Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Citi Group insights: Australian market forecast

Published 21/05/2024, 09:35 am
© Reuters
CBA
-
ANZ
-
NAB
-
RIO
-
WBC
-

Investing.com - Analysts from Citigroup Inc (NYSE:C) have recently provided in-depth analysis on several Australian companies, highlighting potential market trends and movements.

Rio Tinto Ltd (ASX:RIO) shares have risen approximately 27% since the August 2023 lull. However, the company's deep discount to valuation is now diminished. Despite China's recent property easing measures, Citigroup analysts predict no significant support for steel demand, citing ongoing contraction in all property indicators and the return of loss-making steel mills in China. As we approach a period of seasonal weakness for mining equities, Rio Tinto Ltd has been downgraded to Neutral, with an unchanged target price of A$137.

Treasury Wine Estates Ltd (ASX:TWE) has several medium-term positive drivers. These include the potential removal of China's tariffs on Australian wine exports, upcoming Penfolds price increases, rising luxury wine availability, and potential divestment of the underperforming premium business. However, for a positive shift in outlook, better operating momentum in the core business is needed.

Aristocrat Leisure Ltd (ASX:ALL) reported EBITA of $1,027 million, outperforming both Citigroup and Visible Alpha consensus. The strategic review of digital assets removes a significant uncertainty over the stock. These assets, worth an estimated $1.7-$2.3 billion, could enable further capital management following the buyback extension. With a more benign outlook for D&D and UA, EBITA upgrades of ~5-8% are expected. The company maintains its Buy rating and has increased its target price to $53.00.

Gain critical insights using InvestingPro! Unlock access to AI-powered ProPicks, ProTips and more! Use coupon code INVPRODEAL and receive an additional 10% off!
InvestingPro Fair Value indicates 9.6% upside for ALL!

Bendigo And Adelaide Bank Ltd (ASX:BEN) provided a 10-month year-to-date trading update alongside its Pillar 3 release. It reported year-to-date cash earnings of $464m, down about 2% on the previous corresponding period. However, this figure is substantially above both Citigroup and VA consensus estimates. The bank's NIM of 1.87% for FY24 year-to-date implies a 2H24 figure of >1.90%, reflecting management's successful action to reprice deposits lower in November.

Finally, the recent bank results season saw significant near-term capital returns. This helped continue the rally in share prices, though the rate cut-led rally is waning. To sustain current share prices into the medium term, a return to sustainable core profit growth is essential. However, with tech costs set to drive banks' operating expense growth back above inflation, and core lending and deposit spreads expected to continue to decline, Citigroup analysts maintain a Sell call across the banking sector. Their new order of preference is Westpac Banking Corp (ASX:WBC), Commonwealth Bank Of Australia (ASX:CBA), ANZ Group Holdings Ltd (ASX:ANZ), then National Australia Bank Ltd (ASX:NAB), indicating a preference for retail banks over commercial.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.