0324 GMT - ARB Corp. needs to exceed market expectations for a sustained period to maintain its current valuation multiple, Canaccord Genuity analyst Andrew Hodge says. Initiating coverage of the auto-accessory supplier with a hold rating, Hodge says ARB is a fundamentally good business but doesn't justify its current valuation of 30X one-year forward earnings. He says investors should be prepared for this multiple to moderate, and sees market expectations for 2H FY 2025 and the whole of FY 2026 as slightly optimistic. Canaccord Genuity places a A$35.60 target price on the stock, which is down 1.65% at A$37.59. (stuart.condie@wsj.com)

0302 GMT - Citi analyst William Park is more positive on Elders after the agricultural products and services provider's 1H results call highlighted the strength of its rebound from a soft 1Q. He tells clients in a note that 1Q underlying earnings were minimal or negative, which would leave the March quarter almost entirely responsible for 1H underlying Ebit of A$38.4 million. Elders thinks that this momentum is likely to continue, he adds. There are further positives in the form of potential bolt-on acquisitions and Elders' resolution of inventory shortfalls. Citi has a last-published buy rating and A$8.50 target price on the stock, which is up 2.6% at A$8.42. (stuart.condie@wsj.com)

0128 GMT - Out-of-home advertiser oOh!media's retail business looks solid to Morgan Stanley analysts despite the recent loss of its contract with mall operator Vicinity Centres. They tell clients in a note that the revenue impact of the lost contract was less material than they first thought, valuing it about A$33 million annually. The MS analysts reckon that the ASX-listed oOh!media is well run and set to benefit as A$1.3 billion in advertising is redirected away from free-to-air TV over the next five years. MS raises target price 16% to A$1.80 and stays equal-weight on the stock, which is up 0.3% at A$1.615. (stuart.condie@wsj.com)

0057 GMT - SRG Global gets a new bull in Bell Potter, which sees the engineering contractor's revenue rising at a compound annual rate of 16.7% over FY 2023-2026. Bell Potter's positive revenue outlook reflects growth in sectors such as resources and industrial processing, which it expects will lead to a greater need for asset maintenance. In a note, analyst Joseph House is also upbeat about SRG's ability to cross-sell following its integration of the Asset Care business, while an acceleration in iron ore and gold output volumes over the next five years should boost demand for production drilling and geotechnical services. Bell Potter starts SRG at buy with a A$1.30/share price target. SRG is up 4.1% at A$0.90. (david.winning@wsj.com; @dwinningWSJ)

0052 GMT - Elders' recent earnings weakness appears confined to the 1Q of its current fiscal year, UBS analysts say. They tell clients in a note that while 1H EBIT of A$38 million was about 14% lower than the average analyst forecast, livestock markets recovered following a soft 1Q. They say it was important that the agricultural products and services provider reiterated its annual earnings guidance, but warn that it needs a solid 2H improvement to achieve this. UBS has a last-published neutral rating and A$9.00 target price on the stock, which is down 1.5% at A$8.09. (stuart.condie@wsj.com)

0050 GMT - There is a chance for Australian insurer Suncorp to re-rate to the same multiples as its peer IAG, say Morgan Stanley analysts in a note. The investment bank notes that investors seem to think that Suncorp's lower return on equity is a reason it trades at a discount to IAG. While IAG's ROE and return on CET1 capital are higher, MS also sees that since FY 2022, Suncorp has had better returns on regulatory minimum and total capital, plus it seems under-leveraged versus IAG. (alice.uribe@wsj.com)

0040 GMT - Bendigo and Adelaide Bank's trading update showed positive revenue and margin trends in 2H FY 2024, say Morgan Stanley analysts in a note. This increases the investment bank's confidence in Bendigo's earnings trajectory, which could prompt a re-rating of the stock. At the Australian regional lender's upcoming investor day, MS reckons it will reaffirm its medium-term targets of a cost-to-income ratio "towards 50%" and a return on equity above the cost of capital. MS raises its cash EPS estimate for the company by 6% for FY 2024, and says Bendigo is its preferred smaller bank, partly due to its focus on margin management, efficiency and returns. MS stays overweight on the stock. (alice.uribe@wsj.com)

0039 GMT - Elders needs a near-record 2H to achieve the midpoint of its earnings guidance range after a very weak 1H that was driven by farmers holding back from planting due to an El Nino weather event forecast, says Jefferies. It notes that Elders's EBIT is historically split 45%-55% between the first and second halves. "To hit midpoint, they need 29/71 which has never happened," analyst John Campbell says in a note. "That said, the outlook for 2H has improved with good sub-soil moisture profiles across many winter crop regions and stronger livestock pricing." Jefferies has a hold call on Elders.(david.winning@wsj.com; @dwinningWSJ)

0037 GMT - Megaport keeps its bull at Jefferies, where analyst Roger Samuel thinks it's just a matter of time until key performance indicators begin improving again. Samuel acknowledges that the Australian telco-services provider's operational metrics have been slow to ramp up following the addition of new sales staff, but sees an inflection point on the horizon, mostly likely within three or fiscal quarters. Despite increased marketing spend, Samuel is increasingly confident that Megaport has costs under control given its negotiating power with data centers and rigor in calculating sales commissions. Jefferies lifts target price 6.0% to A$17.51 and keeps a buy rating on the stock, which is up 1.5% at A$14.91. (stuart.condie@wsj.com)

0020 GMT - Building materials supplier James Hardie's shares could rise by 5%-10% if it beats expectations for margins and volumes in 4Q, says Morgan Stanley. James Hardie is due to report its 4Q result tomorrow, and analyst Andrew G. Scott says a 4Q EBIT margin in North America of 32% or more would drive James Hardie's share price higher. He says that is the bank's base case. "We expect the 1 January price increases of 4-5% to help offset higher concrete and pulp prices," MS says. "Volume from an improved housing outlook will support margins." MS forecasts a 1Q margin of 32.2% and volumes at 776 million standard feet, which represents 4% growth versus a year earlier. (david.winning@wsj.com; @dwinningWSJ)

0015 GMT - Investors are likely to view Elders' latest set of results as a foundation upon which it can build, Citi analyst William Park tells clients. He writes in a note that the Australian agricultural product and services provider's 1H earnings were softer than he had expected, but calls out the company's improved outlook for cropping and livestock. He observes that Elders' unchanged FY earnings guidance implies a better-than-expected 2H performance, but thinks that investors will remain skeptical until they see evidence of improved changing conditions. Citi has a last-published buy rating and A$8.50 target price on the stock, which is up 1.0% at A$8.29. (stuart.condie@wsj.com)

2356 GMT - Dicker Data's 1Q sales materially fell short of UBS's expectations. Dicker Data reported a 10% decline in quarterly revenue, whereas UBS had forecast a 3% improvement and consensus hopes were even more bullish. "The precise drivers of the sales decline are somewhat unclear from the release," says analyst Apoorv Sehgal, who plans to review Dicker Data's valuation. "Theoretically, group sales growth should improve in 2Q given Dicker Data is cycling an easier comp (+5%) and the order backlog had largely been cleared by the end of 1Q of 2023." UBS has a neutral call on Dicker Data. (david.winning@wsj.com; @dwinningWSJ)

2353 GMT - Building materials supplier James Hardie is likely to provide more color on how it's weathering high interest rates when reporting its FY 2024 result on Tuesday. In a note, UBS highlights the outlook for housing and building materials has largely improved for new construction, but is more muted for repair and remodeling, or R&R work. That puts James Hardie's 1Q guidance and updated 2024 outlook in focus. "In our view positive new housing more than offsets a slower R&R recovery," analyst Lee Power says in a note. UBS assumes 1Q volumes in North America of 794 million standard feet, representing a 6% rise and in line with the company's current macro assumptions.(david.winning@wsj.com; @dwinningWSJ)

2349 GMT - Even though the 1H FY 2024 bank reporting season, marked by near-term capital returns, helped to continue a rally in lender share prices, Citi analysts Brendan Sproules and Thomas Strong reckon this will likely wane. In a note, they say that a return to sustainable core profit growth would be required to sustain the current share prices into the medium term. Citi also sees that tech costs are set to drive banks' operating expense growth back above inflation into the medium term. Combined with an expected decline in core lending and deposit spreads, Citi says its still comfortable with its sell call across the sector. Its order of preference is now Westpac, CBA, ANZ and NAB, favoring retail banks over commercial banks. (alice.uribe@wsj.com)

2333 GMT - Bendigo and Adelaide Bank's actions to reprice deposits lower in November is likely to have had an impact on the lender's net interest margin, say Citi analysts Brendan Sproules and Thomas Strong in a note. In its trading update for the 10 months through April, Bendigo's NIM of 1.87% implies the 2H FY 2024 NIM to be more than 1.90%, reckons Citi. This compares to 1.83% in 1H. While this prompts Citi to raise its earnings forecasts for the lender, it keeps its sell call. It thinks the higher NIMs in the trading update reflects a catch-up from 1H where the NIM was abnormally low due to deposit pricing missteps that have now been rectified. (alice.uribe@wsj.com)

2326 GMT - Rio Tinto's Australian shares still seem a tad cheap, but Citi analyst Paul McTaggart reckons it will be hard for the miner's stock to gain much more given ongoing concerns about China and the property market there. McTaggart downgrades Rio Tinto to neutral from buy, retaining a target of A$137.00/share. The stock, which is up by roughly a quarter since August, could face rising headwinds now that China's steel mills are unprofitable again. The market is also heading into a period of seasonal weakness for mining equities, says McTaggart. Rio Tinto ended Friday at A$132.15/share. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

2305 GMT - The biggest surprise from Bendigo and Adelaide Bank's trading update was a material uplift in its margins, says Macquarie. The disclosure implied a 2H net interest margin of around 1.92%, which is around 9 basis points above 1H, says Macquarie, adding it was also well ahead of consensus. "With limited detail, it is difficult to reconcile the sizable beat," says the investment bank, which suspects it could have been driven by expensive deposits rolling off. Still, Macquarie sees that, while the margin uplift is positive, it remains concerned about ongoing volatility. "We believe a period of stability is needed to incorporate the upside in valuations," says Macquarie. (alice.uribe@wsj.com)

(END) Dow Jones Newswires

May 20, 2024 00:59 ET (04:59 GMT)