0247 GMT - Australian insurance brokers are likely to hand down "solid" 1H FY 2024 results, say Jarden analysts. They attribute this view to the fact that ongoing commercial rate rises add to strong organic growth, which is further enhanced by acquisitions for AUB and Steadfast. Still, there are questions about the sustainability of commercial rate rises, says Jarden, so this will be more of a focus going forward. It reckons AUB offers greater EPS growth support partly from Ebitda margin expansion. (alice.uribe@wsj.com)

0226 GMT - There could be consensus EPS risks for Australian asset managers Perpetual and Platinum in their 1H results, Jarden analysts say in a note. This, they add, reflects lower revenue margins and higher costs. By comparison, Magellan's expected 1H profit before tax is in line with consensus, while Challenger's normalized profit before tax looks to remain on track for FY 2024 guidance, with robust capital coverage despite property revaluations. Still, despite potential consensus EPS risk, Jarden says it favors Perpetual within the asset managers for potential strategic divestment valuation catalysts. It is also positive on Challenger, given structural retirement growth tailwinds. (alice.uribe@wsj.com)

0146 GMT - Costs are likely to be in the spotlight for the Australian wealth-management sector during the upcoming reporting season, say Jarden analysts in a note. For AMP and Insignia, the investment bank reckons progress on strategic cost initiatives will be key to both companies' ability to drive medium-term EPS growth, given continued outflows. For wealth-platform companies Hub24 and Netwealth, there may be some risk to 1H FY 2024 Ebitda margins, even though funds-under-administration updates have shown a return to stronger flows recently. This is partially due to 1H cost-growth skews, says Jarden. (alice.uribe@wsj.com)

0121 GMT - Australian private health insurers may see margin risks more skewed to the downside in the future, with rising affordability pressures driving greater government premium rate scrutiny, say Jarden analysts in a note. Ahead of reporting season, the investment bank says that while Medicare data suggests claims activity continues to recover, it expects "robust" 1H FY 2024 net margins. This is due to contractual inflation lags, expense efficiencies and strong growth in higher-margin overseas books. Jarden prefers Medibank over rival Nib due to lower inflation guidance. Overall, the investment bank expects private health insurers to deliver solid results this earnings season, though it reckons momentum may moderate into FY 2025. (alice.uribe@wsj.com)

0117 GMT - Australian general insurers appear well positioned for wider underwriting margins, say Jarden analysts in a note previewing coming results. Jarden expects QBE to meet FY 2023 combined operating ratio guidance given stronger underlying CORs and benign catastrophe events evident across its U.S. peer's results. The stock could potentially re-rate should FY 2024 guidance meet market expectations, it says. For Suncorp and IAG, strong home and motor premium rates should signal FY 2025 upside risks, particularly for the latter. Suncorp faces risks to sustaining reserve releases at 1% of net earned premium, Jarden says and raises the stock's target by 1.0% to A$15.25. Suncorp is up 0.8% at A$14.21.(alice.uribe@wsj.com)

0108 GMT - Nick Scali secures a new bull at previously bearish Jarden, where analysts see the Australian furniture retailer taking market share and maintaining its expanded margins through the medium term. They tell clients in a note that Nick Scali's 1H results provided evidence that sales have passed a cyclical low and soothed fears that rising freight rates might eat into margins. Strong cost management and a 1H net profit that was 7% ahead of Jarden's forecast move the analysts to raise their recommendation to overweight from underweight. They lift the target price 33% to A$13.87. Shares are up 5.2% at A$14.72. (stuart.condie@wsj.com)

0058 GMT - Microbia Life Sciences looks undervalued to Morgans analyst Iain Wilkie, who sees it benefiting from healthcare professionals' increasing awareness of the importance of gut health. Initiating coverage of the stock with a speculative buy rating, Wilkie tells clients in a note that he likes the look of the global diagnostic partnerships established by Microbia, which specializes in gut-health testing and therapeutic development. ASX-listed Sonic Healthcare is a major shareholder. Microbia offers a compelling opportunity for long-term investors as it progresses clinical-stage drug development and the role of gut microbiome across a range of conditions is better understood, he reckons. Morgans places a A$0.35 target price on the stock, which is flat at A$0.165. (stuart.condie@wsj.com)

0008 GMT - NAB's announcement of a new CEO to succeed Ross McEwan, who is retiring, demonstrates to peers how to achieve a successful leadership transition, say Citi analysts in a note. "Other banks have higher-profile CEO searches under way, yet NAB's process has escaped public speculation," says the investment bank. NAB announced Wednesday that Andrew Irvine, NAB's group executive business and private banking since 2020, would replace McEwan April 2.Citi reckons in all likelihood Irvine was probably hired by the board with a view to the top job, and sees the appointment as positive. Still, Citi adds that given the strong support McEwan has garnered from NAB's investor base, "the bar has been set very high" for Irvine.(alice.uribe@wsj.com)

2357 GMT - CSR gets a new bear in UBS, which says its share price ignores the risk that building materials volumes will decline by double digits in FY 2025. Like many suppliers, CSR's building materials sales were supported by stimulus during the pandemic that has now waned. In a note, analyst Lee Power highlights that detached housing approvals have consistently run 10% below 10-year averages. UBS also thinks that weakness in housing demand, along with so-called 'alterations and additions' work, is unlikely to be offset by strength in other areas of construction. "We still see the next EPS move as down which in our view means risk/reward is skewed to the downside," says UBS, moving to sell from buy. (david.winning@wsj.com; @dwinningWSJ)

2348 GMT - There is unlikely to be a dramatic strategy change or any financial deck clearing when current NAB CEO Ross McEwan departs, says Jefferies analyst Matthew Wilson in a note. The Australian lender Wednesday announced that Andrew Irvine, NAB's group executive business and private banking since 2020, will replace McEwan on April 2. Jefferies reckons McEwan "ran a tight sagacious ship," and says will leave NAB in the "best shape it's been in well over 20-years." Jefferies reckons there could be some level of executive refreshment. This year is shaping up to be the year of major bank CEO succession as "long tenured CEOs with peak share price performance and core profit performance," work against an uncertain macro outlook, it adds. (alice.uribe@wsj.com)

2343 GMT - Packaging company Amcor's profits are being protected by reduced interest expenses and tight cost control, even as volumes deteriorate, Jarden says. Amcor's 1H net interest expense of US$153 million was some 5.5% below Jarden's estimate and compared to consensus forecasts of US$162 million. "We note that whilst the company have maintained FY 2024 Core EPS guidance, this will be assisted by a 2% reduction in the net interest outlook for FY 2024," analyst Jakob Cakarnis says. Amcor expects 3Q EPS to be down in the mid-single digits, before improving in 4Q, which Jarden says introduces some risks to the outlook if conditions remain weak. (david.winning@wsj.com; @dwinningWSJ)

1832 ET - Australian mall owner Region has plenty of options to make use of its balance-sheet strength, Morgan Stanley says. Proforma gearing of around 31% is at the lower end of the company's 30-40% target range. In a note, analyst Simon Chan says Region has "flagged that developments, acquisitions and buybacks are all possibilities, although it may want to see cap rates/yields increase further before doing more deals." Chan points out that Region didn't state how long or how deep its stock would need to trade below net tangible assets for a buyback to happen. And while acquisitions remain on Region's radar, Chan says the "bid-ask spread in the last half was still as wide as 10-15%, so deals may not be imminent." (david.winning@wsj.com; @dwinningWSJ)

2331 GMT - BWP Trust's gearing is one of the lowest in the Australian property sector, but Jarden thinks the Reit has yet to feel the full pain of interest rates rising at unprecedented clip in the pandemic's aftermath. BWP Trust today reported gearing of 17.1% at end-December, up from 15.8% six months earlier, while its cost of debt was 4.2%. In a note, analyst Lou Pirenc said both metrics were in line with expectations. "Given the hedge profile of BWP, we expect the impact of rising rates will come through further in FY 2025/26," says Jarden, which has an underweight call on the stock.(david.winning@wsj.com; @dwinningWSJ)

1828 ET - James Hardie's relatively large exposure to the U.S. makes it UBS's pick of Australian building-materials suppliers ahead of a raft of company earnings reports. Analyst Lee Power tells clients in a note that recent channel checks indicate that U.S. volumes are likely to keep recovering from a weaker 2023. Power says the downturn in the Australian market looks set to be less severe than first feared, but that a fall in building approvals numbers and planning regulations mean that some trend reversion is inevitable. UBS lifts target price 17% to A$68.70 and keeps a buy rating on the stock, which is down 0.6% at A$59.23. (stuart.condie@wsj.com)

1821 ET - Janison Education's new A$45 million contract supports Bell Potter analyst Olivia Hagglund's positive view of the education testing provider. She had already expected Janison to announce new deals and lifts her revenue forecasts for fiscal 2025 and 2026 by 4% and 5%, respectively, on the five-year contract with Australia's New South Wales state. However, she tells clients in a note that the services provided are low-margin and makes no change to her A$0.55/share target price. Bell Potter keeps a buy rating on the stock, which is up 4.0% at A$0.39. (stuart.condie@wsj.com)

1718 ET - The sluggish pace of Nick Scali's store rollout concerns the Australian furniture retailer's newest bull. Citi analysts raise their recommendation on the stock to buy from neutral, lifting their earnings forecasts on improved margin expectations for its Plush subsidiary. They are also incrementally more positive on the domestic housing market and the medium-term outlook for retailers. Yet they warn that higher interest rates and higher rent demands appear to be curtailing efforts to open new stores, which looks like a risk to their medium-term forecasts. Citi lifts target price 12% to A$15.55. Shares are at A$14.00. (stuart.condie@wsj.com)

1646 ET - There's a modest chance that Australian mall owner Region will beat its FY 2024 earnings guidance, says Jefferies. Region yesterday said it continues to expect annual adjusted funds from operations of 13.7 Australian cents/security and FFO of 15.6 cents/security. In a note, Sholto Maconochie highlights that Region's interest expense is likely to fall in line with slightly lower debt costs in 2H. That reflects a lower bank bill swap rate and reduced net debt resulting from asset sales. Also, Region's comparable net operating income growth is set to improve to 4.0% in 2H, from 2.2% in 1H, due in part to higher occupancy, Maconochie says. Jefferies retains a hold call on Region's stock. (david.winning@wsj.com; @dwinningWSJ)

0429 GMT - Following RBA commentary and economic projections that were a touch more hawkish than expected, Capital Economics worries its forecast of a May interest-rate cut is premature. The RBA said it isn't ruling out a further hike, and that any decision will depend on data and the evolving assessment of risks. That language was little changed from statements given at the conclusion of other recent RBA meetings. "For what it's worth, the RBA's forecasts are based on the technical assumption that the bank won't lift rates any higher," economist Abhijit Surya says. They also account for a gradual easing of monetary policy from 2H. "But it now looks increasingly unlikely that the RBA will start cutting rates by May, as we have been predicting," Surya says. (david.winning@wsj.com; @dwinningWSJ)

(END) Dow Jones Newswires

February 06, 2024 23:00 ET (04:00 GMT)