Smurfit Kappa Share Discussion Threads

[philanderer] 19/4/2017 12:12

FTSE100 now under water for 2017.

Overseas earners feeling the brunt of it again today.

[redartbmud] 14/4/2017 10:19

EI

I don't disagree on your short term market sentiment. A pull back seems more than likely.
Like you I now have 'off days' where my focus is not up to the task.

Gnk was one of my competition entries on Vlg! I am now considering dumping, based on market commentaries on consumer spending. There is a lot of same style competition in the sector and price barriers to consider.
Engineering stocks took a wobble for a few days, the major exceptions in my portfolio being Rsw and Spx.
Your love of REIT's has been rewarding. My sale of Nrr @ just below £3.40 maybe wasn't best timed. I might get back in if it hits £3.30.
My small caps have flown away. Not complaining, except I don't have enough to top slice.
If/when Lloy takes off I will really crack the champers. I have accumulated quite a few in recent years. I hope that they keep their noses clean. Antonio's vow to meet the bill for PPI has hit him in the zipper and shareholders in the pocket! The government needs to stop all of this nonsense about making the banks the source of substitute liquidity for the masses. They cannot pay out fraudulent billions of claims for all and sundry trumped up misdemeanours without it impacting on the business.
Same goes for utilities, they cannot provide services at less than cost and expect shareholders to foot the bill.

Sorry - this is Skg board so I shouldn't rant on about other stocks.

red

[essentialinvestor] 14/4/2017 09:41

Hi red, just taking a break from trading for a few weeks, had planned this to coincide
with selling out of HSTN.

Nice week as redeployed 65% of HSTN cash in to ASCI last week, thought ASCI
was looking cheap.


Can only maintain major hrs for a more limited time these days, middle age ).

On markets, looking for some downside, still unsure whether this will happen.

Stock specific, what you may now be seeing are some of the unloved
sectors gaining at least some support, look at the recent REIT performance,
even GNK has perked up a little(not holding). Small caps perked up this week.

LLOY beginning to look interesting on a 6-9 month view IMV,
although if we are going lower then around 60 pence or under may be available.

[redartbmud] 14/4/2017 09:28

phil

Agreed. I am comfortable holding, especially at these levels. The volatility does create some excitement though.

EI

I was getting worried about your lack of activity of late. Good to see that you are awake.

red

[essentialinvestor] 14/4/2017 08:31

Agree, would not be concerned about SKG as mentioned previously.

Markets may get a little bumpy, however this needs to be viewed in the context
of a marked recent lack of volatility, which was always going to end.

[philanderer] 14/4/2017 08:17

Morning red.

I still feel very comfortable holding this one. Patience required and it'll come good I reckon

[redartbmud] 13/4/2017 22:41

Evening phil.

More like close your eyes and hold on tight, at present, whilst it gyrates around.

red

[philanderer] 13/4/2017 21:58

Upgrade to HOLD by Zacks Investment Research

[philanderer] 13/4/2017 08:53

Morning red.

SKG the dog of the portfolio for a few weeks now. Saved by ABF this morning.

[redartbmud] 12/4/2017 17:16

It is something of a white knuckle ride at present.
How does one select a buy or sell price, a pin and a piece of paper would appear to be as good a method as anything else.

[philanderer] 12/4/2017 16:48

At least no end of day sell off today. 😀

[philanderer] 12/4/2017 09:11

What the hell is going to reverse this downtrend ?

[philanderer] 11/4/2017 09:34

Moorsie, good read , many thanks

[moorsie2] 11/4/2017 08:37

NEW YORK, 10 April 2017 (Viewpoint) - excerpt from Vertical Research Partners

Maintain Buy Rating – We maintain our Buy rating and €28 one-year target on the shares of Smurfit Kappa Group. Based on today's €24.20 closing price and the estimated €0.81 in per share dividends to be paid during 2017, SKG’s stock has a potential one-year return of almost 20% should the stock reach our target.

Trimming 2017 and 2018 EPS Estimates – Prices in Europe and the Americas are rising for all containerboard grades (including testliner and kraftliner), but near-term cost pressures and the typical 6-9 month lag in passing through higher board prices into boxes in Europe will make our prior estimates difficult to attain. Also, board price declines in the second half of 2016 actually pushed realizations down in the first quarter versus the fourth quarter of 2016. Thus, we are trimming our 2017 and 2018 EPS estimates to €2.00 and €2.35, respectively. We also introduce our 2019 EPS estimate of €2.50. Our EBITDA expectations (after deducting both “centre costs” as well as deferred equity compensation) are now: €1,270 million for 2017, €1,389 million for 2018, and €1,426 million for 2019.

European Business Becoming More Integrated – Smurfit Kappa sells approximately 500,000 metric tons (tonnes) of kraftliner annually in Europe. Given that it produces 4.4 million tonnes of corrugated boxes, it faces a fiber deficit; we estimate that in 2016 the firm purchased approximately 600,000 tonnes of containerboard from third parties to bridge that gap. In other words, its box production required 120% of its internally produced recycled containerboard. As the firm has been expanding its recycled containerboard capacity in Europe, while keeping its corrugated box capacity stable, it has become more integrated; 2017 may see a temporary half of that trend, as market conditions incentivize Smurfit Kappa to sell increased quantities of kraftliner to other parties. In the Americas, the trend is exactly the opposite as its box production capacity has outpaced its containerboard capacity. In 2016 the company bought approximately 200,000 tonnes of containerboard, or 13% of its total consumption.

Capex Takes a Short Breather, While Americas M&A Likely Remains a Top Focus – After reaching €499 million in 2016, we estimate that 2017 capex will decline by almost 20%. That pause should be temporary; our expectations for 2018 and 2019 are for capex of around €450 million per year. As discussed in more detail below, the firm last year made five acquisitions: two sheet plants in California, one sheet plant and one sheet feeder in Arizona, and a sheet plant in the UK. Going forward, it is likely that Smurfit Kappa’s acquisitions will focus on the US and Brazil.

Acquisitions will Continue to Support Organic Growth

The pace of acquisitions may have slowed down in 2016, with the company spending €40 million compared to over €380 million in 2015 and over €160 million in 2014, but this does not imply a shift in strategy. The company has indicated that it will continue supplementing its organic growth with acquisitions; we are modeling €50 million in acquisitions in each of 2018 and 2019, and we would not be surprised if the company’s spending exceeds our estimates. During 2016, the firm made five acquisitions; two sheet plants in California, one sheet plant and one sheet feeder in Arizona, and a sheet plant in the UK. Going forward, it is likely that Smurfit Kappa’s acquisitions will focus on the US and Brazil.

Capex to Take a Breather

Following five years (since 2011) of increasing capex, we expect that figure to decline in 2017. More specifically, capex was just €277 million in 2011 and has been increasing annually, reaching €499 million in 2016. However, we estimate that 2017 capex will decline by almost 20%. That pause should be temporary; our expectations for 2018 and 2019 are for capex of around €450 million per year.

The Americas Becoming Increasingly Important

It is clear from the above table that Smurfit Kappa’s acquisition activity is primarily focused on the Americas, and especially the US. The country, along with Mexico and Colombia, generated 70% of the company’s 2016 Americas EBITDA. While the segment’s contribution to Smurfit Kappa’s top-line has stagnated since 2013, a number of data points signal greater contribution in the future: 1) The vast majority of its acquisitions in the past three years, both in value and in numerical terms, were made in the Americas. 2) Americas’ share of capex (excluding unallocated items) reached a record 29% in 2016. 3) Assets in the region increased by 18.2% from 2013 until 2016, compared to just 1.7% for the European operations. 4) Capex in the Americas has exceeded segment depreciation in six out of the past eight years, compared to only three years in Europe. One may ask, why did the Americas’ revenue contribution remain stable since 2013, given all these data points? Coincidentally, the only three years where capex exceeded depreciation in the Packaging Europe segment were 2014, 2015 and 2016, when Smurfit Kappa embarked on its “Quick Win” capital investment program. As the pace of this investments moderates – with capex declining in 2017 and stabilizing thereafter, according to our estimates – that trend should reverse, and the share of revenue generated in the Americas should once again move upward.

How Well Will Americas Investments Pay Off?

While it is still early to come out with a verdict on the success of this initiative, we do note that operating margins for the Americas have consistently surpassed European margins. In 2016, the difference between the two regions was 170 bps (12% vs 10.3%). More importantly, margins in the Americas may have room to grow, albeit moderately. Prior to Smurfit Kappa’s temporary exit from the region, operating margins averaged 14.9% (2002-2005). Since 2009, operating margins have averaged 13%, particularly due to the substantial decline since 2014. Among the primary reasons for that trend are recent softness in US pricing, deteriorating economic conditions in Brazil, unrest in Venezuela and integration costs. Capping our margin expansion expectations is the fact that capacity additions in the Americas have focused on less capital-intensive box conversion facilities rather than the more capital-intensive containerboard mills, with the former being a lower margin business as a result.

Chip Dillon, Vertical Research Partners

[moorsie2] 10/4/2017 12:59

9 trading days till it goes ExDiv - therefore would be expecting a rally of sorts..

[philanderer] 08/4/2017 07:21

Smurfit Kappa UK has swept the board at the 2017 European Flexographic Industry Association awards and walked away with two gold, four silver, three bronze and one highly commended award. -

See more at:

[essentialinvestor] 07/4/2017 10:28

Hi phil, two small lots for me under 20.50, only adding in 45 share lots,
as cautious on wider markets.

[philanderer] 07/4/2017 08:46

Morning EI, just about remember posting that. :-D

Portfolio holding up so far. Off out to walk it off.

[essentialinvestor] 07/4/2017 06:34

phil, you had a late one!.

US/China relations perhaps more important for markets atm,
provided US/Russia tensions do not escalate.


Defensives and domestic UK stocks may outperform today.

[philanderer] 07/4/2017 03:40

Well Trump's gone and done what Obama failed to do......let's see how this plays out.

[essentialinvestor] 06/4/2017 17:38

Over £900 on XD's for me today, and HSTN was a star.

Added two lots SKG, both in the 20.50's, what we are seeing imv is
some shorter term profit taking, that's my best guess unless other news emerges,
or markets head hard down. Just IMV only.

[philanderer] 06/4/2017 16:49

Arrived in a very sunny Ibiza , good to see the portfolio more or less unchanged :-)

[essentialinvestor] 06/4/2017 10:37

Goodness phil, I bet Baltimore Technologies will pay for a lifetime of holidays ),
enjoy.

[philanderer] 06/4/2017 10:04

And hauling itself back up again :-)

Off for a few weeks sunshine now . Good holiday guys.

[essentialinvestor] 06/4/2017 08:45

A bit worse now ) - added.