0316 GMT - Insurance premiums offered by Australian general insurers are likely to rise by at least 10% through 2023, KPMG says in a new report on the sector. This is driven by an expectation of increasing frequency and severity of natural hazards, rising reinsurance costs, increasing inflation, supply chain issues and labor shortages, the consulting firm said."Improving resilience and thereby reducing the impact of extreme weather events on Australian communities is a key focus for the industry. This is seen as a must in ensuring insurance remains affordable to all, especially those who need it," says Scott Guse, KPMG Insurance Partner. KPMG's review found that for the 12 months to December, the Australian insurance industry made a profit of A$4.95 billion, up 42% from A$3.5 billion the previous year. (alice.uribe@wsj.com)

0128 GMT - The main battleground for Australian banks over the next few years is still the maturing of A$400 billion of fixed-rate mortgages, which represents 20% of total system residential mortgages, by December 2024, says UBS analyst John Storey in a note. At the same time, he thinks that the single biggest risk for Australian lenders is policy error and a too-aggressive rate-hike profile. UBS reckons that the market is now starting to price in a peak in interest rates and larger-than-expected cuts in 2024. (alice.uribe@wsj.com)

0112 GMT - It's going to be hard to get Liontown Resources's long tail of retail investors to back an Albemarle takeover without the support of the Liontown board, Citi analyst Kate McCutcheon says in a note. And "to get LTR's board to the negotiating table, we think the offer needs a bump," she says. McCutcheon raises Citi's target on the stock to A$2.80 from A$1.80, and above Albemarle's A$2.50/share bid. "ALB says it's all cash; just as well as a scrip deal would be a harder sell," says McCutcheon, adding that with "three offers to date and on-market share purchases, a counter bid seems likely." Liontown is up 1.6% at A$2.61/share, adding to Tuesday's 69% jump. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

0104 GMT - Goldman Sachs analysts will be looking for Seek to reiterate its FY 2023 earnings guidance at its investor day next week, despite ongoing volume headwinds. They think that the Australian jobs advertiser will say it's still on course for FY Ebitda of A$560 million, which compares with their forecast of A$561 million. They also anticipate updates to longer-term revenue targets. The GS analysts tell clients in a note that current market expectations are broadly in line with Seek's 2021 aspiration to double Australia, New Zealand and Asia revenues to A$1.52 billion by FY 2026. They don't expect Seek to provide margin targets, however. GS has a sell rating and A$22.60 target price on the stock, which is down 0.9% at A$23.14. (stuart.condie@wsj.com; @StuartLCondie)

0101 GMT - Australian banks may be sub-economically pricing their new mortgage business due to fierce competition in the sector, says UBS analyst John Storey in a note. "In recent times, due to the continued interest rate hiking cycle from the central banks, mortgage competition has become fiercer than ever," he says. Residential mortgages account for around 65% of total system loans, and around 45%-65% of net interest income for the banks, he notes. UBS estimates that new business is now being written at around 4%-5% internal rate of return, which is below the cost of capital.(alice.uribe@wsj.com)

0051 GMT - Malteries Soufflet's A$1.5 billion play for Australian processor United Malt is broadly consistent with historical takeover multiples for specialty agricultural-processing businesses, Wilsons analysts say in a note. They tell clients that Malteries Soufflet's A$5.00-a-share cash proposal implies that United Malt is worth 12X FY 2024 earnings, which they say compares with multiples of between 10 and 12 seen in prior takeovers. Wilsons raises the stock's target price by 39% to A$4.50 following Tuesday's 31% surge in United Malt shares. It maintains a market-weight rating on the stock, which is up 2.7% at A$4.62. (stuart.condie@wsj.com; @StuartLCondie)

0045 GMT - Latin America could become increasingly key to explosives maker Orica's earnings outlook, with the region having the largest exposure to "future-facing commodities" such as copper among its core markets, Macquarie analysts say in a note. "Orica expects LatAm explosives market to grow at 3.9% CAGR [metric tons] over the next 5 years, driven by growth in gold, copper and iron ore production and related explosives use," the analysts say. Latin America is already Orica's second-largest region by revenue, accounting for roughly 23% of group revenue in FY 2022, they say. Recently, Orica has reported improved earnings there as customer demand rebounds from pandemic lows, add the analysts. They have a neutral rating and A$16.00 target on Orica, which is up 0.3% at A$15.12. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

0040 GMT - Being a big bank in Australia matters, with the cost of funding rising faster than anticipated and competition for deposit pricing heating up, says UBS analyst John Storey, adding that regional lenders may not be able to keep up. "Intense competition on deposit pricing in the market should see the cost of funding for the Australian banks rise faster than we initially expected," he says in a note. UBS prefers more diversely funded banks, specifically those with a larger retail mix. UBS adjusts its net interest margin forecasts for the banking sector on aggregate, shaving 2-5 basis points off NIM.(alice.uribe@wsj.com)

0028 GMT - Recent events in the U.S. and Europe have lowered the confidence threshold of investors for banks in their portfolios, and Australia is no exception, UBS analyst John Storey says in a note. The ASX banking index is down around 6.5% in the year to date compared with the broader market, which is down 1.5%, UBS notes. The Australian banking sector is being affected by a range of dynamics, including funding costs, which are likely to move higher, fierce competition for deposit and higher-than-expected bad debts. On aggregate, UBS cuts its price target on banking stocks by around 18% to reflect some of these dynamics. (alice.uribe@wsj.com)

0022 GMT - Reliance Worldwide's valuation remains attractive to Macquarie analysts despite the macro headwinds facing the Australian plumbing supplies company. The analysts tell clients in a note that Reliance's premiumization of push-to-connect brass fittings and addition of expansion-based fittings to its Americas product line-up add to its organic growth potential and likely assist market penetration. The products open important new fronts for Reliance in new residential construction markets, they say. Macquarie maintains an outperform rating on the stock and lifts target price by 4.8% to A$4.40. Shares are up 1.6% at A$3.585.(stuart.condie@wsj.com; @StuartLCondie)

0010 GMT - Deposit rates offered by Australian banks are likely to continue to rise by more than the country's cash rate in the months ahead, say Morgan Stanley analysts in a note. This comes, its notes, against a backdrop of changing customer behavior, growing regulatory scrutiny and recent developments in global markets. Deposit price competition picked up in February and March, but average deposit costs relative to the RBA's cash rate are generally lower than in the past, says MS. Even so, the investment bank adds that the trend in the past few months shows that margin headwinds are emerging, and forecast the major lenders' margins will fall by an average of 1 bps half-on-half in 2H FY 2023 and 8 bps year-on-year in FY 2024. (alice.uribe@wsj.com)

2350 GMT - Australian jobs advertiser Seek has scope to reduce costs as local ad volumes ease from recent peaks, Jefferies analyst Roger Samuel says. Samuel tells clients in a note that Australian job ad volumes will likely fall 12% in 2H FY23 and 1H FY24, but that Seek should be able to offset the impact through ad yield growth, which has averaged about 10% over the past 10 years. Samuel will be looking for detail on cost structure at Seek's April 4 strategy day, noting that employee benefits represent 34% of revenue. That's significantly higher than online advertising peers Carsales.com and REA Group, he observes. Jefferies maintains a buy rating on the stock and trims its target price 4.3% to A$27.33. Shares are down 1.2% at A$23.08. (stuart.condie@wsj.com; @StuartLCondie)

2334 GMT - Albemarle's takeover campaign for Liontown Resources, if successful, would have broader implications for lithium markets, Canaccord Genuity analyst Reg Spencer says in a note. "Lithium equities have drifted over the past couple of months on the back of lower Chinese pricing, but the bid provides a piece of information on what a large scale lithium business might be thinking in terms of long-term prices," Canaccord says. Albemarle's bid is worth A$2.50/share, implying product pricing of US$1,750/ton. Canaccord thinks the bid is opportunistic given lower sector valuations recently. "It may also impact lithium markets as consumers think about the loss of an independent lithium producer and become concerned around project timelines," Canaccord says. "If this were the case, it may provide some support to pricing." (david.winning@wsj.com; @dwinningWSJ)

2314 GMT - Gearing of Australian reits would look uncomfortably high if cap rates expand and result in a spread versus 10-year bond yields in line with the long-term average, Morgan Stanley says. "Dexus would end up at circa 34%, leaving limited room to fund committed capex, Region would be at 41%, whilst GPT would get to 37%," analysts Simon Chan and Lauren Berry say in a note. Should that happen then assets sales, additional equity, or cancellation of projects may need to be considered to reassure equity investors who generally prefer conservative gearing, MS says. (david.winning@wsj.com)

2258 GMT - One reason why Jefferies thinks M&A in the lithium sector will accelerate through 2030: stricter control of new supply. "We believe the strategic rationale for keeping markets tight in the near term by controlling supply in a relatively small and illiquid market strengthen the incentives for acquisitions of existing or potential major sources of production," analyst Mitch Ryan says in a note. Albemarle is currently bidding to acquire Australia's Liontown Resources, although its proposals have been rejected as too low. If Albemarle succeeds with a bid, it could slow the development of Liontown's Kathleen Valley project "until the lithium market is more amenable to the supply volumes, similar to how it handled the Wodgina lithium mine in 2019," Ryan says. (david.winning@wsj.com; @dwinningWSJ)

2250 GMT - Albemarle's attempted takeover of Liontown Resources represents the first phase of the M&A cycle in lithium, Jefferies says. Elevated lithium prices are swelling miners' cash piles over and above what they need to develop their projects, analyst Mitch Ryan says in a note. "We are likely to see further M&A from market entrants (Rio Tinto, battery manufacturers, OEMs), and market consolidators over development and exploration projects," he says. "Producers can apply their skill sets in operating assets, and provide the funding to accelerate their development." Liontown yesterday said Albemarle's A$2.50/share bid was its third indicative since October, and all have been rejected as too low. (david.winning@wsj.com)

2244 GMT - Malteries Soufflet is likely to have a clear run at acquiring United Malt, Jefferies analyst John Campbell says in a note. Europe's largest commercial maltster is offering A$5.00/share to buy United Malt, or about A$1.5 billion, and Jefferies thinks that's a very good price. The bank doesn't believe there's any major impediment to the deal completing, although regulators may disagree and Malteries Soufflet could need to sell it sole plant in England to overcome any competition concerns. "We also believe it is unlikely there will be other bidders," Campbell says. (david.winning@wsj.com; @dwinningWSJ)

(END) Dow Jones Newswires

March 29, 2023 00:22 ET (04:22 GMT)