0429 GMT - The reduction in Westpac's capital add-on announced last week won't have been a surprise to investors, say Morgan Stanley analysts in a note. Although they add that the move came six months earlier than MS had anticipated. The investment bank says the reduction by the regulator of Westpac's A$1 billion capital add-on by A$500 million will reduce risk-weighted assets by A$6.25 billion and add around 18 basis points to the Australian major lender's CET1 ratio. This, MS says, will support capital management options, adding that the investment bank's forecasts assume further special dividends of 15 Australian cents at both the 2H FY 2024 and 1H FY 2025 results, as well as announcements of A$3 billion of new buybacks over the next two years. (alice.uribe@wsj.com)

0334 GMT - The recent selloff in lithium stocks has uncovered value in Mineral Resources and Pilbara Minerals, Morgans says. "Mineral Resources and Pilbara Minerals's production profiles are expected to grow significantly within the next three years, something the other large-cap listed miners don't have," analyst Annabelle Sleeman says. Morgans sees Mineral Resources and Pilbara Minerals offering long-term value for investors who can be patient through the current downturn in lithium prices. It upgrades Mineral Resources to add from hold, and raises its price target by 4.5% to A$69.00/share. Mineral Resources is down 1.0% at A$55.38 today, while Pilbara Minerals declines 2.0% to A$2.93. (david.winning@wsj.com; @dwinningWSJ)

0319 GMT - Iress's improved near-term outlook appears to be positioning the Australian software provider for a broader upgrade when it announces its half-year results in August, Wilsons analysts write in a note. They tell clients that Iress's expectation of A$65 million-A$67 million in adjusted Ebitda is ahead of their forecasts, which were already ahead of the average expected by analysts. They note that Iress didn't update its guidance for FY adjusted Ebitda of A$122 million-A$132 million and expect, given the company's results typically skew to 2H, to see an upgrade next month. Wilsons is reviewing its market-weight rating on the stock, which is up 11% at A$10.005. (stuart.condie@wsj.com)

0216 GMT - In the near term, President Biden's not seeking re-election and endorsing Vice President Kamala Harris is unlikely to shift markets materially, says Piers Bolger, CIO at Infinity Asset Management. He reckons there will be continued focus on the direction of U.S. Fed policy as the key driver for markets. "We continue to expect that the Fed will begin easing at its September FOMC meeting," he says. Still, while the Republican party has current momentum, Bolger reckons this could easily change after the Democratic National Convention, "coupled with the clear air that now comes with Biden's decision to not run for a second term." If Harris is confirmed, Bolger thinks it is "unlikely she will deviate from the re-election policy framework of what Biden has articulated to date." (alice.uribe@wsj.com)

0201 GMT - Michael Hill International's operating momentum looks set to improve over the Australian jeweler's fiscal 2025 despite economic uncertainty in its domestic market, Macquarie analysts say. They write in a note to clients that uncertainty over the direction of Australian interest rates is a concern ahead of the key Christmas trading period. Rate cuts in New Zealand should help stimulate that country's economy, but the analysts wonder whether they have started early enough to influence end-of-year trading. All told, their worst-case scenario is for flat 1H trade before a material improvement in 2H. Macquarie cuts its target price 4.7% to A$0.81 but keeps an outperform rating on the stock, which is up 0.85% at A$0.59. (stuart.condie@wsj.com)

0138 GMT - Universal Store could benefit from Accent's plans to exit 50% of its Glue Store network, says Wilsons. "Glue does not have complete product and customer cross-over with Universal Store," analyst Tom Camilleri says in a note. "However we believe the closures will be a positive catalyst for Universal Store through lower promotional pressure and modest market share gains." There's also opportunities for Universal Store to take over retail space if Accent decides to close, rather than convert, these stores, Wilsons says. It retains an overweight call on Universal Store. (david.winning@wsj.com; @dwinningWSJ)

0134 GMT - Universal Store keeps its bull at UBS after the Australian fashion retailer's earnings outlook beat analyst Jarrod Chisholm's expectations. Stronger margins mean that FY 2024 underlying earnings will be about 7% higher than where Chisholm, and the broader market, had thought. Chisholm also notes that sales growth of 9.5% compares very favorably with rival Accent Group's 4.1%. He sees Universal's closure of underperforming Glue stores as a slight positive and keeps a buy rating on the stock despite a 35% rise in value so far this year. Its target price rises 8.3% to A$6.50. Shares are up 0.5% at A$5.78. (stuart.condie@wsj.com)

0128 GMT - Packaging company Orora is likely to suspend its dividend as it waits on a market turnaround, reckons Morgan Stanley. At Orora's recent investor day, management said improving the balance sheet is a priority, analyst Andrew G. Scott says in a note. Orora has guided to net debt-to-Ebitda of 2.8X at the end of June. "We now assume that the board will opt against announcing a FY 2024 final dividend," Morgan Stanley says.(david.winning@wsj.com; @dwinningWSJ)

0109 GMT - Woodside Energy's $900 million acquisition of Tellurian and its proposed LNG development in the southern U.S. is precisely the type of deal that Citi thinks works for fixing the Australian company's structural issues. "However, there's a catch," says analyst James Byrne. "A 12% internal rate of return seems difficult to us." Current LNG contract prices only support an infrastructure like return for U.S. LNG, Citi says. "An additional trading margin Woodside could expect to earn is unlikely to achieve hundreds of basis points of additional IRR," Citi says. (david.winning@wsj.com; @dwinningWSJ)

0052 GMT - Investors looking to bet on so-called "Trump trade" could look to overweight Australian stocks with high U.S. exposure, say Macquarie analysts in a note. They say Macquarie's strategy portfolio is overweight the likes of Light & Wonder, ResMed, Computershare, CSL, Amcor and Aristocrat Leisure. "This election takes place in a slowdown, and in these cases average post-election returns are below the long term average," Macquarie notes. On Aussie interest-rates, the investment bank reckons domestic conditions would seem to compel the Reserve Bank of Australia to hike, but in the context of the global macro, holding rates seems a better option. "Markets with rate cuts in 2024 have tended to underperform," Macquarie notes.(alice.uribe@wsj.com)

0043 GMT - Domino's Pizza Enterprises' decision to cut loose underperforming restaurants in Japan and France has set the Australia-listed fast-food franchiser up for growth in fiscal 2026, Citi analyst Sam Teeger says. He writes in a note that the store closures and reinvestment in marketing in Japan should benefit same-store sales growth from fiscal 2025, which could act as a catalyst for its shares. Domino's expansion of its overall network could then pick up in the subsequent fiscal year, he adds. Citi lifts the stock's target price 1.9% to A$45.35 and keeps a buy rating. Shares are up 0.5% at A$33.90. (stuart.condie@wsj.com)

0042 GMT - There may be a "modest unwinding" of the so-called Trump trade with President Biden dropping out of the presidential race and backing Vice President Harris to run in his place, says Betashares chief economist David Bassanese. Trump trade has been characterized by a firmer U.S. dollar and U.S. yield-curve steepening on concerns over ongoing large U.S. fiscal deficits, he says. "Early market reaction is likely to be that Trump is modestly less certain to win the election, though still the strong favorite," says Bassanese. Still, a new Democrat candidate could make it less likely Republicans win a "clean sweep," he says, adding that markets may take comfort from the greater prospect of the political gridlock limiting the chance of major policy changes.(alice.uribe@wsj.com)

2313 GMT - CBA and ANZ have customers that look best placed to meet property-related decarbonization targets, according to Citi. In a note, analysts Brendan Sproules and Thomas Strong say Australian major banks' commercial real-estate decarbonisation pathways are now largely set, but that building owners' unwillingness to upgrade lower quality property could lead to more "stranded assets." Citi reckons ANZ's skew to institutional customers and their higher credit ratings provide greater capacity to invest in, and achieve, decarbonization goals. CBA has a similar commercial real-estate exposure to peers, but its greater skew to residential property leaves it better placed, Citi adds. (alice.uribe@wsj.com)

(END) Dow Jones Newswires

July 22, 2024 01:12 ET (05:12 GMT)