Daily Brief Australia: BHP Group Ltd, Cash Converters Intl, S&P/ASX 200, Canyon Resources, Insurance Australia, Suncorp, Westpac Banking, Woodside Energy Group , ADX Energy Ltd, Woodside Petroleum and more

• Press reports indicated that China could temporarily suspend purchases of BHP’s iron ore from Jimblebar, which could account for a mid-single digit percentage of revenue
• The UK press reported Geraldine Slattery will likely be BHP’s new CEO, who currently heads BHP’s Australian operations and has over three decades with the company
• BHP is 4% above our DCF, its 2.8x P/B is not clearly excessive or attractive, and we see risks to iron ore, copper and coal prices from a broad slowdown

• Cash Converters International (ASX:CCV) is a consumer finance company operating as a service provider, owner and franchisor of second-hand goods and financial services stores in Australia and internationally.
• CCV is currently executing a clearly stated growth strategy involving the reshaping of its personal finance business complemented by growing its corporately-owned store network through acquisition.
• The recent FY25 result was a strong representation of a business that is successfully transitioning and a good leading indicator of the changing business mix which should ultimately result in a business that is geographically broadened yet operating a simplified lending business, with a lower risk profile and improved growth funding optionality.

• As previously forecasted, the S&P/ASX 200 (AS51 INDEX) ended its rally at the end of August/early September.
• The index has corrected for the past 3 weeks and is now very oversold according to our models.
• In the last 3 days the index has been showing some momentum, this insight will try to target potential profit targets for the next 2-3 weeks.

• Canyon Resources (CAY AU) is looking to raise around US$132m in a primary placement.
• The company will use the proceeds to fund capital expenditures, as well as increase its stake in the railway line serving its mine in Central Africa’s Cameroon.
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• Market Leader with Strong Brands: IAG is the largest general insurer in Australia and New Zealand, possessing a portfolio of trusted brands such as NRMA, CGU, and NZI, which provides a significant competitive advantage and customer loyalty.
• Favorable Pricing Environment: The company is benefiting from a favorable pricing cycle, with premium rate increases driving top-line growth and improved insurance margins, which is expected to continue supporting profitability.
• Significant Catastrophe Risk Exposure: IAG’s earnings are inherently volatile due to its high exposure to natural peril events, such as floods, storms, and bushfires, which can lead to substantial claims costs and pressure on profitability.

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• Pivoting to a Pure-Play Insurer: Following the sale of its banking arm to ANZ, Suncorp is now a dedicated trans-Tasman insurer, simplifying its business model and focusing on its core competencies in general insurance across Australia and New Zealand.
• Strong Market Position vs. Headwinds: Suncorp is the second-largest non-life insurer in Australia and New Zealand, boasting strong brands like AAMI and GIO. However, it faces significant challenges from increasing natural hazard costs due to climate change, rising reinsurance costs, and growing competition.
• Capital Management and Shareholder Returns: The bank sale has unlocked significant capital, with a large portion intended for shareholder returns through buybacks and special dividends. Future profitability and dividend stability will heavily depend on disciplined underwriting, managing claims inflation, and navigating the volatile weather environment.

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• Established Market Leader with Resilient Earnings Power: Westpac is one of Australia’s ‘Big Four’ banks, commanding a significant market share in mortgages, business lending, and deposits. This entrenched position, supported by a multi-brand strategy, provides a stable customer base and consistent revenue streams. Despite regulatory headwinds and competitive pressures, the bank has demonstrated robust financial performance and an ability to generate returns above its cost of equity through the economic cycle.
• Focus on Digital Transformation and Cost Management to Drive Future Growth: In response to evolving customer preferences and the rise of fintech, Westpac is making substantial investments in digital technologies to enhance customer experience and operational efficiency. A key strategic priority is a cost-cutting initiative aimed at improving its cost-to-income ratio, which is crucial for sustaining profitability in a competitive market.
• Navigating a Challenging Macroeconomic and Regulatory Environment: The bank’s performance is closely tied to the health of the Australian and New Zealand economies, including interest rate fluctuations, inflation, and the housing market. The highly regulated nature of the financial sector presents ongoing compliance costs and the risk of penalties. Navigating these external pressures while managing credit quality will be critical for future success.

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• Woodside Energy is a leading global energy provider, significantly strengthened by its 2022 merger with BHP’s petroleum business, making it a top-10 global independent energy company and the largest on the Australian Securities Exchange (ASX).
• The company’s strategy is heavily focused on the development of major Liquefied Natural Gas (LNG) projects, particularly Scarborough in Western Australia, to meet the growing long-term demand for natural gas in Asia and other global markets.
• While committed to shareholder returns through dividends, Woodside faces significant risks from volatile commodity prices, substantial capital expenditure on growth projects, and increasing pressure from investors and regulators regarding its climate strategy and emissions.

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• • The Upper Austrian State Administrative Court has rejected objections from environmental activist groups regarding drilling and testing at Welchau.
• The court confirmed that Environmental Clearances were issued in full compliance with applicable regulations.
• • ADX is now authorized to resume operations at the Welchau-1 site during the winter drilling window, spanning 1 October to 31 March.

• Global LNG Powerhouse with a Diversified Portfolio: Woodside is a leading global energy provider, and Australia’s largest independent oil and gas company, with a strong portfolio of assets in Australia, the Americas, and Africa. The company’s recent acquisition of Louisiana LNG has positioned it as a global LNG powerhouse, complementing its established Australian LNG business.
• Commitment to Growth and Shareholder Returns: Woodside is actively pursuing a number of major growth projects, including the Scarborough Energy Project, Trion, and Louisiana LNG, which are expected to significantly increase production and cash flow in the coming years. The company has a strong track record of returning value to shareholders through dividends, with a payout of over US$9.7 billion since the merger with BHP’s petroleum business in 2022.
• Navigating the Energy Transition: Woodside is focused on developing a low-cost, lower-carbon, and diversified portfolio to thrive through the energy transition. The company is investing in new energy projects, such as hydrogen and ammonia, while also working to reduce emissions from its existing operations.

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