|Smurfit Kappa Group
||EPS - Basic
||Market Cap (m)
Smurfit Kappa Share Discussion Threads
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'Smurfit Kappa at the Unified Wine and Grape Symposium'
Zacks Investment Research upgraded shares of Smurfit Kappa Group PLC (NASDAQ:SMFKY) from a sell rating to a hold rating in a research note issued to investors on Thursday|
|JP Morgan. H/T FT AV
Smurfit Kappa today announced €60/t price increases for white and brown kraftliner across Europe from 1 March. This follows €60/t hike announcements over the last few weeks by recycled
containerboard (RCB) producers. Although concerns remain, in our view (significant RCB capacity due in 2017 & 18, potential for product redirection by Stora from exports to domestic, possible
Turkish anti-dumping tariffs), demand on the ground appears to be stronger than expected and momentum for a kraftliner hike by Europe’s major producers (including Mondi) appears to be building. If Mondi was to achieve a €60/t hike in line with Smurfit’s announcement, this would result in additional EBIT of ~€65m in FY17e (JPMe) and increase JPMe FY17 EPS ~7% by our estimates. Mondi’s share price in EUR is + ~7% since 11 Jan indicating market expectations of at least some hiking success. There could be room for more, in our view, if hikes are actually successful given Mondi’s tendency to experience a PE rerating during kraftliner price up-cycles. On the other hand, failure would likely bring about disappointment given the level of expectations that appears to be baked in. While demand looks strong and momentum appears to be building, supply risks lead us to remain cautious for now, thus we leave forecasts unchanged for the time being while noting overall balance of risk to our estimates appears to be to the upside for FY17e.|
|"Smurfit Kappa shares rise on price hike plan"
Packaging group is latest European player to raise cost of recycled containerboard
Shares in paper packaging giant Smurfit Kappa rose in early Friday trading on news that the group plans to increase the price of a recycled containerboard, used to make cardboard boxes.
Smurfit said a €60 a tonne increase in recycled containerboard prices will become effective on February 1st across all its main continental European markets.
Within the first hour or trading, shares in the company rose by as much as 1.9 per cent to €24.565 in Dublin.
“This follows similar announcements on recycled prices from other players in the industry [RECENTLY],” said Barry Dixon, an analyst with Davy. “We estimate that more than 50 per cent of the containerboard industry has announced recycled containerboard price increases for February.”
Mr Dixon said that if recycled containerboard increases are successfully passed through to the final product, corrugated boxes, it could result in analysts upgrading their 2017 and 2018 forecasts for the company.
|Yep, I had a small holding , but trebled up this morning. Sector seems strong.
Hopefully good results in a few weeks|
|Ahead of its results, new FTSE 100 addition Smurfit Kappa was on the front foot, with Goldman initiating coverage on the London ticker with a 'buy' rating earlier in the week with 9% FCF yield in 2017 and 2,460p target price
|Mention of Jefferies note re sector yesterday, would explain price action, Mondi too had a good day....|
|Still maintain my view from before Christmas and again on 5th Jan - that this will run to over 22.00 and will rest above this number awaiting results and possibly even more importantly guidance on market conditions in 2017 when they report their numbers in early February|
|Going well of late......which is nice|
|The expected positions starting to be taken 4 weeks before results are announced.
I am expecting record results and good dividend circa 60c for the end of year payment
This will run to 22 in my opinion|
|I expect a good run on the share price between now and full year results in early February.
I would be surprised if the results were not very good (highest in company history?) and the benefits of FTSE inclusion start to kick in|
|Rarely do you see big positive movements in the first few weeks of listing announcement. It usually takes 3 to 4 months while positions are steadily taken. So nothing wrong|
|Not exactly the share price reaction I would have expected following the announcement of the promotion to the FTSE100. What's going on here?|
|'Being added to the FTSE 100 would force fund managers who track the benchmark to buy £110 million (€128.6 million) worth of shares in the company.'
|should easily get to 20 stg
Fair valuation though in line with peers is more 23-24!|
|Nice open. Hopefully we should see some price action today with punters getting in early before the FTSE rebalance.|
|yip - seems to be in. To be confirmed tomorrow.
This should bring the company on the radar of more analysts and institutional holders so hopefully the low valuation will be spotted and will bring about a more average valuation|
|Looks like SKG will enter the FTSE 100 next month based on the closing mkt cap today. Should hopefully attract interest from tracker funds. Let's wait and see!|
|A puzzle...as usual.....zzzzzzz|
|Down 3% today. Why the drop?|
|6-Eurocent Beat vs. VRP, Operations In-Line – This morning, Smurfit Kappa reported EPS from operations of €0.56, beating our €0.50 estimate by 6-euro cents and outperforming consensus expectations by 3-eurocents. Versus our model, the operating lines combined performed as we expected, with Europe falling 2-eurocents short while the Americas beat by 2-eurocents. All of the overall EPS outperformance in SKG’s third quarter came from the non-operating lines, as lower interest expense, lower corporate expense and a lower tax rate than expected each added 2-eurocents versus our model.
OCC Continues to Be Big Story – On the company’s quarterly investor call, OCC price movements accounted for nearly half the questions asked. As a reminder, Europe experienced a spike in OCC costs in September, which the industry tried to raise test linerboard prices on the back of. However, over the last several weeks OCC prices have begun to fall again and the recycled board price hike has withered and basically failed. We believe the recent decline in OCC is normal as we enter the high generation season (aka Christmas). Furthermore, higher prices lead to higher generation levels as it pays to sort OCC from mixed paper. Stepping back, we believe the near-term downward movements in OCC are only temporary and continue to hold on to our belief that OCC prices are headed higher (and potentially significantly higher) in the long term as little-to-no new net virgin board capacity is added to the supply chain and demand for containerboard continues to grow.
Little Further Testliner Pricing Seen Through 2017 – Though Smurfit (and the industry) partially blamed moderating OCC costs for the failed European testliner increase, we believe the true driving factor was too-high a level of board inventories in the system combined with new recycled fiber-based containerboard machines coming online. As this new capacity finds its way into the market, we believe the market will, at a minimum, remain balanced at current prices and could become more competitive as producers fight for share. On the other hand, we are slightly more optimistic on kraft (or virgin) board pricing. With US domestic containerboard prices going higher, we believe US export prices have some potential to rise, which has the potential to help lift kraftliner pricing in Europe in 2017. We do note that we don’t model any significant rise in kraftliner pricing in Europe into 2017 at this time.
Raising Target €1 as We Roll Numbers – We are not changing our full year estimates, and thus are maintaining our €2.00, €2.15 and €2.40 EPS expectations for 2016, 2017 and 2018, respectively. We are raising our one-year price target to €28 and maintain our Buy rating. However, we continue to question why the stock is trading at such a discount to its peers. On our numbers, SKG continues to trade at a one-turn EV/EBITDA discount to all of its US peers except IP (which we also believe is far too low). Versus its European competitor DS Smith, we calculate a 2-turn EV/EBITDA discount. While Smurfit Kappa does have more debt than most European investors prefer, at a 2.4x leverage ratio, the company’s debt level is not egregious and we would rate it as properly levered given the strong and stable free cash flow generation -- particularly given how cheap debt is versus equity. Though not yet rated a “top pick” due to the fundamental environment in Europe being softer than the US market, the stock is still extremely cheap and we recommend investors continue to build a position in the company.
Looking at Smurfit-Kappa on purely a valuation basis, we come to the conclusion that the stock is attractive, and thus our €28 target price and Buy rating. However, we also believe that the stock could continue to struggle in the near future if macro conditions in Europe soften. On the other hand, we believe the company is making significant headway in improving their margins in the European region and box pricing in the region is likely to head higher as the Euro continues to be weak versus the US Dollar. Furthermore, the company has shown itself as a savvy acquirer and we believe there is potential for the company to grow through acquisitions. Finally, if the company does not grow significantly or lever-up with a significant share buyback, we could see the company taken over, though the probability of such an event is diminishing in our opinion. Should the European region improve, should the company make another acquisition like Orange County or should the company be a target for acquisition themselves, there could be significant upside to our estimates.|
|This is bound to be very attractive at the moment to US institutional investors....|