade [iron-ore] products are likely to remain low, with some major miners already reducing their discounts" on those sales, the analysts say. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

2340 GMT - Johns Lyng, which carries out insurance-related repair work, could be about to upgrade its earnings guidance, according to Citi. That view reflects Johns Lyng's past record of improving guidance at its 1H result. "We expect another primarily underpinned by incremental catastrophe contributions from recent storms and bushfires," analyst William Park says in a note. Citi thinks Johns Lyng's insurance panel contract in New Zealand and instances of burst pipes in Western Australia may boost its so-called Business As Usual work. "The extent of guidance upgrade is likely to depend on how much additional capacity that Johns Lyng has been able to secure over 1H," says Citi, which rates the stock a buy. Citi lifts its price target by 19% to A$8.35/share. Johns Lyng is down 0.6% at A$7.09. (david.winning@wsj.com; @dwinningWSJ)

2333 GMT - Jefferies analysts are forecasting significant earnings growth for Australian construction materials company Boral, but say that is already reflected in the stock price. "At 19x EV/Ebit (v peers 9-11x), transformation and growth benefits appear fully priced," the analysts say in a note. "At through-cycle EV/Ebit of 10.5x, the market is pricing A$484 million" in annual Ebit versus FY23 group Ebit guidance of A$300 million-A$330 million, the analysts say. They expect Boral can reach long-term Ebit margins of more than 10% but say that, plus annual Ebit of circa A$500 million, "is some time away." They have a hold rating and A$5.00 target on the stock, which is down 0.9% at A$5.255. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

2331 GMT - Citi digs into Region's 1H result and finds reasons to support its buy call on the stock, despite the Australian mall owner posting another net loss. In a note, analyst Howard Penny says Region's 1H result was in line with expectations and that's evidenced by shares drifting just 0.2% lower to A$2.235 in early trade. "However, closer inspection of the result shows indicators of a bottoming of key cost items such as net property income and finance costs that are starting to peak," Penny says. Citi sees potential for Region to recover its earnings outlook and return to growth in FY 2025. "We see a slowdown in inflation, and stabilized and reducing interest rate costs as catalysts for a potential earnings recovery for Region," Citi says. (david.winning@wsj.com; @dwinningWSJ)

2257 GMT - There is limited evidence that News Corp. is set on divesting its component businesses, Macquarie analysts reckon. Analysts elsewhere have said that News Corp. could create additional shareholder value by spinning off its property businesses, but the Macquarie analysts don't see any proof that asset sales are occurring. They also tell clients in a note that they expect News Corp.'s 2Q performance to be subdued. The market is too optimistic on the conglomerate's book publishing business given industry data, they add. Macquarie raises target price 12% to A$37.00 after rolling forward to FY 2025, but keeps a neutral rating on the stock, which is at A$39.42 ahead of the open. News Corp. owns Dow Jones & Co., publisher of this newswire and The Wall Street Journal. (stuart.condie@wsj.com)

2251 GMT - Inghams secures a new bull at Bell Potter, where analyst Jonathan Snape sees rapid declines in wheat and soybean prices lowering the poultry supplier's feed costs. Snape lifts his recommendation to buy from hold, telling clients in a note that feed-cost deflation is likely to become a tailwind in FY 2025 given the 6-9 months it takes grain prices to flow through. He adds that the stock is trading at an undemanding 7.7 times earnings, and is at a lower valuation multiples relative to pre-Covid levels despite the business's improved performance and prospects. Bell Potter lifts target price 24% to A$4.90. Shares are at A$4.32 ahead of the open. (stuart.condie@wsj.com)

2244 GMT - The El Nino weather event has been a bit of damp squib for AGL Energy. In a note, Jefferies analyst Anthony Moulder points out the predicted hot dry summer in Australia hasn't produced the benefits it could have in terms of demand. "However, we don't expect this to have been a factor in management's guidance from July 2023, given the Bureau of Meteorology formally declared El Nino on September 19, 2023," he says. AGL expects annual Ebitda of A$1.875 billion-A$2.175 billion, and a net profit of A$580 million-A$780 million. "We expect with the visibility of the 1H results, the FY 2024 ranges will be tightened at the February results, but expect the mid-point remains achievable," Jefferies says. (david.winning@wsj.com; @dwinningWSJ)

2226 GMT - Goldman Sachs analysts want Metcash management to explain how they plan to extract A$14 million in planned synergies following the acquisition of food distributor Superior Food. They tell clients in a note that they would like more details given that Metcash says it does not plan to integrate the business's back-end systems. The analysts stress that they do not take a view on whether Metcash will complete the acquisition of Superior Food and two other businesses it has agreed to buy, and have not incorporated the transactions into their forecasts. Goldman Sachs has a neutral rating and A$3.60 target price on the stock, which is at A$3.64 ahead of the open. (stuart.condie@wsj.com)

2220 GMT - Revisiting provisions and legacy construction projects seem to be the most regular form of update from Fletcher Building for more than a year now, Jefferies says. Fletcher yesterday detailed provisions totaling NZ$180 million against two developments, leading Jefferies to cut its price target by 6.3% to NZ$6.00/share. The provisions on the New Zealand International Convention Centre and WIAL Carpark add to others that continue to overhang the stock, analyst Simon Thackray says in a note. "This is not the end of the unknowns with P2W and WA pipes resolution still outstanding, which will overwhelm any positive New Zealand macroeconomic news until issues are resolved," Jefferies says. Fletcher ended Monday at NZ$4.24. New Zealand's market is closed today for a public holiday. (david.winning@wsj.com; @dwinningWSJ)

2223 GMT - Lower forward electricity prices are likely to impact AGL Energy in FY 2025 and FY 2026, Jefferies says. Forward prices in New South Wales state have fallen to A$97.2/megawatt, from A$116.31/MW when AGL last reported results in August. Similarly, forward prices in Victoria state have reduced to A$61.47/MW, from A$72.48/MW, over the same period. "The ongoing trend lower of electricity pricing is expected to pressure DMO in FY 2025 and the pricing outcome for generation," says Jefferies, referring to the Default Market Offer reference price. "The unknown remains the level of hedging put in place at higher forward prices." AGL Energy is due to report its 1H result on Thursday. (david.winning@wsj.com; @dwinningWSJ)

2212 GMT - City Chic Collective looks on course for a larger annual loss than Macquarie analysts had previously anticipated. The Australian plus-size clothing retailer's 1H sales were 2.4% weaker than the analysts had forecast, driving an Ebitda loss for the period that will be at least twice as large as anticipated by the financial services group. Yet there are positive signs, the analysts tell clients in a note. City Chic's reconfirmed guidance increases their confidence in management's cost control and strategic initiatives, while the mooted sale of its U.S. unit drives a 42% increase in target price to A$0.54. Macquarie stays neutral on the stock, which is at A$0.54 ahead of the open. (stuart.condie@wsj.com)

2207 GMT - Transurban's 1H result will be the first delivered by new CEO Michelle Jablko, and Jefferies thinks it could include a positive surprise to the toll road owner's distribution guidance. Transurban has forecast an annual payout of A$0.62/share and Jefferies's forecasts are in line with it. But in a note, analyst Anthony Moulder highlights that the strong traffic momentum that prompted Transurban to raise its distribution guidance late in FY 2023 continued into 1Q of FY 2024. "That said, the latest CPI print of 0.6% (quarter-on-quarter) for the December 2023 quarter is expected to slow 4Q of FY 2024 tolling increases," Jefferies says. Transurban is due to report its 1H result on Thursday. (david.winning@wsj.com; @dwinningWSJ)

2153 GMT - Australian mall owner Region's 1H result illustrates how rising interest rates have pressured real-estate investment trusts. Region's finance expenses totaled A$32.3 million in the six months through December, up from A$23.9 million a year earlier. Region said its 1H weighted average cost of debt rose to 4.4%, from 3.2% a year earlier, as favorable interest rate swaps expired and market interest rates moved higher. Investors will now focus on the company's A$225 million note that is due to expire in June. Region said today it will likely replace that medium-term note with another should conditions remain favorable. (david.winning@wsj.com; @dwinningWSJ)

(END) Dow Jones Newswires

February 05, 2024 23:00 ET (04:00 GMT)