0443 GMT - Top miners BHP, Rio Tinto, Glencore and Anglo American are expected to record a roughly 4% release in aggregate working capital in 2H 2024 versus 1H, led mainly be receivables, Citi analyst Ephrem Ravi says in a note. The companies' working capital tripled between 2019-2022 before declining in 2023 and edged a tad lower in 1H 2024 versus 2H 2023, according to Ravi. "Working capital build and release cycle tends to be pro-cyclical. Inventories and receivables usually build up as commodity prices rise and the miners' revenues increase" while "a retreat in commodity prices results in working capital release which frees up more free cash flow even as earnings normalize," he says. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

0201 GMT - Commonwealth Bank of Australia is showing a renewed enthusiasm for mortgages, says UBS analyst John Storey in a note looking at lending growth figures for July. He sees that the Australian major lender had yet another good month "highlighting their new views on the current pricing and economics of this product category." At the same time, Macquarie saw net book growth of almost A$2 billion month-on-month in July, which was 30% of the flow and growing at 5.4 times system. In business lending, NAB maintained a stable growth profile with CBA, ANZ and the regional lenders seeing their net books shrink month-on-month.(alice.uribe@wsj.com)

0146 GMT - Persistent revenue leakage at Platinum Asset Management, as well funds under management leakage looks to be persistent, says UBS analyst Shreyas Patel in a note. He thinks that the issue of poor investment performance in the Australian fund manager's core flagship fund product remains. "Until this turns around, Platinum's growth plans to launch new products and become a sub-advisory distributor appear odd," says UBS. It expects a structural decline in earnings to persist, and cuts its rating to sell from neutral.(alice.uribe@wsj.com)

0127 GMT - Australian banks' domestic mortgage growth was seasonally weaker in July, whereas household deposits were seasonally stronger, say Morgan Stanley analysts in a note. They note that Bendigo, ANZ and CBA grew mortgages above the wider system but eased to around 5%-6% in July, while mortgage portfolios contracted at both NAB (-1%) and BOQ (-6%). After averaging around 6% growth in 1H, Westpac's mortgage portfolio didn't grow in July. "We think this partly reflects the removal of cashbacks in June," MS says. Deposits, across the system for households, rebounded to an annualized rate of 25%, but MS notes that growth is generally stronger in July.(alice.uribe@wsj.com)

0045 GMT - Charter Hall stands out to Morgan Stanley as the best exposure to steadying valuations of Australian property. As asset values and cap rates stabilize, analyst Simon Chan thinks that should see transaction volumes and capital flows to commercial property recover. "After all, the reverse of this occurred over the last two years," MS says. The correlation of Charter Hall's price-to-earnings ratio to bond yields looks strong. "From an earnings-driver perspective, the return of transaction volumes, aided by the potential establishment of a new unlisted Diversified fund, as well as improvement in capital flows, could further drive the stock toward our A$15.80 price target over the next 12 months," MS adds. Charter Hall is up 0.4% at A$14.55 today. (david.winning@wsj.com; @dwinningWSJ)

0036 GMT - IDP Education's record share of the Australian student-placement market doesn't persuade Macquarie analysts to become more positive on the stock. They reckon that IDP has a 25% market share after making material gains but see nothing in its annual result to shift their view that average analyst forecasts are slightly optimistic. They tell clients in a note that there is plenty of competition for English-language testing and highlight IDP's comment that migration policy in its key markets tends to be linked to elections, which are scheduled for 2025 in Canada and Australia. Macquarie keeps a neutral rating and A$16.00 target price on the stock, which is down 0.5% at A$16.10. (stuart.condie@wsj.com)

2333 GMT - TPG Telecom's first-half result suggests to Goldman Sachs analyst Kane Hannan that the Australian company's mobile customers may be more sensitive to pricing than previously anticipated. TPG has blamed the loss of 87,000 Vodafone postpaid and prepaid customers on factors including aggressive handset discounting by rivals, but Hannan is uncertain. He tells clients in a note that the apparent underperformance of TPG's Vodafone brand could subdue future price rises. GS lifts its target price by 1% to A$4.40 but keeps a sell rating on the stock, which is at A$4.96 ahead of the open. (stuart.condie@wsj.com)

2321 GMT - Mineral Resources appears to have implemented a strategy that assumes lithium and iron ore prices stay at current levels for a short period only, suggests Goldman Sachs. At current commodity prices, GS estimates that all five of MinRes's mining assets are free cash flow negative. Analyst Paul Young says the Ashburton project likely will only be free cash flow positive sometime in the June half, assuming iron-ore prices average US$95/ton and a production run rate of more than 20 million tons/year. "If commodity prices decline further then we think MinRes may need to cut capex and opex further and potentially place Iron Valley and Mt Marion on care and maintenance," GS says. It has a neutral call on MinRes's stock. (david.winning@wsj.com; @dwinningWSJ)

2311 GMT - The potential for inconsistent work volumes over the remainder of 2024 keep Jefferies analyst Wei Sim from getting more positive on AI-training provider Appen. Sim tells clients in a note that the Australia-listed company's more diverse customer base and lower cost profile have positioned it to deliver earnings growth from any incremental revenues, but warns the road ahead still looks rocky. He recalls management's warnings that volumes could be inconsistent over the December half, and keeps a hold rating on the stock despite doubling his target price to A$1.20. The stock is at A$1.00 ahead of the open. (stuart.condie@wsj.com)

2311 GMT - Sandfire Resources could return to a net cash position by FY 2026, reckons Macquarie. That view assumes the miner doesn't commit to any capital expenditure at the Black Butte copper project in the U.S. Also, it requires base metals prices to remain strong, Macquarie says in a note. Sandfire ended FY 2024 with net debt of US$396 million, down some 8% on net debt of US$430 million at the end of FY 2023. Macquarie retains an outperform call on Sandfire and lifts its price target by 4% to A$9.80/share. Sandfire ended last week at A$8.63. (david.winning@wsj.com; @dwinningWSJ)

2305 GMT - Macquarie pares its earnings outlook for Ramsay Health Care after the private hospital operator's FY 2024 result signaled ongoing pressures in Australia and the U.K., as well as increased costs. In a note, Macquarie cuts its FY 2025 EPS forecast by 23%, with declines of 22% and 15% in FY 2026 and FY 2027, respectively. These reflect revised operational assumptions, higher net interest costs and a higher effective tax rate, Macquarie says. "While our nearer-term Australian forecasts capture reasonable revenue growth and incremental underlying operating leverage, ongoing digital investments are expected to constrain margin improvement," the bank says. "In other regions, we see degree of uncertainty in relation to future tariffs." (david.winning@wsj.com; @dwinningWSJ)

2300 GMT - TPG Telecom's falling postpaid mobile subscriber numbers leave the Australian telecommunications provider with limited room to maneuver on prices, Jefferies analyst Roger Samuel says. He is concerned that TPG lost 47,000 subscribers in the June half, a period in which rivals Telstra and Optus added 53,000 and 13,000, respectively. He tells clients in a note that the risk of churn and customers trading down to lower-priced brands limits TPG's pricing power. With the pace of fixed-wireless growth also slowing over the past year, TPG doesn't appeal to Samuel at its current valuation. Jefferies lifts its target price by 5.5% to A$5.40 and keeps a hold rating on the stock, which is at A$4.96 ahead of the open. (stuart.condie@wsj.com)

2254 GMT - Business lending is currently the bright spot for Australian banks, say Macquarie analysts in a note. Growth in the wider system is around 8% per year on a three month annualized basis, which the investment bank says is broadly consistent with what banks have been reporting. "While growth appears to have slowed in August, banks generally talked about solid pipelines, suggesting potential monthly volatility," says Macquarie. It reckons that if banks put more resources into business banking, there could be a lower outlook for returns. At the same time, anecdotally, there is more evidence of competition re-emerging, suggesting mortgage margins may decline, Macquarie adds. (alice.uribe@wsj.com)

2249 GMT - Goldman Sachs analysts Lisa Deng and James Leigh tell clients that Harvey Norman's annual profits were in line with expectations, but they flag ongoing concerns that comparable sales at the electronics and homegoods chain remain below key competitors such as JB Hi-Fi and Officeworks. Momentum in Harvey Norman's Australian business has improved recently and more innovation should benefit the consumer electronics category, but the Goldman analysts still see continued weakness in New Zealand and volatility in Asia as a risk. They keep their neutral rating on Harvey Norman shares. (mike.cherney@wsj.com; @Mike_Cherney)

(MORE TO FOLLOW) Dow Jones Newswires

2237 GMT - Manganese prices may be weak but history provides a useful guide for why now is a good time to pick up Jupiter Mines's stock, suggests Euroz Hartleys. In a note, analyst Trent Barnett highlights that Jupiter Mines has a long track record of being profitable and paying dividends. "Buying the stock when prices are closer to the bottom of historical range and waiting has historically being a good trading strategy, particularly when supported by valuation/dividend yield," Euroz Hartleys says. At spot manganese prices and FX rates, the bank estimates a sustainable dividend of 1 Australian cent/share annually. Jupiter Mines shares have halved in value since mid-May. (david.winning@wsj.com; @dwinningWSJ)

(END) Dow Jones Newswires

September 02, 2024 01:00 ET (05:00 GMT)