0233 GMT - Life360's control of 1Q expenses dispels concerns that the location-tech developer would again start chasing growth at all costs, Ord Minnett analyst Lindsay Bettiol says. Bettiol writes in a note to clients that 1Q revenue rose 15% against the backdrop of a flat cost base. He sees the Australia-listed company's plan for a U.S. IPO as a positive, despite a lack of detail. He adds that investors should stay focused on Life360's core family safety offering rather than ventures such as that with satellite company Hubble. Ord Minnett raises target price by 9.7% to A$16.68 and keeps a buy rating on the stock, which is up 3.5% at A$15.64. (stuart.condie@wsj.com)
0115 GMT - Explosives maker Orica could record reliable earnings growth for several years, according to Morgan Stanley analysts Andrew Scott and Julianna Sick, who say the company's recent 1H result shows its strategy is bearing fruit. They keep an overweight rating on the stock and raise their target on Orica to A$21.50 from A$19.00. They expect Orica will benefit from price growth in domestic ammonium nitrate markets and a shift to higher-value products and services. "We continue to see re-rating potential as this plays out and [Orica] delivers solid earnings growth, likely an increasingly rare commodity in the next 12 months," the analysts say. Orica is down 0.7% at A$18.18, following a 3.3% gain last week. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)
0017 GMT - Fletcher Building should consider raising equity to shore up its balance sheet after warning on profits today, Citi says. Fletcher now expects FY 2024 earnings before interest, tax, and significant items of NZ$500 million-NZ$530 million. That represents a 10% miss to prior forecasts and reflects worsening market conditions, Citi says. "With rates higher for longer and the slower Fletcher exit rate, we expect there will also be material FY 2025 implications from this update," says Citi. "Given the potential quantum of the unknowns, we retain our sell rating and believe it may be prudent for a new CEO to shore up the balance sheet with a raise." Fletcher's stock is down 9.4% at NZ$3.18. (david.winning@wsj.com; @dwinningWSJ)
2346 GMT - WiseTech Global could increase its share of the landside-logistics market more quickly than investors expect, UBS analyst Lucy Huang says. She thinks that the Australian logistics software developer could grow landside revenues by an annual average 32% to A$1.4 billion by its 2032 fiscal year, compared with an average analyst forecast of 6% annual growth over the same period. WiseTech has invested significantly in landside logistics over recent years, and is launching new capabilities in this area in fiscal 2025, Huang adds. UBS lifts target price 9.8% to A$112.00 and reiterates a buy rating on the stock, which is at A$96.72 ahead of Monday's open. (stuart.condie@wsj.com)
2343 GMT - Location-tech provider Life360's investment in satellite company Hubble could be very meaningful over the medium term, Jefferies analyst Wei Sim writes in a note. He tells clients that there is a medium-to-high level of risk in investing in Hubble, which says it can track bluetooth devices, but that the impact could be significant. He observes that the investment is less than US$10 million and that Life360 has no plans to invest more. Jefferies lifts target price 1.2% to A$17.40 and keeps a buy rating on the stock, which is at A$15.11. (stuart.condie@wsj.com)
2326 GMT - Integrated Research's unexpected and positive trading update leads Bell Potter to raise its revenue and earnings forecasts for FY 2024-2026, while keeping its dividend outlook unchanged for now. Integrated Research now expects revenue of A$76 million-A$85 million in FY 2024, beating Bell Potter's prior A$73.7 million forecast. Its Ebitda guidance was also more bullish than expected. "We note the low end of the guidance ranges assumes only renewals whereas the high end includes risk weighted new contract wins," analyst Chris Savage says. Bell Potter now forecasts FY 2024 revenue of A$78.2 million and Ebitda of A$18.8 million. "We still forecast the resumption of dividends with a 0.5 cent final in FY 2024 but we have not upgraded our dividends forecasts despite the sizeable upgrades in earnings," Bell Potter adds. (david.winning@wsj.com; @dwinningWSJ)
2318 GMT - The nature of Xero's customer base means the Australia-listed cloud-accounting provider is unlikely to experience much of an impact from rising numbers of local insolvencies, Jefferies analyst Roger Samuel says. He tells clients that subscriber growth in Australia should remain strong even with insolvencies rising by 41% over the 12 months through March. He points out that a significant number of these companies operated in construction, which isn't a target market for Xero. He also thinks a proportion of insolvent companies had been previously propped up by Covid-era government stimulus. Jefferies raises its target price by 2.4% to A$150.95 and keeps a buy rating on the stock, which is at A$125.36 ahead of the open. (stuart.condie@wsj.com)
2317 GMT - Gold miner Evolution is likely to set higher FY 2025 production guidance than Macquarie analysts had anticipated, but likely higher cost guidance, too. At a recent sell-side roundtable, the miner signaled output would lift next fiscal year, implying FY 2025 output of at least 750,000 troy ounces, the Macquarie analysts say. However, Evolution also said FY 2025 all-in sustaining costs are likely face adverse pressure from labor and other cost inflation to the tune of around A$105/ounce, they say. Robust copper prices could help counter cost pressures. Macquarie lifts its gold-output forecasts but also its cost estimates, resulting in cuts to EPS expectations and a 2% reduction in its target price on the stock, to A$4.00/share. Evolution ended last week at A$3.84/share. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)
2307 GMT - Tough trading conditions for Baby Bunting prompt Macquarie to lower its margin expectations not only for FY 2024 but the following year, too. Macquarie now expects a gross margin of 36.9% in FY 2024, representing a reduction of 30 basis points on its previous forecast of 37.2%. "Further, we reduce our FY 2025 gross margin expectations to 37% (from 37.5%), with potential for ongoing price investment to improve volume in a tougher consumer environment," Macquarie says. The bank sticks with a neutral call on Baby Bunting, given cost-of-living pressures affecting families. (david.winning@wsj.com; @dwinningWSJ)
2303 GMT - De Grey Mining is likely to go above and beyond the A$800 million of debt that it needs to develop the Hemi gold project after completing a recent equity raise, Macquarie says. "A liquidity buffer above this amount would be prudent for an asset of Hemi's scale," the bank says. De Grey has signaled it could agree to a A$1.0 billion loan plus a A$100 million overrun facility, adds Macquarie, which has an outperform call on the stock. (david.winning@wsj.com; @dwinningWSJ)
2253 GMT - The sales slowdown at Super Retail's Rebel sports chain surprises Wilsons. "While at face-value Rebel like-for-like sales looked to have improved in March/April 2024, on a two-year stack growth has slowed from 9% year-over-year to 5%," analyst Tom Camilleri says in a note. That's puzzling, given Rebel has been upgrading stores to its new rCX concept. In February, Super Retail said around 20 stores are trading as rCX, or some 13% of total Rebel stores. Wilsons says the rCX program should theoretically be lifting sales/store by 1.5-2.0x. "Therefore upgrades may be having a lower impact in the current environment or non-rCX stores may be dragging down Rebel like-for-like sales," Wilsons says. (david.winning@wsj.com; @dwinningWSJ)
2244 GMT - Goldman Sachs takes a rosier view of Helia's earnings outlook following a positive 1Q result. In a note, analyst Andrew Lyons raises a forecast for Helia's FY 2024 EPS by 19.3%, citing lower total incurred claims given the continued benign environment and higher investment income. "While a low claims environment seems beneficial to earnings, to the extent that ROEs were to remain more than 20% from the continuation of benign conditions in the housing market, we believe this may increase the propensity for mortgage lenders to self-insure," GS says. That would be at the expense of Helia's future revenue growth, says GS, which retains a neutral call on the stock. (david.winning@wsj.com; @dwinningWSJ)
(END) Dow Jones Newswires
May 13, 2024 01:02 ET (05:02 GMT)
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