0447 GMT - Macquarie's earnings risks look to be still tilted to the downside, say Morgans analysts. They note that FY 2025 net profit Visible Alpha consensus for Macquarie was previously A$4.11 billion, up around 17%. Thus, 1Q's flat on quarter net profit looks weak compared with full year expectations. Macquarie flags a significant 2H skew for deal flow, and Morgans reminds that the company similarly signalled a stronger 2H for asset realizations in prior year, "something which didn't eventuate as expected."(alice.uribe@wsj.com)

0440 GMT - Seek's bull at Morgans is unperturbed by the Australian job advertiser's softer-than-expected domestic ad volumes at the start of its new fiscal year. Analyst Steven Sassine lowers his EPS estimates for fiscal 2024 through fiscal 2026 by 2%-8% but keeps an add rating on the stock, telling clients in a note that the ASX-listed company still has options to drive medium-term growth. These include changing its pricing model or managing discretionary costs, he says. Morgans cuts its target price 3.4% to A$25.80. Shares are up 2.2% at A$20.64. (stuart.condie@wsj.com)

0405 GMT - Macquarie's stock may feel some near-term pressure as consensus needs to reconsider the timing of FY 2025 earnings, say Morgan Stanley analysts in a note. The Australian financial company's 1Q FY 2025 appears below expectations to MS with the FY 2025 outlook, having tilt to the 2H. The investment bank's analysts say they're looking for 22% earnings growth in 1H and 24% 2H, with 60% of earnings in 2H. "Our view is Macquarie is at the start of a multi-year upgrade cycle as recently announced deals complete later in FY 2025," says MS, adding that it sees clear signs of capital market recovery in Macquarie Capital. Macquarie rise 1.5% to A$204.66. (alice.uribe@wsj.com)

0350 GMT - Macquarie's medium-term outlook remains optimistic, despite its 1Q FY 2025 performance being soft versus Goldman Sachs's previous 1H expectations, say the investment bank's analysts Andrew Lyon and John Li in a note. They note that overall FY 2025 expectations are unchanged, with Macquarie guidance implying a 2H skew in net profit. Positives that GS sees include an improving macro backdrop as well as Macquarie being well positioned to benefit from the global push toward decarbonization. GS sticks with its neutral call on the stock. (alice.uribe@wsj.com)

0220 GMT - Civmec stands to benefit from its proposed change of domicile to Australia from Singapore, UOB Kay Hian analysts say in a research report. They raise the stock's target price to S$1.32 from S$1.23 with an unchanged buy rating. Benefits include more future opportunities for Civmec on projects that have stringent "local content" policies, and potentially increased access to capital for the new entity to finance future growth, the analysts say. The construction and engineering services provider's current valuation of 8x FY 2025 price-to-earnings is also attractive, given its strong order book and positive outlook backed by high tendering activities, the analysts add. Shares are 1.1% higher at S$0.95. (ronnie.harui@wsj.com)

0142 GMT - Seek's writedown of its stake in Zhaopin makes no significant difference to Macquarie analysts, who already saw the Chinese jobs advertiser as worth less than its carrying value. They write in a note to clients that their neutral rating and A$23.00 target price remain unchanged by Seek's A$120 million impairment against the value of its 23.5% stake. However, the softer trading conditions in China do move them to trim their EPS forecasts by 4% for fiscal 2024, by 5% for fiscal 2025 and by 3% for fiscal 2026. Shares in the Australian employment marketplace are up 0.25% at A$20.25. (stuart.condie@wsj.com)

0138 GMT - Nestle (Malaysia)'s 2H earnings may be supported by likely stronger spending power amid the restructuring of the national pension fund and better margins from its product price increases on July 1, Maybank IB analyst Jade Tam says in a note. These could help offset further earnings declines in 2H, despite anticipated ongoing subdued consumer sentiment, she says. Tam lowers Nestle's 2024-2026 earnings forecasts by 28%, 15% and 11%, respectively, after its 2Q earnings came in below expectations. Maybank cuts Nestle Malaysia's target price to MYR120.00 from MYR123.60, while maintaining a hold rating on the stock. Shares are 2.6% lower at MYR118.80. (yingxian.wong@wsj.com)

0137 GMT - Morgans wonders whether Fortescue's hematite production will fall in FY 2025. That's because Fortescue has signaled a ramp up at Iron Bridge to 5 million-9 million tons, from 1.2 million tons in FY 2024, while only forecasting group shipments of 190 million-200 million tons. For comparison, Fortescue shipped 191.6 million tons in FY 2024. "Management denied this view, commenting that changes in FY 2025 will only be minor, but the facts are hard to dismiss," analyst Adrian Prendergast says. "The lack of commentary makes it hard to identify the drivers of the change, but it is clear that Fortescue has been pushing some of its aging mines hard with strip ratios rising and the need for increased mine replacement invariably increasing." (david.winning@wsj.com; @dwinningWSJ)

0134 GMT - Macquarie's asset management unit earnings are now lower than UBS was expecting, but this is offset by an earnings upgrade for the Australian financial company's commodities unit, says UBS analyst John Storey in a note. UBS now sees Macquarie's FY 2025 earnings being weighted to the 2H and upgrades its cash net profit forecasts by 0.9%, 6.4% and 5.9%, respectively over FY 2025-FY 2027. For the asset management unit, it cuts earnings by 20%, 2.5% and 2.5%, respectively over the period, largely reflecting further delays to asset realizations. It upgrades earnings for the commodities unit by around 14% on average over the forecast period, driven by better-than-expected performance in North American Gas and Power. (alice.uribe@wsj.com)

0126 GMT - Ampol's weak 2Q doesn't end the chances of additional capital management this year, suggests Macquarie. Ampol's 1H Ebit of A$500 million-A$510 million was lower than Macquarie had expected, as softer refining margins coincided with reliability issues at its Lytton refinery in eastern Australia and slower international trading. However, Macquarie said resilience in the domestic fuels business--wholesale and retail--was noteworthy. "We still see special dividend potential at year-end," says Macquarie, albeit now A$0.50/share, from a prior expectation of A$0.60. (david.winning@wsj.com; @dwinningWSJ)

0123 GMT - Iron-ore miner Fortescue may need to borrow to shore up its dividend, reckons Macquarie. Fortescue has recently taken action on costs, including cutting 700 jobs. But Macquarie is more bearish than the market on iron-ore prices, and is notably some 11% and 13% below consensus in FY 2025 and FY 2026, respectively. As a result, Macquarie sees Fortescue's minimum 50% payout ratio coming under pressure. "To sustain the dividend policy, we believe Fortescue may need to increase gearing," Macquarie says. (david.winning@wsj.com; @dwinningWSJ)

0122 GMT - Coles should have room for capital management of between A$400 million and A$1.3 billion over the next two years even if it keeps investing in automation and refurbishment of its supermarkets. Citi analyst Adrian Lemme tells clients in a note that there is a strong case for Coles to respond to what he calls an undergeared balance sheet by investing in further distribution-center automation and store refreshments. He trims his annual EBIT forecasts through fiscal 2026 by about 1% on lower expectations for Coles' liquor and property earnings, but keeps a buy rating and A$19.00 target price on the stock. Shares are down 0.1% at A$17.73. (stuart.condie@wsj.com)

0115 GMT - Karoon Energy keeps its bull at Citi despite lower annual earnings expectations due to operational issues and higher-than-expected amortization and depreciation. Analyst James Byrne drops his production forecast for Karoon's Bauna project offshore Brazil toward the lower end of the producer's guidance and cuts his fiscal 2024 EPS forecast by 14%. Yet he tells clients in a note that Karoon's new capital returns policy strikes the right balance between rewarding shareholders and preserving reinvestment capacity, and sees average annual growth in free cash flow yield of 18% through fiscal 2028. Citi cuts its target price by 15% to A$2.35 and keeps a buy rating on the stock, which is up 5.75% at A$1.84. (stuart.condie@wsj.com)

0113 GMT - Coronado Global Resources is likely to miss annual targets for metallurgical coal production and costs, reckons UBS. In a note, analyst Lachlan Shaw highlights a 2-week rail maintenance stoppage is scheduled for end-July and early August across the Blackwater rail system in Australia. Coronado is targeting saleable coal output of 16.4 million-17.2 million tons, above UBS's forecast for 16.2 million tons. Coronado has guided to average mining costs of $95-$99/ton, but UBS thinks $100/ton is more likely. (david.winning@wsj.com; @dwinningWSJ)

0101 GMT - UBS cuts its forecast for Ampol's EPS this year by 18%, reflecting reduced volumes at its Lytton refinery in eastern Australia and lower earnings from its Z Energy unit in New Zealand. At Lytton, Ampol has scheduled a 45-day turnaround over July and August. In a note, analyst Tom Allen says this will constrain diesel output and production of higher-octane premium fuels. UBS trims its annual refinery production forecast to 5.58 billion liters as a result. The bank also sees pressure on Z Energy earnings from weaker volumes as market share is lost to lower-priced independent retailers, albeit partly offset by better retail fuel margins.(david.winning@wsj.com; @dwinningWSJ)

2322 GMT - Macquarie's 1Q FY 2025 result may mean a substantial miss to market expectations, Citi analysts Brendan Sproules and Thomas Strong said in a note. The Australian financial company said that 1Q earnings were "broadly in-line" with the prior corresponding period, but Citi notes that, prior to this update, Visible Alpha consensus was expecting 1Q earnings of around A$950 million, however, a "broadly-in-line" result implies a substantial miss with cash earnings of A$700-750 million. "The 1Q weakness appears to reside in Banking and Financial Services, where margin pressure is hurting more than expected," says Citi. It keeps its "sell" call on the stock. (alice.uribe@wsj.com)

2254 GMT - While private debt in Australia doesn't have the financial system of penetration as that of the U.S., it has established a foothold in both asset and cash flow lending, say Citi analysts Brendan Sproules Thomas Strong in a recap of the investment bank's Inaugural Private Debt conference. Domestically, Citi reckons scale is going to be increasingly important as the industry grows, "as having available funding provides a competitive advantage and relevance in the market." It adds that larger funds may have an advantage, with the ability to underwrite transactions at shorter notice. (alice.uribe@wsj.com)

0506 GMT - The fundraising environment for illiquid assets has been challenging, but investor appetite could start to pick up, Macquarie CEO Shemara Wikramanayake tells media ahead of the company's AGM Thursday. She says big pension funds have had issues with asset realizations which have stymied cash flow. But with these realizations picking up, flow of funds could also benefit. Macquarie itself hasn't been as challenged by fundraising blockages. "Because we are in that sub-sector where people are still allocating, we've had quite good experience," says Wikramanayake.(alice.uribe@wsj.com)

(END) Dow Jones Newswires

July 26, 2024 01:00 ET (05:00 GMT)