0354 GMT - Cochlear's higher-than-expected 1H sales of its hearing implants bode well for margin expansion, Jefferies analysts write in a note. David Stanton and Vanessa Thomson tell clients that Cochlear's high fixed-cost base means that higher revenues could lift the Australian company's FY 2024 net margin to 17.2% from 15.6% in FY 2023. He adds that Cochlear is seeing strength in rollouts of its N8 processor, with new features well-received by the market. The analysts lift their EPS forecasts for FY 2024 and FY 2025 by 8% and 10%, respectively. Jefferies raises its target price 12% to A$291.00 and keeps a hold rating on the stock, which is up 4.6% at A$305.20. (stuart.condie@wsj.com)

0021 GMT - Pilbara Minerals' expanded supply deal with Chengxin Lithium Group is "a step in the right direction," to address market concerns about uncontracted volumes as the company's spodumene concentrate production ramps up, Morgan Stanley analysts say in a note. "A key reason for our UW [underweight] thesis has been the significant portion of the company's ramping SC production (from P680+P1000 projects) being uncontracted," they say. Until the end of last year, they'd estimated about 73% of the miner's fiscal 2025 shipments wouldn't be under contract. That's now closer to 54%, they say, but retain the underweight rating in part due to caution on lithium prices, which have fallen sharply. MS has an A$3.00 target on the stock, which is down 0.6% at A$3.55. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

0008 GMT - Mirvac may find an early 5.8% share-price rise following its 1H result hard to sustain today, Citi says. Mirvac's 1H EPS missed consensus hopes, but the company left its annual guidance unchanged. Citi highlights that Mirvac's 1,131 residential lot settlements in 1H fell short of the 1,169 lots that the market expected. Residential gross margins of 17% in 1H were also below the range of 18%-22% that Mirvac targets through the cycle. "We believe the strong positive reaction at open could fade toward the end of the day given the weaker residential sales result," says Citi, which is neutral-rated on the stock. Mirvac is at A$2.265 after the first hour of trading in Australia. (david.winning@wsj.com; @dwinningWSJ)

2358 GMT - Calling a halt to merger talks is the right outcome for Woodside Energy and Santos, says Jarden. In a note, analyst Nik Burns says Santos can now focus on delivering its key growth projects of Barossa in Australia and Pikka in Alaska, while weighing other options to unlock value as it moves to a strong free cash flow generation position by 2027. Burns expects Woodside to focus more on "inorganic growth," particularly where it expands the company's LNG production or trading positions. "However, any potential deals big enough to shift the needle at Woodside may need a further equity injection," Jarden says. The bank prefers Santos to Woodside. (david.winning@wsj.com; @dwinningWSJ)

2351 GMT - Mirvac's guidance suggests the property company needs 2H on year growth of 9%-13%, says Jarden. Based on development activity, this likely needs a significant improvement in market conditions, analyst Lou Pirenc says following Mirvac's 1H result. Mirvac reaffirmed guidance for FY 2024 operating EPS between 14.0-14.3 Australian cents, meaning a 2.7%-4.8% fall on 14.7 cents 12 months ago. Jarden notes the majority of Mirvac's earnings come from residential and office property, so there is some downside risk near term unless conditions improve. "We expect sentiment to remain subdued but, at first glance, this result looks ok to us and we see Mirvac as being in a strong position to benefit from a more stable (or lower) interest rate environment," Jarden says. Mirvac rises 5.1% to A$2.25. (david.winning@wsj.com; @dwinningWSJ)

2341 GMT - REA Group's updated guidance could imply A$20 million-A$30 million in incremental 2H costs at the Australian property classifieds provider, Jarden analysts say. Tom Beadle and Liam Robertson tell clients in a note that REA's annual cost guidance for a percentage increase in the mid-to-high teens should be viewed alongside 1H expenses, which were about A$11 million lower than the average analyst forecast. The outlook implies a much higher skew in costs toward the fiscal 2H than previously anticipated, they add. Jarden has a A$155.00 target price and underweight rating on the stock, which is down 1.4% at A$181.57. News Corp. owns Dow Jones & Co., publisher of this newswire and The Wall Street Journal. (stuart.condie@wsj.com)

2332 GMT - Charter Hall Long WALE REIT's progress on asset sales appears to be easing investor concerns around its balance sheet. The company today said it has completed or agreed to sell A$145.8 million worth of assets, with another A$500 million or more of divestments undergoing due diligence. Charter Hall Long WALE REIT's gearing ticked up to 41.2% at the end of December, from 40.1% six months before. Ahead of its 1H result, Charter Hall Long WALE REIT's stock was trading at a 27% discount to net tangible assets. "While gearing has increased, the news on asset sales should be positively received by investors," says Citi, which is neutral rated on the stock. Charter Hall Long WALE REIT is up 3.5% at A$3.88/share today. (david.winning@wsj.com; @dwinningWSJ)

2314 GMT - Logistics-software provider WiseTech Global is unlikely to be materially impacted by Red Sea shipping disruption, Citi analyst Siraj Ahmed says. He tells clients in a note that the situation could result in an increase in transactions due to freight re-routing, but lower volumes are also possible due to longer shipping times. In any case, he adds that industry volumes have not been a key driver of revenue growth on WiseTech's CargoWise platform over the past few years. Ahmed expects 3% growth in 1H Ebitda and sees potential for WiseTech to increase its A$40 million cost-out target. Citi has a "neutral" rating and A$71.75 target price on the stock, which is up 0.6%, at A$74.21. (stuart.condie@wsj.com)

2304 GMT - REA Group's guidance for higher operating costs is likely to limit any share-price lift from its stronger-than-expected 1H result, E&P Capital's Entcho Raykovski says. He tells clients in a note that REA's 1H net profit and Ebitda were both stronger than expected by the market, but points to the real-estate classifieds provider's outlook for moderating yield growth and higher costs. The stock should hold onto recent gains but not much beyond that, he adds. E&P has a "neutral" rating and A$161.50 target price on the stock, which is at A$184.13 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 - Platinum Asset Management is likely to see continuing outflows from its fund in the near term as its performance wanes, say Citi analysts in a note. For January the Australian asset manager's funds under management is down 1.7%, to A$15.19 billion, with net outflows of A$166 million. At the same time, Citi points out that Platinum's investment performance declined through January, and remains poor on one, three and five year horizons, which it expects "is likely to weigh on future net flows." Citi keeps its sell call and A$1.00 target price. Platinum was last up 2.7%, to 114.5 Australian cents. (alice.uribe@wsj.com)

2250 GMT - Transurban's shares are likely headed for a fall when Australia's share market opens after its 1H revenue and traffic fell short of expectations, Citi says. Transurban reported proportional revenue of A$1.763 billion, which was up 6.3% on year but represented an around 7% miss to Citi's A$1.905 billion forecast. Traffic growth was also more muted than projected, up 2.1% year-over-year. Transurban kept its annual distribution guidance unchanged at 62.0 Australian cents/share, which may also disappoint many in the market given consensus expectations are for a payout of 62.6 cents. "We expect the stock to trade weaker today on the revenue and traffic miss," Citi says. Transurban ended Wednesday at A$13.32. (david.winning@wsj.com; @dwinningWSJ)

2157 GMT - Australian stock futures are pointing toward an uncertain open amid continuing debate among economists about the likely timing of potential interest-rate cuts. ASX futures are barely moved, suggesting that the S&P/ASX 200 is heading for a flat open. Investors may be waiting on company earnings reports before making bets. Ahead of the open, toll-road operator Transurban lifted its dividend after 1H net profit surged more than fivefold. Property classifieds provider REA Group hoisted its dividend, and AGL Energy returned to a half-year profit amid higher power prices. In the U.S., the DJIA and S&P 500 rose 0.4% and 0.8%, respectively, to close at records. The Nasdaq Composite gained 0.9%. (stuart.condie@wsj.com)

0436 GMT - A less volatile and more financially tolerable cost of funding could provide an activity catalyst for M&A, say Morgan Stanley analysts in a note. This comes after volatile markets, higher rates and credit spreads, lower liquidity and capital availability, as well as rising recession risks, which were all headwinds for M&A activity in 2023, the investment bank notes. "Leading indicators continue to point to a rebound in M&A deal activity, after 2023 brought the lowest completed M&A volumes in a decade," says MS. Pent-up demand should drive up activity levels as CEO confidence builds. Supporting this view is that companies enjoying a relative valuation premium can argue for greater accretion via M&A. "Balance sheet/operating strength can provide a cost of funding advantage and easier access to capital markets," says MS. (alice.uribe@wsj.com)

(END) Dow Jones Newswires

February 07, 2024 23:00 ET (04:00 GMT)