How much further can Smurfit's shares go?
SINCE its return to the Stock Exchange in 2007, paper and packaging group Smurfit Kappa has repaid €800m of debt.
With the group now paying dividends once again and the maturities on most of its remaining debts set to be pushed out to 2016 and 2017, how much further can the share price -- which leapt more than 10 per cent on last week's better-than-expected full-year results announcement -- go?
Smurfit increased its pre-exceptional operating (pre-interest) profits by 52 per cent to €624m in 2011 and pre-exceptional pre-tax profits by 77 per cent to €327m.
It also made serious inroads into its debt mountain, cutting its net debt by 12 per cent or €358m to €2.75bn.
That's the good news. However, following this week's jump in the share price to €7.30, Smurfit now has a market capitalisation of just over €1.6bn. Add in net debt and the company has a total enterprise value of almost €4.4bn or seven times pre-exceptional operating profits.
With a full-year dividend -- which will cost Smurfit in the region of €50m -- likely to reduce its ability to pay down debt in the current year, most of the good news is already in the share price.
