Forum Topics News Summary DJ Australian Equities Roundup -- Market Talk 15 Aug 2024 14:57:14
Jimmy
Added 3 months ago

0444 GMT - Uncertainty over the earnings impact of Treasury Wine Estates' planned divestment is likely to blame for the share-price fall that followed its management's call with analysts, according to E&P's Phillip Kimber. He writes in a note that the impact is still unclear despite analysts asking three times for it to be quantified. Kimber says that the Australian wine producer's apparent indication that the lost Ebit would be greater than A$60 million compares with his expectation of a A$30 million-A$40 million impact. Treasury Wine shares were up by as much as 2.6% in early trade before dropping 2.2% into the red after the call. The stock was recently down 0.6% at A$12.04. (stuart.condie@wsj.com)

0143 GMT - Telstra's improved earnings outlook is likely supported by mobile price rises and a better-than-expected outcome on wage negotiations, Macquarie analysts write in a note. They tell clients that the Australian telecommunications provider's move to raise the bottom end of its fiscal 2025 Ebitda guidance range by A$100 million represents a 0.6% increase at the range midpoint. Last month, Telstra outlined a range of price rises across its mobile services to be implemented through 1H fiscal 2025. The Macquarie analysts think that these increases are coming through earlier than previously expected. Macquarie has an outperform rating and A$4.30 target price on the stock, which is up 2.6% at A$3.97. (stuart.condie@wsj.com)

0137 GMT - There's unlikely to be many operational benefits for Australia's Pilbara Minerals from its agreed takeover of Latin Resources, which has a lithium project in Brazil, says RBC Capital Markets analyst Kaan Peker. RBC doesn't have a specific valuation on the lithium explorer, but Peker says the premium agreed--32% on its 30-day weighted average--is significant and the deal will be dilutive to earnings and free cash flow in the near term. "This will likely weigh on the stock today," he says. Pilbara Minerals falls 4.0% to A$2.735, while Latin Resources surges by 52% to A$0.1825. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

0056 GMT - Telstra's move to raise the lower end of its fiscal 2025 earnings guidance range should support an improved full-year dividend payout, UBS analysts Lucy Huang and Ailsa Lei write in a note. They tell clients that the tightened range points to a full-year payout of A$0.19 a share, up from A$0.18 in the year just completed. The Australian telecommunications provider's 2H fiscal 2024 performance was in line with the pair's expectations, including the improved final dividend of A$0.09. UBS has a last-published buy rating and A$4.40 target price on the stock, which is up 1.8% at A$3.94. (stuart.condie@wsj.com)

0050 GMT - Cochlear's disappointing profit guidance implies that the hearing implant manufacturer's margins will be weaker than expected, UBS analysts say in a note. They tell clients that the Australia-listed company's guidance for 10% fiscal 2025 revenue growth is in line with the average analyst forecast, but that the midpoint of its A$410 million-A$430 million underlying profit guidance is 7% below expectations. The miss appears to include a mix of operational costs and currency assumptions, they add. UBS has a last-published sell rating and A$270.00 target price on the stock, which is down 7.7% at A$311.70. (stuart.condie@wsj.com)

0045 GMT - Treasury Wine Estates' FY 2025 earnings guidance slightly misses consensus expectations, but Jefferies says it's welcome nonetheless. "Guidance is rare in the consumer space which we think demonstrates management's confidence and earnings certainty created by supply constraint," analyst Michael Simotas says in a note. Treasury forecasts FY 2025 Ebit of A$780 million-A$810 million, implying 18.5% to 23.0% growth. Consensus forecasts were for A$807 million, and Simotas says the miss is likely due to weakness in the Treasury Premium Brands division. "Treasury should grow circa 20% in FY 2025 and with the challenged brands earmarked for divestment, we remain comfortable," Jefferies says. (david.winning@wsj.com; @dwinningWSJ)

0039 GMT - Treasury Wine Estates' fiscal 2025 guidance appears to depend upon an uncertain stabilization in the performance of its non-luxury portfolios, Citi analyst Sam Teeger says. He tells clients in a note that he doesn't think recent trends offer strong support for this assumption. The Australian wine producer's expectation of fiscal 2025 earnings between A$780 million and A$810 million also assumes strong top-line luxury growth. Citi has a last-published neutral rating and A$12.11 target price on the stock, which is up 1.65% at A$12.31. (stuart.condie@wsj.com)

0036 GMT - Orora's FY 2025 outlook commentary for its high-end glass bottle maker Saverglass was more upbeat than UBS had anticipated. Orora expects Saverglass's FY 2025 Ebit to be in line with the 2H run rate, and management thinks customers will stop running down bottle stocks early in 2025. "This is ahead of our expectations for destocking to continue through FY 2025, which remains a key uncertainty given persistently weak consumer volumes and ongoing industry destocking trends," analyst Nathan Reilly says in a note. Still, UBS remains cautious about Orora's ability to deliver EPS growth in FY 2025. "We look for evidence of improved trading conditions for Saverglass," Reilly says. UBS retains a neutral call on the stock. (david.winning@wsj.com; @dwinningWSJ)

0030 GMT - The earnings trough in FY 2025 that Origin Energy must get through before profits regain their pep over the medium term growth is deeper than Citi expected. Origin expects Energy Markets Ebitda of A$1.1 billion-A$1.4 billion in FY 2025, some A$100 million shy of Citi's expectations of A$1.2 billion-A$1.5 billion. Still, the bank retains a buy call on the stock, which is down 8.5% at A$9.70 today. "We have seen nothing today that suggests our thesis on Origin is incorrect, which is to say volatility in the National Electricity Market is increasing and Origin is the best placed player in the market to capture this," analyst James Byrne says. (david.winning@wsj.com; @dwinningWSJ)

0021 GMT - Origin Energy's share price falls some 8.9% to a three-month low of A$9.66 after profit guidance for its Energy Markets division disappointed. Origin says it expects Energy Markets Ebitda of A$1.1 billion-A$1.4 billion, representing a 13% miss to consensus expectations of A$1.43 billion at the midpoint of the range, Jarden says. Origin is feeling the sting of lower regulated tariffs, higher coal costs and moderating gas gross profit margins, partly offset by lower cost-to-serve and growth in customer accounts, analyst Nik Burns says in a note. (david.winning@wsj.com; @dwinningWSJ)

0020 GMT - Industrial property owner Goodman began the last fiscal year forecasting operating EPS growth of 9%. It then went on to raise guidance twice before achieving a 14% increase across FY 2024 as a whole. So, analysts are confident Goodman's maiden guidance for FY 2025 of 9% operating EPS growth isn't going to be its final word. Jarden analyst Lou Pirenc is tipping 11% growth, with consensus expectations even higher at 12%. "Operating metrics (work in progress, assets under management) are all slowing a little but we believe Goodman remains very well positioned to deliver 10-15% compound annual growth rate in operating EPS over the next few years," Pirenc says. Jarden is neutral-rated on Goodman. (david.winning@wsj.com; @dwinningWSJ)

2309 GMT - Commonwealth Bank's net interest margin was a key positive of the Australian major lender's FY24 result, say Goldman Sachs analysts Andrew Lyons and John Li in a note. But this was offset by some early signs of asset quality deteriorating, with the pressure on real households expected to drive this further, GS adds, as well as the potential for mortgage competition re-emerging. GS remains "sell" rated on the stock. (alice.uribe@wsj.com)

2307 GMT - Elevated rates, resilient credit quality and balance sheet growth provide near-term support for Commonwealth Bank, but margin pressures are likely to re-emerge when rates decline, Macquarie analysts say in a note. "We expect 1-2% revenue growth as the impact of rate cuts reduces CBA's margins and see limited upside to a broadly flat pre-provision growth trajectory in FY 2025-26," it adds. FY 2024 saw earnings decline by around 2%, with what it sees to be limited growth prospects in FY 2025-26, Macquarie says it "can't justify the current multiple." The investment bank says CBA remains very expensive, trading at around a 45%-70% premium to major Australian bank peers. (alice.uribe@wsj.com)

2305 GMT - CBA's FY 2024 result looked to have met investor expectations, but Citi analysts Brendan Sproules and Thomas Strong still see plenty of issues outside of management's control in the Australian banking sector. In a note, they say these include prospects of rate cuts on a larger deposit franchise and a quick pick-up in arrears in housing and personal lines. "Should the macro environment deteriorate, it provides management and the share price very little wriggle room to absorb any adverse impacts, and it seems the valuation is ascribing very little probability to any downside scenarios," says Citi which keeps its sell rating. (alice.uribe@wsj.com)

1101 ET - The European Union and Japan push for a $100 tax per tonne of CO2 emitted by ships, the first move by a wide bloc of countries to back a carbon levy before a key meeting by the International Maritime Organization, shipping's global regulator, that will decide on the matter in September. The EU-Japan proposal is seen as an effort to converge opposing views by China and the Pacific Islands. Beijing is against a specific levy while the Marshall Islands want a minimum $150 carbon tax. (costas.paris@wsj.com)

(MORE TO FOLLOW) Dow Jones Newswires

0530 GMT - Commonwealth Bank's FY 2024 results are broadly in line with Morningstar's expectations, with the earnings highlighting the Australian lender's quality aspects, analyst Nathan Zaia says in a note. Still, it is facing competition, which saw its full-year net interest margin slip 8 basis points to 1.99%, he adds. "This was marginally better than our 1.97% forecast, and the 1 basis point improvement on the first half 2024 supports our forecast for modest margin improvement over the medium term," says Zaia. He adds that over the next five years, Morningstar assumes rational competition when it comes to pricing loans and customer deposits, resulting in Commonwealth Bank's NIM rising to 2.05%. (alice.uribe@wsj.com)

(END) Dow Jones Newswires

4