ASX 200 gains; Lendlease in $4bn offshore retreat; Star suitor proposes turnaround; Aust Vintage suspension

Australian Vintage extends suspension as Accolade ends talks. Star suitor proposed turnaround strategy. Restructure boosts Lendlease. Healius to offload Lumus. Neuren soars after drug trial. Cettire jumps.

The ASX 200 is set to rise after Friday’s sell-off. Picture Gaye Gerard.

Welcome to the Trading Day blog for Monday, May 27. The ASX 200 index closed 0.8 per cent higher at 7788.30 points, with the real estate sector leading the gains.

The Aussie dollar is trading around US66.40c.

Updates

5:14 pm May 27, 2024

ASX rebounds 0.8pc, led by property

Megan Neil

The ASX 200 index has closed 0.8 per cent stronger at 7788.30 points, with a positive lead from Wall Street helping the local bourse rebound from Friday's decline.

Trading was quiet ahead of public holidays in the US and UK tonight.

All sectors with the exception of energy finished in the green, with property leading the gains as sector major Goodman Group rose 2.3 per cent.

The strongest ASX 200 stocks were Neuren Pharmaceuticals, which shot up almost 16 per cent on the back of encouraging trial results for a treatment for the rate Pitt Hopkins syndrome, and Lendlease. Lendlease rose 8 per cent as the market welcomed its $4bn retreat from offshore markets and initial $500m on-market buyback.

The heavyweight financial sector helped boost the bourse, with the major banks up 0.8-1.1 per cent.

The heavyweight materials sector gained as BHP lifted 1.1 per cent. But iron ore majors Fortescue, down 1 per cent, and Rio Tinto, off 0.6 per cent, followed the iron ore price lower.

Elsewhere, Telstra rose 2.3 per cent.

3:02 pm May 27, 2024

Online retail sales accelerate: NAB

Megan Neil

Online retail sales growth accelerated in April, although consumers are cutting back on takeaway food and recreational goods, NAB data shows.

NAB's online retail sales index shows growth accelerated to 1.3 per cent in April, from 0.3 per cent in March.

A return to growth for the biggest category of homewares and appliances boosted the result, along with department stores. Sales of takeaway food, and personal and recreational goods, contracted.

"This is the second consecutive month where takeaway food has contracted, and the category has been relatively subdued since the start of the year," NAB chief economist Alan Oster says.

"This is in contrast to growth in the online grocery and liquor category, which has outpaced it.

"This may suggest consumers are becoming more focused on budget saving measures."

12:35 pm May 27, 2024

Fitch upgrades outlook on Aussie banks

David Ross

Global ratings agency Fitch Ratings has upgraded its outlook on Australia’s biggest banks, noting they were "nearing the completion of a build-up in loss absorbing capacity".

Fitch said it would upgrade ANZ, CBA, NAB, Westpac and Macquarie in light of their moves to pump up cash buffers ahead of any potential downturn. The banks were given a 'one-notch' upgrade.

"We believe the banks’ resolution plans will effectively protect third-party senior creditors in the event of failure,” Fitch said.

However, Fitch said it would extend the ratings uplift to any subsidiaries of the five banks, noting it was unclear if their qualifying junior debt was available to benefit senior creditors.

"This approach may change if it becomes clearer that the major banks’ resolution plans envisage support for their subsidiaries," Fitch said.

12:28 pm May 27, 2024 Highlight

Neuren shares soar after drug trial

David Rogers

Neuren Pharma shares jump to a three-month high as it NNZ-2591 drug shows promise its second Phase 2 trial to treat Pitt Hopkins Syndrome.

Wilsons Advisory reiterates its Overweight rating while lifting its price target 10pc to $30 as Neuren shares soar to $23.07 after its investor presentation.

"This data provides a second independent validation of NNZ-2591 as a potential treatment for cognitive impacts in orphan neurodevelopmental disorders," says Wilsons analyst Melissa Benson.

"As we have consistently noted, we assess the opportunity for NNZ-2591 to be at least five-fold that of DAYBUE owing to its superior tolerability and apparent efficacy profile with a strong intellectual property moat.

"The consistency of this data gives us conviction in the upcoming 3Q and CY25 readouts of NNZ-2591 in Angelman and Prader Willi syndromes, respectively, leading us to de-risk the Phase II programs. "

Dr Benson says this should elevate investor’s confidence in the reality of NNZ-2591 as a future blockbuster and appetite to reflect that in valuations.

NEU shares last up 10 per cent to $22.80.

12:26 pm May 27, 2024 Highlight

Aust Vintage extends suspension

Eli Greenblat

Australian Vintage has asked for its shares to remain suspended for another two weeks – despite advising investors an announcement on its trading performance would be made on Monday – as it seeks to organise a capital raising and debt restructure.

Australian Vintage, the maker of McGuigan and Tempus Two wines, has also announced that the nation’s second largest winemaker Accolade Wines has now walked away from its protracted merger negotiations, leaving the embattled winemaker without a merger partner and swimming in debt.

The struggling winemaker put its shares in a trading halt on Thursday as it prepared to make a trading update, due on Monday, however, that trading halt will need to remain until at least June 11 as the company seeks to raise cash and restructure its debt which has blown out to as much as $75m.

“Australian Vintage requests that the suspension continue until such time as Australian Vintage releases an announcement to ASX in relation to the proposed capital raising, debt refinancing and trading update, which is expected to be on or around 11 June 2024 and expects that the suspension will be ended by this announcement,” it said in a statement.

Australian Vintage has been in lengthy negotiations with the private equity owned Accolade, but the company announced also on Monday that on May 22 it received correspondence from Accolade via its advisors that it was “not in a position to continue discussions further at this time”.

Australian Vintage said in its update on Monday that its debt was expected to be in the order of $70m to $75m as at June 30. However, $15m of existing bank capacity is due to expire at the end of July 2024, reducing Australian Vintages bank capacity, including overdraft facilities, to approximately $78m.

12:11 pm May 27, 2024

ASX 200 up 0.7pc in broad rebound

David Rogers

Australia's share market ekes out a fresh intraday highs near midday as a broad-based rebound from a relatively sharp fall on Friday continues courtesy of a US rebound that cancelled what might have been a deeper reversal.

The S&P/ASX 200 index is up 0.7 per cent at 7784.2 after hitting 7790.3.

Property, consumer staples, communications, tech and financials lead gains.

Lendlease is up 9 per cent on its restructure and capital return plans.

Godman Group soars 2 per cent, CBA gains 1.2 per cent, Telstra tries to rebound, rising 1.3 per cent to $3.50 and BHP adds 1.1 per cent.

Neuren Pharma jumps 9 per cent as its drug trial shows promise.

11:42 am May 27, 2024

UBS cautious on Lendlease strategy

David Rogers

UBS also sounds cautious on Lendlease's strategy,.

While noting that the company is addressing key investor concerns around the unprofitability of its offshore construction and development businesses, UBS questions whether it will manage to get enough scale in Australia.

"Once the dust settles the key question is what is left in Australia, with the $13bn development pipeline currently lacking scale," says UBS analyst Tom Bodor. He notes that Mirvac's pipeline for reference is $31bn.

"Lendlease have pointed to a further $27bn of projects in early stages which will need to be converted if the business is solely focussed on Australia."

UBS stays Neutral with a $7.10 target.

LLC last up 9.1 per cent at $6.43.

11:22 am May 27, 2024

Ingenia lifts on trading update

Megan Neil

Ingenia Communities Group shares have risen after the rental and holiday accommodation provider says it is on track to reach the upper end of its annual guidance range.

Ingenia says it is on track to deliver its stated 2024 financial year guidance at the upper end of the range, targeting EBIT growth of 10-15 per cent and underlying earnings per share of 20.8c to 22.3c per share.

Two months into the job, Ingenia chief executive John Carfi says cost growth has been outpacing revenue growth but he has identified a number of opportunities to address that. "There has been good delivery of cost savings to date, but more efficiencies can be achieved, including further opportunities to drive cost reduction in the near to medium term," he says.

Insignia says its residential communities are continuing to deliver stable recurring rental income as the portfolio benefits from ongoing demand and high occupancy levels.

Its holiday parks continue to experience strong demand with a solid performance over the third quarter with forward bookings remaining elevated, the company says.

Insignia shares are up 3.4 per cent to $4.88, in a stronger overall market.

Citi analysts say the update with above consensus guidance should be seen positively. "The market has been waiting for more information on the new strategy, and while today’s update lacked details here, we believe the focus points highlighted by the new CEO may be received positively."

11:10 am May 27, 2024

Citi cautious on Lendlease strategy

David Rogers

Citi stays Neutral rated with a $6.90 price target on Lendlease as it expresses some caution over the time it may take the company to execute on its plans.

"Today's update is positive and in-line with broader expectations," says Citi analyst Suraj Nebhani.

"However, we continue to remain of the view that executing this strategy may take some time."

Lendlease's exit of international business will result in $1.15-$1.475bn of impairments and while FY24 EPS guidance was unchanged, that's pre-impairments and subject to completion of sale transactions, of which the Australian communities sale has been delayed already, Mr Nebhani notes.

LLC last up 8.7 per cent at $6.40 after hitting a four-week high of $6.47.

10:41 am May 27, 2024 Highlight

Star approached with turnaround strategy

Glen Norris

Brisbane developer Patrick Farrugia has revealed he made a "confidential non-binding indicative offer" to acquire certain assets of troubled casino operator Star Entertainment Group.

In a statement released on Monday morning, Mr Farrugia's private company HDI-BB said that in March in association with "well-credentialed international partners", it approached Star with a turnaround strategy for its NSW and Queensland assets, covering the casinos, hotels, entertainment, retail, and associated businesses.

The turnaround strategy included repositioning and rebranding assets with many well-known international brands, none of which were pre-committed at that time.

HDI said that it was confident, based on its existing relationships, that they would have an interest in engaging once the due diligence and regulatory issues of Star Sydney had been settled.

Star shares rose 22 per cent last Monday after Star said it had been approached by investors linked with global hospitality chain Hard Rock International. HDI said Monday that all discussions or negotiations with Star concerning the turnaround strategy and the proposal were conducted exclusively by HDI and Hard Rock was not involved.