OUR QUEST IS NOT TO BE BULLISH OR BEARISH, BUT TO CORRECTLY ASSESS FUTURE TRENDS

Macquarie rates CNU as Outperform

Chorus' FY26 earnings (EBITDA) met Macquarie's expectations with fibre growth and cost management offsetting the greater decline in copper.

The results support the analyst's view in management's transition to a simpler fibre-based infrastructure business. FY27 earnings (EBITDA) guidance of NZ$730m–NZ$760m encompasses earnings (EBITDA) forecast of NZ$746m.

Higher depreciation assumptions post the network revaluation result in a decline in EPS forecasts with DPS forecasts unchanged with underlying cash flow sustained.

EPS forecasts are lowered by –19% for FY27 to –35% for FY29 for depreciation plus higher effective tax rate.

The company is viewed as offering an appealing mix of infrastructure-like cash flows and a 7%-plus dividend yields with a forecast 30% total shareholder return based on the unchanged target price of NZ$10.26.

Outperform rating retained.

Citi rates TLC as Sell

Following continued soft like-for-like trends, and despite Powerball approaching a $60m jackpot, Citi cuts its target for Lottery Corp to $4.50 from $5.00 and retains a Sell rating.

The stock is also trading at a larger premium to the market than its historical average, prompting the broker to assume a lower PE premium to the ASX200 Industrials.

Downside earnings risk to consensus estimates is expected in FY27-FY28, with recent jackpot weakness continuing to weigh on trading.

While a larger Powerball draw could provide near-term support, Citi remains cautious on the broader earnings outlook.

Citi rates XRO as Buy

Following recent share-price weakness and ahead of first-half results on November 12, Citi cuts its target for Xero by -19% to $91.55 due to lower peer multiples. A Buy rating is maintained.

Current weakness is seen as a buying opportunity, with the analysts expecting strong top-line growth including Melio and potential upside to FY27 margins from cost control.

FY27-FY29 profit forecasts fall -3%-6% due mainly to higher interest costs following the NZ$700m buyback.

Citi forecasts FY27 earnings of $904m, towards the top of guidance, while Melio revenue is expected to grow 44% year-on-year in the first half.

A 90-day Upside Catalyst Watch for Xero stock has been implemented by the broker ahead of Xero's first-half result.