0415 GMT - Whitehaven Coal has an array of options available to fund an acquisition of BHP's Daunia and Blackwater metallurgical coal mines, UBS analyst Lachlan Shaw says in a note. UBS assumes the mines sell for US$3.3 billion, estimating Blackwater alone is worth A$2.5 billion. The bank also thinks Whitehaven will partner with a customer or trading house that would fund 25% of any bid. "Based on these assumptions, we estimate Whitehaven could potentially fund the acquisition 50-70% cash requiring US$800 million-US$1.3 billion debt (A$1.1 billion-A$1.8 billion) with gearing 18-30% and completion FY25," UBS says. "These assets could lift Whitehaven's revenue share from met coal from less than 20% to 60%." (david.winning@wsj.com; @dwinningWSJ)
0404 GMT - Commonwealth Bank of Australia's enthusiasm for raising mortgage rates and ending cash incentives for new borrowers appears to have cost it customers, Jarden analysts say. They write in a note that volumes at Australia's largest bank fell in July, with broker feedback suggesting that pricing rather than service is to blame. They reckon that Westpac has been the key beneficiary, with sharper pricing and cash incentives helping lift volume growth to about three times the industry average. Westpac's improvement may require continued pricing efforts if that is to be sustained, the analysts add. (stuart.condie@wsj.com)
0403 GMT - An acquisition of Australia's Costa by Paine Schwartz Partners remains likely, despite the U.S. private-equity firm cutting its takeover offer by around 9%, Jarden says. Paine Schwartz's revised offer of A$3.20/share is its best and final proposal, having previously bid A$3.50/share. "We see a high probability of the deal proceeding, despite the cut, owing to significant downside post Costa's recent downgrade and weaker domestic pricing in recent weeks," analyst Ben Gilbert says in a note. "We continue to believe Paine Schwartz would be able to extract material synergies with respect to tech, genetics and general expertise" in agribusiness which, coupled with landholdings in Costa, create an attractive proposal, Jarden adds. (david.winning@wsj.com; @dwinningWSJ)
0339 GMT - Morgan Stanley analysts are increasingly confident that Premier Investments can keep its retail earnings margins above 20%. They tell clients in a note that while they see risks from intensifying cyclical headwinds, there are several factors working in the retail conglomerate's favor. They cite the accretive impact of Premier's growing online sales, margin resilience through the past three fiscal years, scale, and a mix shift toward its higher-margin Smiggle and Peter Alexander businesses. MS has an overweight rating and A$32.25 target price on the stock, which is down 1.0% at A$25.235. (stuart.condie@wsj.com)
0159 GMT - Analysis of Australian job ads suggests that project award momentum at engineering contractors Monadelphous and NRW is accelerating in the background, according to Citi analysts. They tell clients in a note that August job postings across Australia's west and its east coast were up 15% on-year, touching their second highest level so far in 2023. There has been a sequential improvement in volumes since June, which the Citi team sees imply a healthy pipeline of opportunities to be awarded over the near-term. Contractors' primary growth headwind remains labor capacity, they add. (stuart.condie@wsj.com)
0104 GMT - Perseus Mining's estimate of how much it will cost to develop the CMA underground gold mine at its Yaoure operation in Ivory Coast is well above Macquarie's prior forecast and yet the bank says it's not a surprise. Perseus estimates the development capital for the underground mine at US$131.7 million, some 63% higher than Macquarie's US$80.9 million forecast. "The higher-than-expected underground development costs do not come as a surprise due to industrywide cost inflation experienced in the mining sector," says Macquarie, which rates Perseus at outperform. (david.winning@wsj.com; @dwinningWSJ)
0056 GMT - While the performance of Evolution's Red Lake gold mine in Canada has been underwhelming, the operation appears to be stabilizing, says Macquarie following a site visit. "We see a pathway to sustainable production of 200,000 oz per annum," the bank says in a note. Red Lake produced 121,000 oz of gold at an all-in sustaining cost of A$2,620/oz in FY 2023, while guidance for the current fiscal year is 170,000 oz at an AISC of A$2,000/oz. "Evolution's past investment is starting to gain traction, in our view, including new management, equipment, methods, and more established mine development," says Macquarie, which has an underperform call on Evolution's stock. (david.winning@wsj.com; @dwinningWSJ)
0008 GMT - Affordability issues should increase customer churn at Australian general insurers and put pressure on incumbents' market share, Macquarie analysts say. They see OUTsurance Group-owned Youi's FY 2024 focus on claims inflation and cost control as a useful reference point for the broader Australian market, also noting the impact of supply chain issues and reinsurance renewals on risk appetite. Looking at incumbents IAG and Suncorp, the Macquarie analysts say in a note that IAG's underlying insurance trading ratio will be easier to improve than Suncorp's. (stuart.condie@wsj.com)
2207 GMT - Gold miner Silver Lake's purchase of an 11% stake in Red 5 is a logical move, Ord Minnett analyst Paul Kaner says in a note. That's because Silver Lake had previously done due diligence on the Leonora region of Australia as part of its pursuit of St Barbara assets, as well as the dearth of large scale, long-life opportunities in Western Australia's gold-mining sector. "We acknowledge that this now gives Silver Lake exposure to the broader Leonora consolidation, however, the end goal here is still unclear," Kaner says. If Silver Lake wants a controlling stake in Red 5, it's hard to see how this can be achieved without materially altering the balance sheet or diluting shareholders, he says. That's because Red 5's market value is around A$917 million. (david.winning@wsj.com; @dwinningWSJ)
(END) Dow Jones Newswires