Azzet reports on three ASX stocks with notable trading updates today.
IAG lifts on RACI acquisition
Shares in IAG (ASX: IAG) were up around 4% at the open after the insurer announced it was entering into a strategic alliance with the Royal Automobile Club of Western Australia (RAC), acquiring 100% of RAC Insurance (RACI) for $400 million.
IAG will pay a further $950 million for long-term distribution and brand licensing rights, giving the deal a total value of $1.35 billion.
The deal includes a 20-year exclusive distribution agreement to provide RAC-branded general insurance products for the Perth-based insurer’s 1.3 million members.
On completion, the acquisition is expected to add around $1.5 billion to IAG’s gross written premium of around $8.4 billion.
Due to reinsurance and operational efficiencies, the deal is expected to result in around $100 million in synergies for IAG and be earnings accretive in its first full year.
In addition to today’s announced acquisition, IAG updated on its natural peril expectations and guided towards an estimated $900 million in losses through to the end of April 2025 - $250 million lower than expected.
Meanwhile, IAG maintained its full-year peril budget guidance of $1.28 billion.
Assuming favourable conditions continue, IAG expects its reported insurance profit to increase between $1.65 - $1.85 billion, while insurance margins would also come in towards the top end of the 16-18% range.
Despite 5% growth over the 10 months to April, management expects a softening NZ economy to leave the division's gross written premiums broadly flat in A$ terms.
Today’s announced RAC acquisition follows the group’s 90% purchase of shares in RACQ for $855 million in November last year.
IAG has a market cap of $20 billion, making it the ASX’s 20 largest stock; the share price is up 38% in one year and up 3% year to date.
The stock is in a strong bullish trend confirmed by multiple indicators.
Consensus is Moderate Buy.
NRW tanks on major impairment warning
Shares in NRW Holdings (ASX: NWH) were down around 7% at the open after the contractor all but pencilled in a major impairment hit related to unpaid invoices by its subsidiary Golding for works completed at the ill-fated Whyalla Steelworks which has debts of $1.35 billion.
Given that the ailing steel mill had a paltry $8 million left in the bank in March, NRW had previously flagged major concerns about this debt being paid.
In light of these concerns, back in February, NRW managed to obtain, through Golding Contractors, a guarantee and indemnity from both Liberty Primary Metals Australia and Whyalla Ports plus a first-ranked security over the assets and share of Whyalla Port relative to money owed by OneSteel.
However, what heightened the uncertainty over NRW’s debt position with Whyalla were maneuvers by the South Australian (SA) state government to hasten the sale process.
NRW now claims that further intervention by the SA government today – including a new draft bill called the Whyalla Steel Works Amendment Bill 2025 - has “seriously undermined” the $113.3 million owed to the mining contractor.
In its market update today, NRW told investors that the ministerial statement makes it clear that the proposed bill will enable OneSteel to usurp that personal property by declaring it void and part of the land, with ownership vesting in OneSteel and without any mention of compensation to Whyalla Ports.
“If the Proposed Bill is passed by the South Australian Parliament in the form described in the Ministerial Statement, NRW is concerned that any recovery of the outstanding indebtedness via Golding’s first-ranking security in respect of Whyalla Ports assets will be seriously impaired,” NRW said.
NRW also noted that the SA government’s sudden intervention will pre-emptively determine certain issues that are before the federal court for determination before trial due to commence in three weeks’ time.
NRW has a market cap of $1.2 billion making it an ASX200 stock; the share price is flat in one year and down 29% year to date.
The stock’s shares appear to be in a long-term bearish trend confirmed by a falling 200-day moving average.
Consensus is Strong Buy.
Xero jumps on strong FY25 profit
Shares in Xero (ASX: XRO) were up around 3.5% at noon after the cloud accounting software giant announced a 30% jump in annual profit to NZ$ 227.8 million, while also flagging that more growth is on the way.
Market expectations showed revenue was up 23% to NZ$2.1 billion.
Commenting on today’s result, CEO Sukhinder Singh Cassidy told investors that the FY25 results demonstrate Xero’s macro-resilient growth and effective strategy execution.
“We remain excited about the large, untapped opportunity to help SMBs and accountants and bookkeepers globally to digitise, and we continue to focus on making life better for people in small business, their advisors, and communities around the world.”
Looking forward, Xero believes it has the opportunity to both double the size of its business and deliver a combined revenue growth rate and profit margin of 40%-plus over time.
Total operating expenses as a percentage of revenue are expected to be around 71.5% in FY26.
This ratio is expected to be higher in H1 FY26 versus H2 FY26.
Xero has a market cap of $27 billion; the share price is up 46% in one year and is up 6% year to date.
While the stock’s 200-day moving average is trending upwards and highlights long-term investor interest in the stock, the 20-day moving average is falling as upward momentum wanes.
Consensus is Moderate Buy.
The share price is currently trading at $178.93.
This article does not constitute financial or product advice. You should consider independent advice before making financial decisions.
