0437 GMT - Insignia's balance sheet and free cash flows remain key concerns for Morgan Stanley analysts. They see the possibility of a near-term capital raising, although they reckon a dividend cut is more likely. At the same time, MS has concerns about the Australian financial company's new A$188 million pretax remediation provision increase, funded via existing debt facility and cash. The analysts think it's likely material and strains Insignia's balance sheet. While MS sees flows getting better from here it still expects consistent net outflows. MS cuts the stock's target price by 2.2% to A$2.25. Insignia is down 4.5% to A$2.65. (alice.uribe@wsj.com)

0228 GMT - Challenger's valuation looks fair versus the banks, say Morgan Stanley analysts in a note. They say that while longer product tenure and successful growth in longevity and retirement products could mean better return on equity in the future, competition in shorter-duration term deposits has been a recent headwind. Still, the retirement income covenant could also provide an opportunity, for example with tailored solutions similar to the Telstra Super deal. MS says its forecast for normalized earnings are up around 1.5% in FY 2024 on better net fee income and cost management. MS raises Challenger's target price 2.8% to A$7.40. The stock falls 2.0% to A$6.92. (alice.uribe@wsj.com)

0231 GMT - UBS analysts turn bearish on Australian broadcaster Seven West Media after slashing their expectations for growth in free-to-air TV advertising. Weak macroeconomic conditions move them to push back their forecasts for a recovery in metropolitan TV advertising to fiscal 2026. They now see the ad market shrinking 3% in fiscal 2025, well below their previous forecast for 7% growth. For Seven West, this results in a 6% cut to UBS's fiscal 2025 revenue forecast, and a 24% drop in Ebitda expectations. Broadcasters including Seven West are likely to keep cutting costs, the analysts say. UBS cuts its target price on Seven West by 39% to A$0.16/share and lowers its recommendation to sell from neutral. Shares are down 2.8% at A$0.175. (stuart.condie@wsj.com)

0223 GMT - CBA is on track to deliver around A$2.5 billion in cash earnings in 4Q FY 2024, says UBS analyst John Storey in a note. This assertion, coming ahead of the Australian lender's FY 2024 results, is based on its 3Q trading update and a pre-close meeting with management. UBS's 4Q forecast is around 2%-3% ahead of Visible Alpha consensus, but the investment bank still reckons 4Q could be a weaker quarter for CBA. This is despite an expected expansion in its net interest margin, which UBS thinks will be offset by around 40% quarter-on-quarter rise in expected credit losses. UBS has a sell rating on CBA. (alice.uribe@wsj.com)

0108 GMT - Bravura Solutions' improved earnings guidance is positive but it would be better if the Australian software developer delivered upgrades based on top-line growth, Macquarie analysts say. They tell clients in a note that Bravura's earnings continue to be supported by better-than-expected outcomes on costs. They point out that Bravura raised its fiscal 2024 Ebitda guidance to A$25 million from A$18 million-A$22 million, but still expects revenue for the period to remain broadly stable. Macquarie trims its target price 3.1% to A$1.26 and stays neutral on the stock, which is down 5.6% at A$1.105. (stuart.condie@wsj.com)

0059 GMT - AMP remains Morgan Stanley's preferred Australian wealth manager but sees that the company still needs to rebuild trust to re-rate. In a note, MS says that trading at around 10.5 times FY 2025 estimated price-earnings ratio, AMP seems compelling at first glance. But, MS reckons AMP needs to deliver for shareholders, and remains equal weight as it sees more upside and less uncertainty at other stocks. For FY 2024, MS' forecast for underlying net profit after tax rises 4%, and 3% in FY 2025 on stronger markets and better wealth flow prospects. (alice.uribe@wsj.com)

0045 GMT - The current trading multiples of Australian banks aren't supported by their growth and return profiles despite healthy balance sheets and capital management initiatives, say Morgan Stanley analysts in a note. "We have underestimated banks' re-rating potential this year. However, we believe share prices already reflect all the benefits of rate cuts, a soft landing and less competition," they say. At the same time, MS notes that on average, the major banks outperformed the Australian market in July. Among the majors, Westpac was the best performer and ANZ was the worst. The smaller banks, Bendigo, BOQ and Judo, also outperformed.(alice.uribe@wsj.com)

0041 GMT - Citi analyst Siraj Ahmed says U.S. tech giants' capital-expenditure plans support his buy rating on Australian data-center operator NextDC. He tells clients in a note that Google's higher-than-expected June-quarter capex is a positive demand signal for data centers more broadly, and points out that Microsoft has already been a been a key driver of NextDC's recent contracts. He adds that industry feedback points to broadening of demand, with Oracle and TikTok apparently looking to lease capacity. Ahmed does see some risk that NextDC could miss analysts' FY 2025 Ebitda expectations due to higher costs. Citi has a A$19.75 target price on the stock, which is down 2.3% at A$16.68. (stuart.condie@wsj.com)

0029 GMT - ResMed's 4Q earnings look stronger than expected once the impact of the breathing-tech developer's equity investment loss is stripped out, Citi analysts write in a note. They tell clients that 4Q adjusted EPS of US$2.08 is about 4% ahead of the average analyst forecast once the loss's US$0.10/share headwind is removed. Compared with analysts' expectations, they observe that revenue was in line, gross margin was wider, and operating expenses higher. Citi has a last-published neutral rating and A$30.00 target price on the stock, which is up 2.4% at A$33.17. (stuart.condie@wsj.com)

2355 GMT - QBE's premium rates are growing at a slightly slower pace, as the Australian general insurance market continues to roll off all-time highs, Macquarie analysts say in a note reviewing 18 offshore results for 2Q as a read-through for QBE. The investment bank sees that QBE is trading at a +6.5% premium to weighted international peers, which compares to a three-year average premium of about 2.8%. From this, Macquarie keeps its neutral recommendation on the stock. (alice.uribe@wsj.com)

2348 GMT - Current housing-market conditions in Australia are likely to persist through the rest of this year, Morgan Stanley expects. House prices in July rose by 0.5% on month, with growth in values of apartments and detached homes. "While an expected slowing in migration rates this year should reduce some of the underbuild, we do not expect enough of a decline to completely offset this, which should see prices somewhat supported," equity strategist and economist Chris Read says in a note. Affordability remains a key overhang to activity and construction, Morgan Stanley says, and this is unlikely to meaningfully improve until interest rates are cut. Morgan Stanley expects the RBA to begin lowering rates in May next year. (david.winning@wsj.com; @dwinningWSJ)

2340 GMT - Packaging company Orora loses a bull in Citi on signs that it is taking customers longer than expected to use up excess stocks. Analyst Samuel Seow says there are pockets of strength in cans and tequila, but "it appears the majority of Orora's end markets are still declining." So, Citi thinks Orora will find it hard to grow its earnings in FY 2025, or profit will be materially weighted to 2H. "Despite already material declines in the share price, we think the cycle has further to play out," adds Citi, moving to neutral from buy. (david.winning@wsj.com; @dwinningWSJ)

2333 GMT - Freight costs are shaping as a future headwind for Australian consumer stocks, reckons Jefferies. Analyst Michael Simotas expects sharply higher freight costs to compound the weak Australian dollar for retailers that import products directly, although they are unlikely to impact companies' FY 2024 results given contracted rates. "In our coverage, Wesfarmers, Super Retail and Harvey Norman are likely to be most impacted," Jefferies says. "JB Hi-Fi generally sources product from its suppliers domestically so is relatively unaffected." (david.winning@wsj.com; @dwinningWSJ)

2325 GMT - Pinnacle Investment Management's growth outlook remains attractive, say Macquarie analysts in a note. It sees that the Australian financial company also has the potential to add accretive M&A. For FY 2024, underlying net profit after tax beat Macquarie expectations by 5%, as Affiliate revenue growth delivered operating leverage, the investment bank says. At the same time, International distribution and Private market strategies are delivering FUM, with Macquarie saying "we expect Pinnacle's diverse affiliates, strategies, and asset classes, combined with distribution, will continue to support net inflows and operating leverage." Macquarie has an outperform call on the stock. (alice.uribe@wsj.com)

2323 GMT - Treasury Wine Estates and Endeavour are Jefferies's top picks ahead of Australia's corporate results seasons this month. Analyst Michael Simotas says risks around Treasury's FY 2024 result have been reduced by the vintner's recent reiteration of guidance, while a three-year outlook for its luxury Penfolds brand provides comfort on its longer-term growth profile. "Strong Wine Australia June quarter export data points to strong initial sales into China and we expect optimistic commentary on U.S. luxury outlook, with potential upside from separation of Treasury Premium Brands," Jefferies says. It thinks Endeavour has continued to take share from Coles, while its Hotels unit should be supported by gaming growth and changes to its menus. (david.winning@wsj.com; @dwinningWSJ)

304 GMT - MoneyMe's 4Q FY 2024 trading update looks in-line with Morgans's expectations for both revenue and book growth, says its analyst Steven Sassine in a note. He sees that asset quality looks sound, with the overall credit profile of the book improved. MoneyMe is continuing its broader strategy of originating higher credit quality loans, Morgans notes, saying this increases the secured portion of its loan book. The company's 4Q update sees Morgans make only marginal changes to its FY 2024 estimates. It says, while MoneyMe is now profitable, given the pivot of the business to a more moderated book growth rate, some near-term risks remain, including funding risk. (alice.uribe@wsj.com)

2247 GMT - Jefferies upgrades oOh!media to buy, from hold, as outdoor advertising shows continued resilience at a time of broad-based weakness in Australia's media sector. Analyst John Campbell highlights that outdoor advertising revenue is up 6% this year, compared with a 10% fall for television and a 4% decline by radio. "Outdoor year-over-year ad growth's been positive every month for the last 12 months excluding January," Jefferies says. "We're confident it will continue to outperform." Investors are awaiting an update on a contract in Auckland, but Jefferies is confident that oOh!media is in a good position to retain it. (david.winning@wsj.com; @dwinningWSJ)

2228 ET - Pinnacle Investment's FY 2024 result was strong, with underlying net profit and group funds under management ahead of consensus, say Wilsons Advisory analysts Tom Camilleri and Cameron Halkett in a note. Despite continued softness in domestic institutional flows, retail and international FUM continued, they say. "We continue to expect improved group profitability in FY2025 supported by smaller affiliates reaching scale and improved earnings diversification," Wilsons says, calling out affiliates Aikya and Longwave as potential good contributors.(alice.uribe@wsj.com)

(END) Dow Jones Newswires

August 02, 2024 01:02 ET (05:02 GMT)