0350 GMT - BlueScope's waiving of its pre-emptive right to South32's Illawarra Metallurgical Coal in return for improvements to its coal-supply agreement with the planned new owners is a "sensible outcome" with benefits for both sides, RBC Capital Markets analysts say. While it was unlikely BlueScope would have stepped in for Illawarra--having previously signaled it didn't want to own or operate a coal mine--the steelmaker faced concerns about future coal supplies from the operation that it would find challenging to replace with imports, the analysts say. BlueScope is up 0.1% at A$21.24/share. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

0154 GMT - Optus's mobile tariff changes suggest that market concerns that competition is about to intensify are overdone, Jarden analysts Tom Beadle and Liam Robertson say. They write in a note to clients that, while the Singapore Telecommunications-owned company has cut the price of its most expensive plan by about 8%, only a small minority of its customers are likely to be on it. Optus has also raised prices at the low end of its range, they point out. They see the changes as positive for its Australian rivals. They expect Telstra to increase prices in 2025, and reckon that higher Optus prices will help TPG Telecom recover the cost of its regional network-sharing agreement with the Singtel-owned provider. (stuart.condie@wsj.com)

0149 GMT - Singapore Telecommunications' Optus' revised mobile price plans may boost its profit, Citi Research analysts say in a note. Optus has increased its SIM only plans prices by 5%-6% for small to medium sized data bundles, they note. The financial impact may take 1-2 years to flow through as subscribers need to gradually migrate from their current phone plans into the new plans, they say. Citi estimates that every A$2 increase in average revenue per user may raise Optus' FY 2025 Ebitda by A$137 million and Singtel's group profit by 2%. "Moreover, an increase in Optus' profitability would serve to improve the benefits of any potential monetization exercise," they say. Citi keeps a buy rating and S$3.54 target price on Singtel's stock, which is last at S$2.46. (amanda.lee@wsj.com)

0145 GMT - Domino's Pizza Enterprises' European strategy update supports Jarden analysts' bullish view of the Australian fast-food franchiser. They tell clients in a note that better price compliance by franchisees in France and improving same-store sales growth in Germany give them confidence that earnings will re-accelerate. The Jarden team makes no changes to its earnings forecasts, but does highlight management's view that there is a material long-term opportunity and the company's clear plans to lift same-store sales and profitability. They keep an overweight recommendation on the stock, while acknowledging that market expectations are low. Jarden has a A$48.00 target price on the stock, which is up 1.1% at A$37.43. (stuart.condie@wsj.com)

0059 GMT - Lynas will likely need to further expand its Mt Weld rare earths mine in order to use up its spare cracking and leaching capacity, Morgan Stanley analysts say. Options for getting unprocessed rare earths from third parties don't look promising, and Lynas's costs will be higher than they could be until it can run its operations at full capacity, say the analysts. They estimate an expansion of Mt Weld and the miner's separating and finishing capacity could cost A$430 million-A$820 million and be completed by FY29. Although, there's a risk that Lynas's Malaysia operating license isn't extended beyond March 2026, as well as risks from a forecast multiyear oversupply in the market, they say. MS raises its target to A$5.35 from A$5.20 and keeps an underweight rating. Lynas is up 0.5% at A$6.745. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

0059 GMT - Domino's Pizza Enterprises needs to lift customer orders in Europe if it is to grow its store count, Macquarie analysts tell clients in a note. They point out that the payback period for new stores has widened to four or five years, and reckon that the development of new products is key to improving profitability in the region. The Australian fast-food franchiser is aiming to reduce the payback period to about three years, they observe. The analysts see new items as essential if Domino's is to appeal to new customer segments and improve sales through the day. Macquarie has a neutral rating and A$41.00 target price on the stock, which is up 2.5% at A$37.92. (stuart.condie@wsj.com)

0044 GMT - Steadfast may need to accelerate M&A in the U.S. given the multiple revenue headwinds facing the insurance broker and underwriter over the next two fiscal years, Macquarie analysts say. They tell clients in a note that the market doesn't appear to be pricing in organic growth challenges including the roll over of the industry premium cycle and peaking usage of the company's client trading platform. They reckon that this could lead to Steadfast leaning into M&A over the short term to generate earnings upside, or possibly buying U.S. technology. Macquarie lifts its target price 5% to A$6.70 and keeps an outperform rating on the stock, which is down 0.9% at A$5.28. (stuart.condie@wsj.com)

2351 GMT - Peter Warren Automotive's margins are likely to get squeezed more, Citi says following its weak trading update. Peter Warren Automotive expects FY 2024 underlying pretax profit of A$52 million-A$57 million, some 3% below Citi's forecast at the midpoint and an even bigger miss to consensus forecasts. Competition to sell new vehicles has intensified just as the consumer grapples with pressure on budgets. To shore up margins, the company is limiting inventory levels, cutting costs, and increasing revenue growth in used cars and back-end revenues. Still, these actions won't fully offset lower new car margins, the company says. "We expect margins to be under further pressure from here, with Peter Warren Automotive also noting it expects further contraction in gross margins," Citi says. (david.winning@wsj.com; @dwinningWSJ)

2346 GMT - Eagers Automotive loses a bear in Jefferies after last week's downbeat trading update brought its share price closer to the bank's target. Eagers has signaled its 1H underlying pretax profit would be around 85% of what it achieved a year earlier, whereas Jefferies had forecast 95%. Analyst John Campbell cuts his FY 2024-2026 EPS forecasts by 4%. "Eagers is unique in a global sense with its 12% market share, far beyond any other dealer we're aware of," Jefferies says. Valuation metrics are similarly unique, he says, with Eagers trading on a price-to-earnings multiple of 10X compared to most other car dealerships at 6-9X. "We like Eagers but still view it as fully priced in the context of likely diminishing margins," Jefferies says. Eagers ended Monday at A$10.52, just above Jefferies's A$10.40 target. (david.winning@wsj.com; @dwinningWSJ)

2335 GMT - Peter Warren Automotive's trading update was weaker than expected, with Ord Minnett predicting downgrades to consensus forecasts. Still, analyst Phillip Chippindale notes similar messaging by Eagers Automotive last week, so headwinds appear to be industry-wide. Peter Warren Automotive now expects FY 2024 underlying pretax profit of A$52 million-A$57 million, missing Ord Minnett's A$64 million forecast. Improved vehicle supply has intensified competition more than Ord Minnett was expecting, hurting margins, while demand has softened due to cost-of-living pressures. "We note that the midpoint of guidance implies A$20.1 million of 2H pretax profit, which would mean pretax profit margin has dropped from 2.9% in 1H to 1.7% in 2H," Ord Minnett says. (david.winning@wsj.com; @dwinningWSJ)

2331 GMT - Lendlease's key challenge in slimming down its business model is to manage divestment of its overseas assets without incurring significant impairments, Macquarie analysts write in a note. They tell clients that the real-estate developer aims to optimize returns from a simpler business model, but observe that it hasn't reiterated its 8%-10% group return-on-equity target. Lendlease instead says that it will aim for group RoE to be sustainably above cost of equity, they add. Macquarie is unrated on the stock, which is at A$6.36 ahead of the open. (stuart.condie@wsj.com)

2323 GMT - St Barbara's production-guidance downgrade is disappointing, says Macquarie, paring its target on the stock by 14% to A$0.25/share. "However, with higher grades pushed into FY 2025, we are somewhat more confident in the recently released outlook for FY 2025," Macquarie analysts say. The downgrade to FY 2024 guidance is attributed to equipment availability, which delayed access to a high-grade area of ore. Macquarie keeps a neutral rating on the stock. St Barbara ended Monday down 16% at A$0.235/share. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

2319 GMT - Lendlease says its business overhaul is laying the platform for an initial A$500 million share buyback, but Citi is doubtful many stock repurchases will happen any time soon. In a note, analyst Suraj Nebhani says Lendlease's buyback, funded by proceeds from asset sales such as the international construction business, is more likely to be realized down the line. "While this is positive, it will be reliant on progress on asset sales," Citi says. "And given long dated timing on some of the asset sales, we believe not much activity may be seen on the buyback near term." (david.winning@wsj.com; @dwinningWSJ)

2314 GMT - Serko's fiscal 2025 income guidance looks a little soft to RBC Capital Markets analyst Wei-Weng Chen. The travel- and expense-software developer expects income growth from new unmanaged customer acquisition and activation initiatives, but its NZ$85 million-NZ$92 million guidance range is lower than both Chen's forecast of NZ$96 million and the average analyst forecast of NZ$93 million. Chen tells clients in a note that Serko's fiscal 2024 earnings were stronger than both he and the market had expected, driven by lower costs. RBC has a last-published sector-perform rating and NZ$4.00 target price on the stock, which is down 0.6% at NZ$3.10. (stuart.condie@wsj.com)

2310 GMT - Serko's fiscal 2024 earnings were stronger than expected by Citi analyst Siraj Ahmed, who nonetheless has questions about the visibility of future revenues. Ahmed tells clients in a note that the travel- and expense-software developer's NZ$1.6 million underlying Ebitda loss compared with his forecast of a NZ$3.8 million loss. He had been more pessimistic than the broader market, which had anticipated a NZ$2.3 million loss. The driver of the Ebitda beat was lower-than-expected costs, he says. Citi has a last-published buy rating and A$4.00 target price on the stock, which is at A$3.04 ahead of the open. (stuart.condie@wsj.com)

0631 GMT - Lithium supplies are expected to rise and potentially push down prices of the battery metal, Morgan Stanley analysts say. Australia's spodumene shipments should start to improve in the coming months and African shipments should also recover following the end of the wet season, say the MS analysts. China is likely to record another year of strong production growth after easing environmental restrictions, and Chile's exports are touching all-time highs, they add. "While the lithium price has held up well year-to-date, a loosening [supply-demand] balance from here brings downside risks," say the analysts. "The China lithium carbonate price is currently trading close to our base case of $13,500/ton but we see room for it to fall below this, with the price already starting to roll over recently." (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

0535 GMT - Northern Star Resources is acting as "a clean beta to the gold price" amid light newsflow, says Citi analyst Kate McCutcheon, raising the bank's target on the stock to A$15.20 from A$14.50. A neutral rating is retained. McCutcheon updates Citi's model on Northern Star to include a 2024 gold-price forecast of US$2,400/oz and a long-term view on the metal's price that's been upgraded to US$1,850/oz from US$1,600/oz. The miner's stock is up 2.0% at A$14.50/share. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

0505 GMT - Australia's five largest banks get Fitch Ratings upgrades to reflect the building up of resolution buffers. One-notch upgrades to ANZ, CBA, NAB, Westpac and Macquarie lift each bank's long-term issuer default rating, which measures default risk for senior creditors, above its viability rating, which gauges lenders' risk of failing. That reflects the implementation of a formal resolution planning framework and that each bank is nearing completion of a buildup in loss-absorbing capacity, Fitch says. Australian regulation requires LAC buffers be big enough to let banks recapitalize in a resolution process and protect senior creditors, while reducing the need to use taxpayer funds. As of end-March, all five banks were close to meeting 2026 LAC requirements. "We believe the banks' resolution plans will effectively protect third-party senior creditors in the event of failure." (fabiana.negrinochoa@wsj.com)

(END) Dow Jones Newswires

May 28, 2024 01:03 ET (05:03 GMT)