Forum Topics News Summary DJ Australian Equities Roundup -- Market Talk 04 Mar 2024 14:58:28
Jimmy
a month ago

0245 GMT - Xero gets a new bull at Macquarie as the cloud-accounting software provider sharpens its focus on core opportunities and markets. The investment bank raises its rating on the stock to outperform from underperform after Xero used its investor day to outline its focus on helping its small- to medium-sized business customers perform three core tasks in its three largest markets. Macquarie's analysts are pleased to see Xero focusing on what they call low-hanging fruit, with an expectation that insights gleaned from Xero's high-quality data can facilitate better product development. Target price is raised 75% to A$152.60. Shares are up 0.5% at A$135.55. (stuart.condie@wsj.com)

0035 GMT - Megaport's move to lower its FY 2024 capital-expenditure guidance leaves Citi analyst Siraj Ahmed wondering whether this will be a normal level in future years. Ahmed tells clients in a note that the communications tech provider's lower capex results from a build-up in inventory amid supply chain uncertainty over the last two fiscal years. There is an impact from reduced capitalized costs and a slowdown in the opening of new sites, he says. Given this, Ahmed reckons that capex will increase from A$20 million-A$22 million in FY 2024 to A$24 million in FY 2025 and A$28 million in FY 2026. Citi lifts the stock's target by 39% to A$16.80 and keeps a buy rating. Shares are up 1.0% at A$14.66. (stuart.condie@wsj.com)

0029 GMT - They say a rising tide lifts all boats. However, MMA Offshore's earnings growth looks more akin to a king tide with a robust cyclical upswing in offshore capex coinciding with no new vessel supply, says Citi analyst James Byrne in a note. The bank starts coverage of MMA Offshore, which provides vessels to the energy industry, at buy with a A$2.60/share price target. Citi expects MMA Offshore's earnings to peak at A$91 million in FY 2026. That's roughly quadruple core earnings in FY 2023. "All tides recede," Byrne says. "However, the diversification of revenue, a comparatively younger and more sophisticated fleet, a healthy balance sheet and potentially adding length to the contract book would reduce risks to equity versus prior cycles." MMA Offshore is up 1.1% at A$2.245. (david.winning@wsj.com; @dwinningWSJ)

0028 GMT - A market perception that Australian banks are relatively defensive is unlikely to hold for long, Citi analysts say in a note. This is particularly true as the economy slows down. Citi reckons that banks' shares marched higher as investors rotated into the sector on the absence of "bad news" and because lenders' earnings revisions were marginally positive during the recent reporting season. But Citi thinks the revisions were driven by lower-quality earnings beats, and that the results showed a challenging outlook for core earnings on account of rising funding costs. Citi continues to hold an underweight view on the sector, expecting banks' share prices to correct. (alice.uribe@wsj.com)

0022 GMT - Commonwealth Bank of Australia's mortgage business continues to underperform after the lender in mid-2023 decided to slow down growth and pull back from the home lending market, Citi analysts say in a note. "Now six to seven-months down the line, competition on the asset side has become minimal but underperformance in growth persists," says Citi. In a review of regulatory statistics for January, the investment bank finds that CBA is underperforming its peers on growth metrics, even in mortgages and household deposits where it has had historical strength. Citi thinks it's unlikely CBA will reclaim its growth "heritage" in 2H FY 2024, thinking that management may deem the funding-cost environment too non-conducive to pursue growth. (alice.uribe@wsj.com)

2355 GMT - Life360's 2024 earnings guidance is comfortably ahead of what Bell Potter analyst Chris Savage had thought it might be. Savage tells clients in a note that the family tracking provider's adjusted Ebitda guidance of US$30 million-US$35 million compared with his prior expectation of US$24 million. The better-than-expected guidance comes off a 2023 earnings base that was 49% higher than Savage had anticipated. He raises his 2024 revenue forecast by 2% to US$365 million, which includes about US$5 million from advertising, and sees Life360 meeting the lower end of its Ebitda guidance. Bell Potter raises target price 32% to A$14.50 and keeps a buy rating on the stock, which is up 6.8% at A$12.07. (stuart.condie@wsj.com)

2321 GMT - Stockland is more likely to beat consensus expectations for residential settlements in FY 2025 than Mirvac, according to Morgan Stanley. In a note, analyst Lauren A. Berry estimates Stockland has the capacity to deliver around 6,000 settlements, or some 8,500 once its acquisition with Supalai of 12 masterplanned communities projects from Lendlease is included. "In our view, this compares favorably to consensus of 6,700 lots, suggesting there may be upgrades to estimates as the Lendlease acquisition is factored in," MS says. Mirvac, however, is on track to deliver 1,800 lots in FY 2025, which would miss consensus expectations of around 2,500 lots, the bank says. (david.winning@wsj.com; @dwinningWSJ)

2318 GMT - The Australian media industry could lose around A$70 million in revenue annually from Meta's decision not to enter new commercial deals for traditional news content, say Goldman Sachs analysts in a note. Meta plans to depreciate its Facebook news tab in Australia in early April. News Corp, Seven West Media and Nine Entertainment are among companies that could see lost revenue, says GS. But it reckons Seven and Nine have greater exposure to Meta's payments relative to News Corp, publisher of The Wall Street Journal and Dow Jones Newswires. Australian authorities have power to force a commercial agreement through arbitration with digital platforms, GS notes, adding the government doesn't "believe Meta should get a free ride." The Australian commercial deal expires later in March. (alice.uribe@wsj.com)

2247 GMT - Life360's 2024 revenue guidance looks achievable even if U.S. payer conversion remains at current levels, Goldman Sachs analyst Chris Gawler says. He writes in a note to clients that growth in monthly active users, international expansion and improved hardware sales all look like supporting Life360's aim of growing core revenue by 20% or more. The family tracking app's 2024 Ebitda guidance looks conservative to Gawler even without factoring in the high-margin ad revenue that Life360 expects in the December half. Gawler reckons that successful execution on introducing this advertising could represent an inflection point in Life360's earnings profile. GS raises its target price by 35% to A$14.20/share and keeps a buy rating on the stock, which is at A$11.30 ahead of the open. (stuart.condie@wsj.com)

2241 GMT - Life360's gradual unlocking of the value embedded in its 61 million users keeps Ord Minnett analyst Lindsay Bettiol bullish on the family safety app developer. He tells clients in a note that focusing solely on Life360's move to expose users to third-party advertising doesn't offer a full picture of the company's potential. He points out that Life360 aims to expand into new verticals, which means even more revenue streams. That is what he thinks investors should be looking at. Ord Minnett raises target price 36% to A$11.98 and keeps a buy rating on the stock, which is at A$11.30 ahead of the open. (stuart.condie@wsj.com)

2125 GMT - Investors betting on a quick rebound in sentiment toward packaging company Orora are likely to be disappointed, Jefferies says. That's because the risk to earnings growth is elevated, analyst Richard Johnson says in a note, as Orora's newly acquired Saverglass business grapples with customer destocking and some softness in consumer demand. Johnson thinks the road to recovery for Orora's share price may be a long one. "EPS downgrades, no matter what the reason, coming hot on the heals of a major, high-priced and equity funded acquisition always undermines confidence, which in turn overshadows the multiple," he says. Orora ended last week at A$2.70. (david.winning@wsj.com; @dwinningWSJ)

2124 GMT - Life360 could generate US$7.5 million in 2024 advertising revenue as it starts to monetize non-paying users of its tracking app, Jefferies analyst Wei Sim tells clients in a note. Sim raises his 2024 revenue forecast by 2% to US$361 million and writes that he could see Life360 report US$750 million revenue by 2029. He acknowledges that Life360 has outlined an aspiration for US$1 billion in revenue and separately stated a five-year view on strategy planning. Jefferies raises its target price by 19% to A$14.30/share and keeps a buy rating on the stock, which is at A$11.30 ahead of the open. (stuart.condie@wsj.com)

2117 GMT - Jefferies expects an ongoing focus on Star Entertainment's balance sheet. In a note, analyst Simon Thackray says risks remain around the debt refinancing for Star's Queen's Wharf Brisbane precinct, the QWB retail offering and the impact of the introduction of cashless gaming in New South Wales from August. "Liquidity is exhausted by the end of FY 2025 absent project financing for Epsilon, a better start for QWB and a material improvement in trading even after assuming A$180 million net proceeds for the Treasury complex (2H25)," he says. Jefferies retains a hold call on Star, but cuts its price target by 4.1% to A$0.47/share. Star ended last week at A$0.52. (david.winning@wsj.com; @dwinningWSJ)

(END) Dow Jones Newswires

March 03, 2024 22:58 ET (03:58 GMT)

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