Smurfit shares rated 'outperform'
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.