Friday 18 August 2017

Smurfit shares rated 'outperform'

John Mulligan

John Mulligan

SHARES in the paper and packaging group Smurfit Kappa have been rated 'outperform' by Credit Agricole brokerage Cheuvreux, which has placed a six-month price target of €8.50 on the stock.

It ended yesterday's trading session up almost 3.1pc at €6.92. The brokerage initiated coverage of the stock yesterday.

Cheuvreux analysts said that a peer-group valuation shows that Smurfit Kappa stock is trading at a discount to sector-average multiples, with a discounted cash-flow valuation approach giving a fair value of €12 per share.

"In the financial crisis, Smurfit Kappa was perceived by the market as a company with excessive debt," noted Cheuvreux.

"In response, during Q4 of 2009, the company rescheduled its debt burden and its debt is now manageable.

"Management's priority short-to-medium term is to further reduce debt via cash-flow generation. The target is to reach net debt of €2.8bn by 2012." It added: "Profits were hit during 2008 and 2009, but started to recover during the latter part of 2009. We expect a gradual improvement going forward, driven by a general economic improvement."

Smurfit Kappa expects full-year earnings for 2010 to be up 20pc to about €900m as it pushes through more price increases.

Irish Independent

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