Smurfit Kappa Share Discussion Threads

[moorsie2] 13/1/2015 17:18

Large end of session "Uncrossed Trade" at 20 Euros today.

There is good demand here and once the shares steady above 20 over the next couple of weeks it should easily run on to 21-22 range.

This sort of valuation would be underpinned by the trading performances but I also wonder if 2015 will see more industry consolidation

[moorsie2] 24/3/2014 13:48

Dolmen Securities started coverage on the share today and issued a strong buy


Dolmen Stockbrokers examines Smurfit Kappa:

We are adding Smurfit Kappa to our core portfolio. Smurfit have had a transformative year in 2013. The company has completed the makeover of its debt profile, having reduced debt levels by ~E800m since the peak in 2007, with net debt standing at 2.4x EBITDA (target range is 2-3x).

In addition, the company has successfully integrated the acquisition of OCCG - benefitting from significant synergies, stripped a further E100m of costs out of the business, increased the dividend by 50Per cent, and announced a E150m 3yr additional capex program, focusing on efficiency improvements and high return projects which had been put off while the debt pay-down was a priority.

While some business risk exists with regard to operations in Venezuela, we view current levels as an attractive entry point. The shares trade on 5.8x FY14 EV/EBITDA, a discount to peers on 7.4x, despite the company�s leading position in Europe, and strong international presence according to Dolmen Stockbrokers.

[moorsie2] 19/2/2014 10:23

Main Broker (Davy) note out this morning 24 Euro target


DAVY VIEW
Strong cash generation remains one of the key reasons to invest in Smurfit Kappa Group (SKG). With debt levels now at more manageable levels, shareholders are likely to benefit directly from this cash in the form of growing dividends or value-enhancing investments in capex or M&A. In the absence of deals, management will return capital to shareholders. We are increasing our price target to 2400c to reflect the potential benefits of this new capital allocation strategy.

Capital allocation strategy could add over 300c to the share price over time
Strong cash generation has been one of the main reasons to invest in SKG. Over the past five years, however, investors have had to rely on the pay-down of debt – and the consequent accretion to equity – in order to benefit from this cash.

With debt levels now reduced to manageable levels, management has outlined a new capital allocation strategy that will allow shareholders to benefit in a more direct way.

The first element of the new strategy is a progressive dividend policy. The final dividend for 2013 was increased by 50% and management has promised to pursue a progressive dividend policy, i.e. to grow the dividend with earnings.

The company will also invest an additional €50m per annum in capex over the next three years. This will yield incremental EBITDA of €75m after the third year. We estimate that this could add 90c to the share price.

Post dividends and capex, we estimate that SKG will generate almost €860m in cash flow over the next three years. This, combined with excess cash balances, could facilitate M&A activity or a share buyback programme in excess of €1bn. We estimate that M&A activity could add 250c to the current share price while a buyback programme could add 370c per share.

Upside risks to forecasts
Although we are leaving our full year 2014 and 2015 forecasts unchanged, we believe the risk is to the upside depending on movements in corrugated and OCC prices in Europe.

Stock looks cheap; upgrading price target to 2400c
With numbers unchanged and with the stock continuing to trade at a 20% discount to peers, the core value of the business remains 2100c. We believe that the new capital allocation strategy will add a minimum of 300c per share to the equity value of the business. We are increasing our price target to 2400c, 22% above current levels.

[moorsie2] 19/2/2014 08:53

21.50 is the next resistance level as its the company's all time high

[moorsie2] 14/2/2014 09:35

Very positive Edison Broker note out this morning. I didnt see Edison cover this company before so that is a positive new extra coverage.

Can now easily be trading in the Euro 22-24 range within a few months

[moorsie2] 11/2/2014 15:05

Full year results out tomorrow - any views on results??

[wexboy] 05/2/2014 05:12

2014 – The Great Irish Share Valuation Project (Part I)

I take a look at Smurfit Kappa Group, plus a batch of other Irish stocks:

hxxp://wexboy.wordpress.com/2014/02/03/2014-the-great-irish-share-valuation-project-part-i/

Cheers,

Wexboy

[moorsie2] 03/2/2014 15:22

seems to be stuck in a 17-19 trading range.

Below 17 is a nice opportunity to top up

[moorsie2] 13/1/2014 12:39

This should now test the £20 barrier

Expecting a solid performance for the year as outlined in Q3 update.

[mr_bluesky] 11/1/2014 15:22

SKG "pot hole" 09/01/14. Price: 17.90p

Ok I have found a pot hole before it has broken out.

It is not text book as I would have liked to see the price on the left of the hole a bit more flat and horizontal,but its good enough to meet the criteria.

I find pot holes work better when a round the 50dma and 200dma as this is so it should lead to a strong break out.

Its just a case of watching it to see it pop up.

Mr Bluesky

[moorsie2] 06/11/2013 08:15

very strong set of results - nothing holding this back now to 2200

[moorsie2] 16/10/2013 08:49

John Mulligan – 16 October 2013

Shares in packaging giant Smurfit Kappa could hit €20 – or 15pc above trading levels yesterday morning – as it benefits from a recovering eurozone and the full impact of synergies from a US acquisition, according to Citi.

has raised its price target for the packaging group's shares to €20 from €14. The shares hit €17.47 in early trading yesterday – the highest level since Smurfit Kappa floated on the stock market in 2007.

Smurfit Kappa acquired US-based Orange County Container Group last year for $340m, extending its footprint in the Mexican market.

Smurfit Kappa has also just bought CRP Print and Packaging in the UK. CRP operates a box plant that produces litho-laminated packaging and other products such as 3D point of sale displays. Among its customers are Mondelez International's Cadbury brand as well as Procter & Gamble's Pantene and Oral B products.

Smurfit Kappa's chief executive Gary McGann has said that the company has the financial flexibility to do deals worth €300m every year.

"As Smurfit Kappa's debt position becomes more manageable and the successful integration of OCCG approaches completion, we believe the focus is shifting back to an acquisitive growth strategy, which has been SKG's strength historically," said analysts at Citi.

[moorsie2] 03/10/2013 11:38

Davy's are suggesting a price target of 23 Euros per share

[moorsie2] 17/9/2013 08:09

Significant deal in the US - PCA buying Boise. Both share prices lifted significantly.

M&A season I think for paper and corrugated - watch out for consolidations this side of the pond too if the CEO's are doing their jobs!!!

[ygor706] 09/8/2013 10:01

Few in the market will appreciate the benefit of the virtuous circle created by a leveraged buyout situation normalising itself into a corporate risk. It just doesn't happen that often and is a testament to the strength of the cash flows within the business. I'm expecting a couple of wake up calls to occur after the next two sets of figures. Enjoy the ride.

[moorsie2] 31/7/2013 08:52

Well as predicted at the start of the month....



Moorsie2 8 Jul'13 - 10:39 - 362 of 365 0 0 edit

Breaking the 13 barrier is a big move today. Once stabilised above this number then there is no resistance through to 15.

Great for the long term holders - been a slog



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Great results out today and with the company usually having a much strong 2nd half to every year then this company is motoring along.

Next level is £18. But I think it will take some time to stabilise in the £15 to £16 range before kicking on.... only my opinion though

[moorsie2] 25/7/2013 11:27

Re-financing set to save €13m in interest costs, with more to go; equity continues to look cheap
DAVY VIEW
SKG's latest re-financing will potentially add over 7% to group earnings. It also completes the transition of the company from leveraged to corporate credit. The bond market has consistently recognised the attractiveness of SKG's cash generating model. At a P/E of sub-10 times, versus the sector on closer to 12 times, the equity market does not appear to recognise this value. Applying a peer average P/E of 11.5 times implies a share price of almost 1700c, well ahead of our current 1500c price target.

Re-financing set to save €13m in annual interest costs as company moves to corporate credit
Smurfit Kappa Group (SKG) announced that it has completed a further re-financing of its balance sheet which results in its transitioning from leveraged to corporate credit. Under the latest arrangement, SKG has negotiated a new five-year facility of €1,375m all of which is unsecured. €750m of the funding is to replace all of the remaining senior secured credit while €625m replaces the existing €525m revolving credit facility (RCF). As a result of the new senior credit facility, all of the recent secured bond issues also become unsecured.

There is a significant interest cost savings under the new funding arrangement with the senior credit being priced at a spread of 225bps over EURIBOR and the RCF at 200bps over. This compares with the previous cost of 375bps and 325bps respectively. Management expects that the cumulative saving will be of the order of €13m on an annualised basis.

AR securitisation provides additional flexibility; calling the 2017 bonds could save an additional €20m in interest costs
In addition, the company has agreed a new five-year accounts receivable (AR) securitisation programme of up to €175m at a margin of 170bps. This is in addition to the existing €250m securitisation programme.

In the statement, management indicates that the new funding structure provides the company with "greater financial flexibility ... including the potential to refinance part of its more expensive bond debt at the appropriate time". This could refer to the €500m of 7.25% 2017 bonds which become callable in November this year. Assuming this bond issue is re-financed using the €175m from the AR securitisation programme, €125m of the RCF (management has in past indicated that a facility of €500m is sufficient) with the balance from a new bond issue at circa 4.5%, could result in an annual interest cost saving of over €20m. Combined therefore, the latest re-financing programme could result in an annual interest cost saving of €30-35m, or over 10c EPS on our current 2013 forecast of 137c.

Equity continues to look cheap; applying peer average P/E implies a share price of almost 1700c
We are currently forecasting an adjusted EPS for 2013 of 137c. An annualised interest saving of €33m adds another 10c to this figure, implying a pro-forma EPS of 147c and a P/E of 9.6 times. This compares with a P/E of 9.8 times for Mondi Group, 11 times for DS Smith and 14.3 times for the European sector.

Applying a peer average P/E of 11.5 times to the pro-forma EPS of 147c implies a share price of 1690c, well ahead of our current price target of 1500c.

Adding €33m to our current circa €300m FCF forecast (pre-dividends) for 2013 implies a free cash-flow yield of over 10% which again looks very good value for a corporate credit.

EBITDA interest cover would go from a healthy 5.4 times to 6.4 times.



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[moorsie2] 18/7/2013 18:21

LBO - where have you gone?

You must be devastated to see these shares do well!

[ygor706] 17/7/2013 08:31

I bought these during the April dip as an analogue for the drinks industry. They have a big Distillers contract and I hear that it has been keeping them flat out in that area. I'm expecting steady progress.

[moorsie2] 08/7/2013 10:39

Breaking the 13 barrier is a big move today. Once stabilised above this number then there is no resistance through to 15.

Great for the long term holders - been a slog

[willydoctor] 03/5/2013 11:48

Cracking results today. I think you need to rethink your valuation Wexboy! SKG now big enough to be included in tracker funds so this is likely to push higher.

[willydoctor] 26/3/2013 09:40

Thanks Wexboy - very interesting!

[wexboy] 26/3/2013 02:21

2013 – The Great Irish Share Valuation Project (Part VIII)

I take a look at Smurfit Kappa Group, plus a batch of other Irish stocks:



Cheers,

Wexboy

[willydoctor] 13/3/2013 17:08

I bought SKG and also PRV this morning again. First in SKG at 7.8 and out at 9.4. Have been watching since planning to add on weakness and of course being a numpty have sat on the sidelines all the way up to 12! In this morning at 12.25 - and may double up tomorrow if they open off any.

[moorsie2] 05/3/2013 19:36

LBO have you gone away? Not heard your doom and gloom for a while