Forum Topics News Summary DJ Australian Equities Roundup -- Market Talk 13 Feb 2023 15:24:20
one year ago

0419 GMT - IAG is anticipating its July 1 reinsurance renewal may be tough, says Chief Financial Officer Michelle McPherson. Speaking at an investor call after the Australian general insurer issued 1H FY 2023 results, McPherson says the company will be renewing a "significant" component of the aggregate program. "I wish i could say that its all done and dusted and were not going to face into a challenging 1 July renewal," she says. "I can't go into the commercial detail of various arrangements we have in place with our reinsurers, but clearly it's a challenging reinsurance market." She adds that IAG is pleased it has placed its catastrophe reinsurance program, but it expects some challenges with the aggregate placements, "as I would expect the industry will moving forward."(

0343 GMT - IAG's double-digit premium rate increases that it exited 2022 with, and which went beyond the Australian general insurers' original expectations, should start flowing through in its earnings pattern over the next six to 12 months, Chief Executive Nick Hawkins says. Speaking on an call with investors after handing down IAG's 1H FY 2023 earnings, Hawkins says the company is expecting more premium price increases in 2023. In the Direct Insurance Australia unit, which represents roughly half the company, IAG has been materially increasing risk pricing for the last six months, partly in response to the inflationary environment, with similar action being taken elsewhere in the business. "We're expecting more of that for the balance of 2023," says Hawkins. "There is significant price flowing through everywhere in our organization." (

0055 GMT - While AMP has a solid scale in Australia's wealth management sector, it's no longer the largest, and still faces a long journey to stabilize profits, say Morgan Stanley analysts. AMP's bank, for example, had a tough 1H FY 2022 on margins, but it could grow net interest margin by 11 basis points in 2H FY 2022 as higher cash rates more than offset competition on lending and funding, they say in a note. Still, long term the bank is sub-scale and lacks competitive advantage versus peers, MS says, even as a recent digital bank acquisition could help with customer acquisition technology. The investment bank adds that AMP is currently "not cheap." The stock is unchanged at A$1.32.(

0015 GMT - Endeavour's 1H earnings came in better than expected. In a note, Jefferies analyst Michael Simotas says Endeavour's A$364 million net profit represented a 13% beat, while EBIT was 11% higher than consensus forecasts. "The January trading update was solid, albeit with a slight slowdown in 3-year sales in Retail," Simotas says. "The market should take comfort from the Retail margin performance after the 2H22 disappointment." The drinks-and-pubs group's stock is up by 3.4% to a two-month high at A$7.05. Jefferies has a buy call on Endeavour. (; @dwinningWSJ)

0005 GMT - Investors should focus on JB Hi-Fi's three-year sales trends for a snapshot of the electronics retailer's underlying demand, Jefferies says after assessing the company's 1H results. "On this basis, sales have continued to slow, with a material degradation in the Good Guys, suggesting consumers are starting to pare back," analyst Michael Simotas says in a note. "The result itself was driven by strong gross margin offsetting cost deleverage, which we believe is unsustainable." Jefferies says the Australian business of JB Hi-Fi had three-year sales growth of 25.4%, below the 29.8% growth rate recorded for 2Q of FY 2023. (; @dwinningWSJ)

2355 GMT - Australian rail-haulage company Aurizon Holdings posted a very weak first-half result, with all segments of the business disappointing, RBC Capital Markets analysts say in a note. Ebitda reported for Aurizon's network, coal and bulks divisions were 10%, 16%, and 17% below RBC's estimates, respectively, the analysts say. Aurizon's interim dividend of A$0.07 disappointed as a result, with RBC having forecast A$0.103/share. Aurizon's stock is down by 8.9% early in Sydney, at A$3.36/share. (; @RhiannonHoyle)

2348 GMT - An Australian government review into the financial advice sector should be a medium-term positive catalyst for wealth managers Insignia and AMP, say Morgan Stanley analysts in a note. Still, in the short term, MS thinks there could be lower adviser numbers and a decline in practice profitability, although these may slow. Insignia remains MS' pick of the wealth sector due to its cost-efficiency abilities as it transitions to a simpler business model. MS is overweight on Insignia and says the stock offers compelling value. "Concerns over elevated cash burn on capex spend, below the line integration costs and some customer remediation payments are holding back the stock," says MS. "But we think these are more than in the price and risk-reward looks attractive from here." (

2344 GMT - BHP, the world's No. 1 miner, should report a sharp fall in 1H profit, and consequently declare a slimmer interim dividend, due to a pullback in commodity prices, according to Macquarie analysts. They expect an underlying profit of US$6.6 billion, down 39% on year, when BHP reports its 1H earnings on Feb. 21. They forecast an interim dividend of US$0.97, vs. record interim dividend of US$1.50/share a year ago. Still, that would be a solid result given changes in commodity prices, they say. "Capital spending and working capital movements could be swing factors and we believe are key to watch," say the analysts, adding that they will also be watching for remarks on BHP's Jansen project, coal-business plans and planned Oz Minerals takeover. (; @RhiannonHoyle)

2339 GMT - Recent weakness in mining shares should continue in the short term, but could provide a good chance for those bullish on miners' stocks to top up ahead of any fresh surge in prices, according to Jefferies analysts. "If history is a guide, these pullbacks are often followed by rallies to new highs, especially when in the midst of a structural bull market in the sector," the analysts say in a note. Their forecast of continued weakness for now is tied to an expectation that fiscal results and capital returns this earnings season will disappoint the Street and spark further profit-taking in shares that had been riding high on optimism around China's reopening. "For those with a 12-month horizon, buy now," they say. "For those looking for a tactical bottom, a more optimal entry point is likely coming." The analysts name Rio Tinto, Freeport-McMoRan and Glencore as their top picks for a recovery. (; @RhiannonHoyle)

2326 GMT - Whether Medibank's membership levels held up in the wake of a cyber attack last year will be top of mind for investors when the Australian health insurer reports its earnings later in February, say Morgan Stanley analysts in a note. At its AGM, Medibank said policyholder growth was 14,500 in the fiscal year through Nov. 12, which MS says was a small decline since the data breach commenced. The investment bank is modeling for 0.6% growth in policyholders for Medibank, noting that net growth of 14,500 across FY 2023 would represent 0.7% growth. Medibank previously withdrew its policyholder growth guidance of 2.7%. MS expects 1H total policyholder growth of 2.0%, compared to the 3.3% growth that was achieved in the previous year. (

2323 GMT - IAG's near-term margin guidance looks to be based on premium repricing claims inflation moderating, running yield pickup and no reserve strengthening, which UBS analysts reckon looks optimistic. They say in a note analyzing the Australian general insurer's 1H result, considering the scale and complexity of recent claims headwinds, the guidance drivers appear hopeful. The investment bank notes that all IAG's key metrics and guidance items are in line with profit warning delivered on February 3, with the market now focusing on the granular divisional drivers and timeframe for margin recovery. UBS notes that home and motor claims inflation was double-digit, against which repricing still appears to be lagging. UBS has a sell call on the stock. (

2318 GMT - Deterra Royalties is now fairly valued in the eyes of Morgan Stanley analysts. In a note, MS analysts trim their target on the Australian mining-royalty stock to A$5.10/share from A$5.25/share, citing softer-than-expected 1H iron-ore output from the BHP-run operations on which Deterra receives royalties. The analysts also downgrade the stock to equal-weight, or EW, from overweight, after some solid gains in recent months, they say. "Risk, both upside and downside to our EW call remains any bolt-on royalty acquisitions by the company which may change the earnings and valuation profile," say the analysts. Deterra last traded at A$4.87/share. (; @RhiannonHoyle)

(END) Dow Jones Newswires