0326 GMT - Australian chemical and raw-material supplier Redox gets a new bull following its recent ASX listing, with UBS initiating coverage of the stock with a buy rating. UBS analyst Tim Piper points to Redox's 10% Ebit margin and medium-term return on invested capital of 22%, both of which are higher than peers. He tells clients in a note that both metrics look sustainable given Redox's scale and strong market position. He adds that many of Redox's end markets are benefiting from structural growth and likes the opportunity for the company to further expand in the U.S. UBS places a A$2.90 target price on the stock, which is up 0.4% at A$2.30. (stuart.condie@wsj.com)

0150 GMT - Orica is benefitting from a less competitive explosives market after many years of strong competition and low prices, says IML's portfolio manager Daniel Moore. "We're seeing really strong price growth in the explosive space, so we're seeing the outlook for margins, for Orica in particular, is really strong," Moore tells Dow Jones Newswires. The Australian fund manager favors stocks that aren't reliant on a strong economy or have come from a relatively poor environment historically, and sees Orica fulfilling these criteria. With Russian explosives out of the market because of the Ukraine War and the accompanying sanctions, the explosives environment is less competitive, Moore adds.(alice.uribe@wsj.com)

0126 GMT - Australian general insurers' profit margins are looking the best they have for some time, says IML Portfolio Manager Daniel Moore. The Australian fund manager is favoring stocks from industries that have emerged from a tough period, and sees that insurers, particularly general insurers, fulfill this criteria. "Insurance was really competitive over a number of years, and now given higher reinsurance costs, the industry is much more rational and we're seeing really strong premium growth," Moore tells Dow Jones Newswires in an interview. Insurers like Suncorp and IAG have "better pricing power and own their own distribution," he adds, noting their strong retail brands and capacity to get price renewals annually, allowing them to adjust for inflation. The direct nature of their businesses, which don't rely on brokers, is another attribute. (alice.uribe@wsj.com)

0111 GMT - Telix Pharmaceuticals' excellent cost control went unrewarded by the market following the radiopharmaceutical company's 2Q trading update, Wilsons analysts say in a note. The stock was heavily sold-off following the update, which the Wilsons' analysts say was perplexing. They highlight company commentary that volume-based discounts would become a factor for an imaging method known as PSMA PET/CT category but reckon that this is old news and unsurprising. The Wilsons analysts point out that 1H R&D cash expenses were A$48 million, in-line with FY guidance of A$100 million. Wilsons raises the target price 1.0% to A$13.13 and stays overweight on the stock, which is down 3.5% at A$10.02. (stuart.condie@wsj.com)

0102 GMT - SiteMinder needs to prove it can continue to control costs and simultaneously reaccelerate annual revenue growth toward its 30% target, Morgans analysts say. They initiate coverage of the hotel-commerce platform with a hold rating, forecasting strong double-digit revenue growth through fiscal 2027. Yet they remain cautious in the near-term amid a challenging macro environment. They point out in a note to clients that growth in revenue and annual recurring revenue both slowed in 2H fiscal 2023, a trend that they see continuing into 1H fiscal 2024. Morgans places a A$3.80 target price on the stock, which is down 3.7% at A$3.545. (stuart.condie@wsj.com)

0054 GMT - Premier Investments is cut to neutral from outperform by Macquarie's analysts, who see the retailer's Covid-era margin gains being unwound by rents and wages. They tell clients in a note that the retailer's increased proportion of online sales should help keep margins above pre-Covid levels, but that Ebit margins will nonetheless normalize from about 20% to 16% in fiscal 2024. Worries that macro conditions could further deteriorate are also an overhang on the stock, they add. Macquarie cuts the stock's target price 31% to A$21.00. Shares are down 2.0% at A$21.02. (stuart.condie@wsj.com)

0052 GMT - QBE's preliminary 1H FY 2023 update and reaffirmation of its FY 2023 guidance look net positive for the mid-term earnings outlook--driven by topline momentum and investment returns, says UBS analyst Scott Russell in a note. Still, he notes that shorter term, underwriting margins have been impacted by excess catastrophes and additional reserving for events last year. UBS reckons QBE stock remains cheap considering a consensus return on equity outlook of 16%-17% and relative to global peers' multiples. UBS keeps its buy rating. (alice.uribe@wsj.com)

0035 GMT - QBE's update, which pre-reported some 1H FY 2023 results, implies FY 2023-2024 consensus earnings upgrades, Morgan Stanley analysts say in a note. The update also suggests that QBE is managing its earnings volatility better, which could help with a rerating toward domestic general insurance peers. MS notes that QBE pre-reported modest negative impacts on its 1H combined operating ratio, but better-than-expected 1H premium and investments, plus reiterated its FY 2023 outlook for a COR of around 94.5%. "The latter is important as 1H negative impacts are around 0.5% drag over FY 2023, implying improving confidence in margin expansion," says MS, which has an overweight call on the stock. (alice.uribe@wsj.com)

0031 GMT - Zip Co.'s 4Q update shows the Australian buy-now-pay-later provider inching closer to profitability but concerns remain over its growth outlook in the current challenging macro environment, Jefferies analyst Roger Samuel says. He tells clients in a note that things look more positive now that Zip has neutralized cash-burn from its international operations and improved its balance-sheet position. Yet customer growth could be difficult to attain in the short-term due to weak consumer sentiment, he warns noting that customer numbers have stalled in the U.S. and domestically. Jefferies raises target price on the stock 10% to A$0.49 and lifts its recommendation to hold from underperform. Shares are unchanged at A$0.445. (stuart.condie@wsj.com)

0024 GMT - There is likely limited scope for Australian banks to re-rate from current levels, with the risk to near-term multiples skewed to the downside, say Macquarie analysts in a note. The investment bank reckons investors remain concerned with potential credit quality issues stemming from the economic slowdown. "We see risk of around 1-5% downgrades to consensus earnings in FY 2024 and to the extent these earnings downgrades will be bigger or smaller than the broader market will determine how banks perform in the short term." Macquarie is neutral rated on the banking sector and has NAB as its top pick, followed by Westpac, ANZ and CBA for the majors, and Bendigo over BOQ amongst the regionals.(alice.uribe@wsj.com)

2345 GMT - QBE's combined operating ratio and investment income preview for its 1H FY 2023 issued Thursday was worse than Macquarie analysts were expecting, they say in a note. But, the analysts also see that QBE's underlying business looks better, noting that the earnings preview included higher catastrophes and reserve strengthening, while also reiterating the FY 2023 COR outlook. "The 1H FY 2023 result has now de-risked. Focus now goes on 2H FY 2023 North American crop growing conditions and continuation of the premium rate cycle," Macquarie says. It has a buy call on the stock and keeps its target price unchanged at A$16.90/share. QBE was last up 2.4% at A$15.60/share. (alice.uribe@wsj.com)

2332 GMT - Monadelphous gets a new bull in Citi, which sees an improving outlook for its engineering and construction business. Citi raises its FY 2024 and FY 2025 Ebitda forecasts by 2.0%-2.25%, and says E&C contract award momentum could accelerate from here, driving better margins for Monadelphous. "We acknowledge that this is oxymoronic but given persistent uncertainty driven by labor shortage and inflationary pressure, we think customers are becoming more wary of deliverability of projects," analyst William Park says in a note. "This should translate to increased competition for constrained capacity in the industry as these projects cannot be delayed indefinitely, potentially improving clarity around Monadelphous's E&C revenue profile." Citi upgrades Monadelphous to buy from neutral.(david.winning@wsj.com; @dwinningWSJ)

2323 GMT - It could get worse before it gets better for Australian property stocks. Macquarie expects the U.S. to enter a recession in 2H, and typically an early contraction is a poor time to own reits, which have been the worst-performing sector on average historically. The bank notes that reits are trading on multiples above long-term averages, while facing headwinds including widening credit spreads and falling asset values. "Against this backdrop, we have a neutral rating for the sector over the remainder of 2023 and prefer defensives with earnings resilience and balance sheet strength," Macquarie says. Still, it says the sector's fortunes could turn in 2024 as monetary policy easing begins, likely from 2Q. (david.winning@wsj.com)

(MORE TO FOLLOW) Dow Jones Newswires

2321 GMT - Investors will be eyeing CBA's net interest margin in its upcoming FY 2023 results, with indications that some mortgage competition has eased, but deposit competition is accelerating, say Goldman Sachs analysts Andrew Lyons and John Li in a note. At the same time, term deposit rate increases look to be outpacing RBA cash rate rises. GS says it is keen to see how these market dynamics have impacted CBA's NIM so far, and what could flow through to 1H FY 204. GS also reckons this will have a flow through to the other bank's next set of results for the September year-end, as they could experience a fuller period of impact from these deposit spread headwinds. GS forecasts a final dividend of A$2.40 per share for CBA, versus Visible Alpha consensus of A$2.24 per share. (alice.uribe@wsj.com)

2312 GMT - Santos can move higher as overhangs over its stock are lifted, Macquarie says. In a note, the bank says Santos's Barossa natural-gas project remains paramount to a rerating of its share price. After resubmitting its drilling environmental plan to Australian regulators, Santos could get approval within months. That would enable it to resume drilling and pipe laying in 4Q, which Macquarie says would be a "material catalyst not only for Santos shares, but also others such as Woodside with Scarborough." In addition, Santos investors are waiting for the sale of a 5% stake in the PNG LNG project to complete. "A successful transaction would enable Santos to materially reduce gearing, and consider a new buyback," Macquarie says. (david.winning@wsj.com)

2305 GMT - CBA has the capacity to announce an additional A$2 billion buyback to be completed over FY 2024, say Goldman Sachs analysts Andrew Lyons and John Li in a note. Ahead of the Australian lender's FY results, GS says CBA's last reported CET1 ratio in 3Q FY 2023 came in at 12.1%, which implies a capital surplus of around A$4 billion. The investment bank sees that CBA is likely well-provisioned, with consumers seeming to be well-placed to handle higher interest rates. GS says it will be keen to get management commentary around capital management outlook. GS stays sell rated, but cuts its target price 1.8% to A$83.42/share. CBA was last up 0.6% to A$105.25/share. (alice.uribe@wsj.com)

2244 GMT - QBE's reaffirmation of guidance suggests the business is performing well, even while managing unexpected adverse events, say Jefferies analysts Simon Fitzgerald and William Richardson in a note. QBE on Thursday reaffirmed its FY 2023 combined operating ratio guidance, and increased its FY 2023 catastrophe allowance to $1.33 billion (previously $1.175 billion). Jefferies sees that, based on information in the update, COR for 1H is likely to be around 99.1%, inclusive of the impact of the $1.9 billion reserve transaction announced in February. But for the FY, Jefferies reckons the impact won't be significant and recorded within Net Insurance Revenue (AASB17). Jefferies has a buy call on the stock. (alice.uribe@wsj.com)

(END) Dow Jones Newswires

July 21, 2023 01:25 ET (05:25 GMT)