0455 GMT - Bank of Queensland's turnaround will continue to be challenged by weak volume growth, competition, and the cost and execution risk associated with its multi-year transformation, say Morgan Stanley analysts in a note. They think the stock is fully valued, based on the investment bank's earnings growth and return-on-equity estimates. Regarding the Australian lender's 1H FY 2024 results, MS reckons there were no adverse surprises. While management has said that it expects revenue and margin pressure to moderate, the investment bank thinks a re-rating would require evidence that BOQ can address its legacy disadvantages by improving its deposit franchise and lowering its cost base. (alice.uribe@wsj.com)

0441 GMT - The sustained strength of Tower's gross written premium growth gives Macquarie more confidence that the company will be able to achieve its medium-term expense ratio guidance. Tower's recent FY 2024 guidance changes for gross written premium is due to better customer retention, it has said, but Macquarie reckons the New Zealand CPI print in March suggests pricing is also continuing to ramp higher. Macquarie reinstates its expectation for a FY 2024 dividend payout ratio of 40%, which it says equates to a dividend yield of over 7%. "We believe it would also be prudent for management to utilize the one-off weather beat to further strengthen 2011 Earthquake reserves, and we include a further NZ$6 million in our FY 2024 forecasts to this end." (alice.uribe@wsj.com)

0234 GMT - Brambles can't be expected to trade at historic earnings multiples due to the pallet provider's reduced growth options and structurally weaker cash flows in its Americas business, Jefferies analysts write in a note. They tell clients that times and the company have changed. They point out that when Brambles was priced at a high price-to-earnings premium during the five years through fiscal 2016, average annual revenue growth was about 40% stronger than the market expects for the years through fiscal 2028. They see Brambles' investment in pallet tracking tech as a positive, but say they are waiting to see the results. Jefferies has an underperform rating and A$13.22 target price on the stock. (stuart.condie@wsj.com)

0123 GMT - More than 10,000 Australian companies are expected to enter external administration by end-June, a level not seen since the financial year 2012-2013, says the Australian Securities and Investments Commission. In an update on insolvency data for the nine-months starting July 1, 2023 to the end of March this year, ASIC says it found an increase in the number of Australian companies failing. During the period, 7,742 companies entered external administration, a 36% increase compared with the corresponding nine-month period ending March 31, 2023. (alice.uribe@wsj.com)

0103 GMT - Macquarie Technology gets a new bull in Morgan Stanley, which thinks the financial and strategic value of its data centers is undervalued. Structural tailwinds for data centers are well known, given the rapid expansion of AI, analyst Andrew McLeod says in a note. MS estimates data centers account for roughly two-thirds of Macquarie Technology's share price and the company's development portfolio is more measured than main peer NextDC. "Thus it is not as capital hungry and at 15x FY 2025 enterprise value-to-Ebitda it trades at a significant discount to NextDC on 50x." MS upgrades to overweight from underweight, and doubles its price target to A$100.00/share. Macquarie Technology is up 3.6% at A$78.04. (david.winning@wsj.com; @dwinningWSJ)

0059 GMT - In Santos's 1Q report, Citi's eye was drawn to Papua New Guinea signing a fiscal stability agreement for the P'nyang natural-gas development. The agreement with Exxon Mobil--operator of P'nyang--and partners Santos and JX Nippon was inked a month ago. Citi analyst James Byrne said Exxon typically demands such agreements from governments so it can confidently allocate capital. "The timing is peculiar, which is to say it's earlier than we thought," Citi says. It thinks the Hides gas field's "decline is faster than the equity market appreciates and this will pull forward capex to maintain higher rates through the LNG facility." P'nyang is estimated to deliver 4.5 trillion cubic feet of natural gas to the active PNG LNG export facility, with a final investment decision targeted in 2029. (david.winning@wsj.com; @dwinningWSJ)

0053 GMT - Bank of Queensland remains in a tough spot, with its 1H FY 2024 results showing a lack of positive catalysts, Macquarie analysts say in a note. They point out that the Australian regional lender needs to cut expenses and improve profitability, while still putting money toward investments for the future. "With capitalization rates well above sector averages, we see headwinds to expense growth over the next few years as BOQ addresses this issue," says Macquarie. Macquarie also sees that BOQ appears to be accepting that it may be difficult to reach its FY 2026 ROE and cost-to-income target. (alice.uribe@wsj.com)

0051 GMT - Australian software provider Technology One is likely to provide and then beat guidance for 10%-15% annual profit growth, Bell Potter analyst Chris Savage says. He tells clients in a note that he still expects the company to provide its typical guidance for pre-tax profit growth, but for this to prove conservative. He points out that Technology One guided for 10%-15% growth in its last fiscal year, only to report 16%. Bell Potter's current fiscal 2024 forecast is for 18% growth in pre-tax profit, based on mid-teens revenue growth and margin expansion of between 50 and 100 basis points. Bell Potter has a buy rating and A$18.50 target price on the stock, which is up 0.4% at A$15.78. (stuart.condie@wsj.com)

0048 GMT - Ansell's integration of the personal protective equipment business it is acquiring from Kimberly-Clark comes with notable risk, Citi analyst Mathieu Chevrier says. Ansell expects synergies of US$10 million by its third year of ownership, but Chevrier tells clients in a note that he is not incorporating any synergies into his forecasts just yet given the integration risks. Nonetheless, he sees the acquisition as strategically sensible given it improves Ansell's growth profile and brings with it complementary customers and products. Citi lifts the stock's target price 4.8% to A$27.25 and keeps a neutral rating. Shares are down 0.2% at A$24.86. (stuart.condie@wsj.com)

0043 GMT - Evolution Mining's reliance on a big 4Q to achieve its annual gold-production guidance is a factor in Macquarie's move to downgrade the stock to neutral from outperform. Evolution expects FY 2024 output of 749,000 oz of gold at an all-in-sustaining cost of A$1,410/oz. "Despite Evolution retaining FY24 guidance we continue to see elevated guidance risk," says Macquarie in a note. "Hence, we forecast a modest guidance miss noting that a 32% quarter-on-quarter production lift is required to meet." Macquarie says Evolution's recent share-price strength also fed into its downgrade. (david.winning@wsj.com; @dwinningWSJ)

0024 GMT - BHP's 3Q production report was broadly in line with Citi analysts' expectations. They tell clients in a note that Western Australia iron-ore volumes were only marginally below their forecasts, with weather to blame. Output from BHP's Escondida was also marginally below Citi's expectations, although they point out that annual copper and iron-ore production guidance remain unchanged. They add that BHP is most likely to announce the closure of its Western Australia nickel business in the coming months. (stuart.condie@wsj.com)

0019 GMT - Despite Qantas experiencing more competitive intensity across its international operations as capacity recovers post Covid-19, Jarden reckons that the Australian airline still has a dominant position in key markets. In a note, Jarden analysts Jakob Cakarnis and James Wilson say that due to its superior fuel hedging, Qantas can remain competitive, despite the fuel-price environment, which could prove volatile through 2024. Jarden keeps its buy call on the stock. (alice.uribe@wsj.com)

0013 GMT - A material step-change in Bank of Queensland's profit and return on equity profile still seems elusive, say Jarden analysts in a note. Following the Australian regional lender's 1H FY 2024 earnings release, Jarden now forecasts FY 2026 ROE of around 6% versus BOQ's more than 9.25% target. "Overall, we believe BOQ is heading for a multi-year recovery but the path is likely to be uneven," says the investment bank. It notes that BOQ is considering options to help meet its target including an additional simplification cost-out program, which Jarden expects to hear more about at BOQ's FY 2024 results.(alice.uribe@wsj.com)

2345 GMT - Bank of Queensland has a range of competing pressures, including addressing structural disadvantages via a digitization and simplification program, and while it's making some progress, Jefferies analyst Matthew Wilson views it to be "tough going." In a note, he says much of the Australian regional lender's upside hinged on interest rate cuts, which look to be delayed. On BOQ's 1H FY 2024 results, Wilson says it met expectations at the core profit level, with its cash earnings beating expectations by around 7% on lower than forecast bad debts. He sees the results as "low quality." (alice.uribe@wsj.com)

2322 GMT - The market's positive reaction to Bank of Queensland's 1H FY 2024 results likely came from an expectation that earnings are close to their lows, rather than anything overly positive, say Citi analysts Brendan Sproules and Thomas Strong in a note. They say they agree that FY 2024 is likely to be the bottom for the current earnings contraction cycle, and that looking forward, it will be the medium term outlook that will drive the share price. But, Citi sees that there is where uncertainty for investors has increased. "Management conceded that there is no discernible path to their FY 2026 targets, says Citi, adding that with these targets likely to be relinquished in 2H FY 2024, future returns are uncertain for BOQ. (alice.uribe@wsj.com)

(END) Dow Jones Newswires

April 18, 2024 01:00 ET (05:00 GMT)