News SummaryDJ Australian Equities Roundup -- Market Talk16 Nov 2022 15:00:283 Views0133 GMT - The glow of positive 1Q net-interest income trends at Commonwealth Bank is somewhat diminished by higher-than-expected costs and credit impairments, UBS analyst John Storey says. Storey estimates that Commonwealth's 1Q net-interest margin increased by 25 basis points over 4Q of FY 2022, beating all other major bank rivals. He says in a note that rising interest rates are benefiting both deposit spreads and equity hedge balances. Yet, Storey notes that Commonwealth is building from a soft FY 2022 base that flatters its current performance, while A$2.9 billion in costs was slightly higher than anticipated. UBS maintains a neutral rating and A$100.00 target price on the stock, which is down 2.6% at A$103.75. (stuart.condie@wsj.com; @StuartLCondie)
0059 GMT - Commonwealth Bank's loan-impairment expense looks to be ramping up more quickly than Morgans analysts had anticipated. The lender's 1Q loan-impairment expense represented 10 basis points of its average gross loans and acceptances. The Morgans analysts say in a note that credit quality still looks strong but that they are now factoring in materially larger charges for FY 2023. They still assume that the loan-impairment expense will normalize to a long-run loss rate of 17 basis points of gross loans by FY 2024. Morgans maintains a hold rating on the stock and trims its target price 1.2% to A$93.48. Shares are down 2.3% at A$104.05. (stuart.condie@wsj.com; @StuartLCondie)
0047 GMT - HealthCo Healthcare & Wellness REIT said its latest transactions will boost FY 2023 earnings, but management only reaffirmed annual guidance for funds from operations of 6.8 Australian cents per security. That caught the eye of Morgan Stanley, which thinks it may be due to the cost of debt. In a note, analyst Lauren Berry says HealthCo REIT uses a Bank Bill Swap Rate of 2.7% in its guidance, whereas the spot rate is currently above 3%. (david.winning@wsj.com; @dwinningWSJ)
0039 GMT - United Malt's operational performance appears to be improving, says UBS, which expects 40% Ebitda growth in FY 2023 and 22% growth in FY 2024. Improved earnings, together with lower capex, utilization of a new factoring facility and likely lower barley prices should help United Malt reduce its leverage to within the 2.0X-2.5X target range in FY 2023. That compares to 5.0X in FY 2022. "In this context, we see value," analyst Apoorv Sehgal says in a note. (david.winning@wsj.com; @dwinningWSJ)
0030 GMT - Nine Entertainment's revenue growth appears a positive against the backdrop of what looks to be a softening overall ad market, Macquarie analysts say. A 9% increase in 1Q total TV revenue is at the upper end of the range Nine flagged in its August trading update, they say in a note. Nine expects 2Q total TV revenue growth in the low single-digits, which Macquarie analysts assume is driven by improved market share. Macquarie is neutral on the stock and trims target price by 5.9% to A$1.91 on higher publishing costs and lower listings expectations at property advertiser Domain, majority owned by Nine. Shares are unchanged at A$2.13. (stuart.condie@wsj.com; @StuartLCondie)
0027 GMT - Incitec Pivot's disclosure that it has received third-party interest in buying its Waggaman ammonia plant in Louisiana and decision to pursue a strategic review of the facility has UBS assessing how much the asset is worth. "We value the 800,000 ton/annum plant at circa A$2.5 billion and highlight its cost advantaged position on the global cost curve, its potential for blue ammonia production (CCS), and increasing replacement cost dynamics in the U.S. that support the valuation," analyst Nathan Reilly says in a note. UBS retains a buy call on Incitec's stock. (david.winning@wsj.com; @dwinningWSJ)
0020 GMT - While United Malt is worth materially more than its current share price, the company's earnings recovery will take time, Morgans analyst Belinda Moore says in a note. "The risk is if new management raise capital to deleverage the balance sheet and position United Malt to take advantage of new growth opportunities," Morgans says, which rates the stock at hold. Following United Malt's FY 2022 result, Morgans cuts its net profit forecasts for FY 2023-FY 2025 by 12%-31% to reflect higher net interest and tax. (david.winning@wsj.com; @dwinningWSJ)
0015 GMT - If Incitec Pivot proceeds with the sale of the Waggaman ammonia plant in Louisiana then the form that the transaction takes will affect its valuation, Morgans analyst Belinda Moore says in a note. "Given the energy crisis [leading to high ammonia prices] and the arbitrage [margins] this facility makes from having lower cost U.S. gas, it is a highly valuable facility," Morgans says. The bank notes that the facility's replacement value for insurance purposes is US$1.6 billion, equivalent to A$2.37 billion. "While Incitec will likely incur a significant tax bill associated with a transaction, we think the excess funds will be returned to shareholders," says Morgans, which rates the stock at add. (david.winning@wsj.com; @dwinningWSJ)
0009 GMT - The market is expecting too much from Seven West Media, Macquarie analysts say. They tell clients in a note that Seven's expectation of an 8% decline in 1H TV revenue against the backdrop of a smaller drop in the size of the broader market implies a fall in market share. This is to be expected given that Seven broadcast the Olympics in the prior year, they say. The Macquarie analysts also think that their discussions with ad agencies are supporting their prior forecast that the free-to-air ad market will decline by 10% over the 2023 calendar year. Macquarie cuts the stock's target price 18% to A$0.41, reflecting Seven's reduced share of a softening free-to-air TV market. It stays neutral on the stock, which is flat at A$0.45. (stuart.condie@wsj.com; @StuartLCondie)
2240 GMT - Despite recent evidence that job-vacancy numbers are falling across Australia, a survey by NAB shows business owners are still desperately seeking workers. The survey of 760 small and medium sized businesses in 3Q shows 38% feel labor shortages will affect business in a very significant way over the next three months. This is an increase from 35% in 2Q, the data shows. Those who expect the effect to be very significant in the next 12 months also rose, from 34% to 38% across the same period. (james.glynn@wsj.com; @JamesGlynnWSJ)
2139 GMT - Australia's 3Q wages data at 0030 GMT will likely reveal some acceleration in wage growth for workers, with economists expecting 3.0% growth on-year from 2.6% in 2Q. Such a result would be welcomed by the RBA, which has long wanted wages to grow faster. But it would not add much to risks around inflation, which is expected to peak in 4Q. The RBA looks set to continue tightening policy settings into next year, albeit any sharp upward move in unemployment could alter that outlook. ( james.glynn@wsj.com ; @JamesGlynnWSJ )
1136 GMT - Australian supply chains brace for chaos after the country's biggest tag operator will lock out its crews starting Friday over a three-year pay dispute. Svitzer, a subsidiary for shipping giant A.P. Moller-Maersk AS, said crews won't be allowed to tow ships in and out of Australia's 17 biggest ports, halting consumer goods imports and commodity exports such as coal and iron ore. Switzer enjoys a near-monopoly status as towage provider at ports such as Melbourne, Newcastle and Brisbane. "The shutdown affects people who work at ports, it then affects the truck drivers, it affects warehouses and ultimately you end up shopping at Christmas time and what you need on the shelves isn't there," Australia's Employment Minister Tony Burke said. (costas.paris@wsj.com)
(END) Dow Jones Newswires