Smurfit Kappa Share Discussion Threads

[soundbuy] 06/3/2018 14:19

Olivetree - The main question circulating today is why Smurfit has chosen to pre-announce this transaction. International Paper has made no secret of its desire to acquire in Europe. But there is no love lost between these two companies. It would not be a normal line of defence to announce that you have been approached. However, with potentially the threat of IP making the first public statement, and perhaps a confidence in the value defence they have hear, it may be that Smurfit is seeking to steal the initiative here. Historical transactions point to a wide range of multiples, but Smurfit’s market position, strong ROCE and positive growth outlook coupled with the strong strategic merit to this transaction for IP would point to a value at the top end of this range. An offer at €38 per share is 8.7x 2018 EBITDA. Recent multiples would justify a price north of €40, synergies permitting. The questions will be how close to the upper end of the historic multiple range IP is prepared to go and whether Smurfit has the support of the register such that it can push a meaningful bid/ask spread here.

[soundbuy] 06/3/2018 14:19

Goodbody - Based on Fy19 forecasts a 9x EV/EBITDA on SKG would imply a 3670c equity valuation (28% premium to last night), 10x implies 4260c (49% premium) and 11x implies 4850c (69% premium). At the time of the last speculation a leaked report suggested advisors to IP were valuing Smurfit Kappa on €36/share. Based on International Paper's balance sheet we estimate that increasing gearing to 5x would underpin an all cash offer. Given the stage we are in the cycle that would prove a risk in our view. International Paper have stated they wanted to grow containerboard business which has little scope in the US and have recently withdrawn from Asia. Having already committed some capital to a mill project in Madrid the intention is already clear on Europe. Buying the number one player would clearly be attractive. There is a complimentary footprint in South America where IP’s only material presence is in Brazil. SKG is number one corrugator in South America. With regard to the US market packaging is pretty unsophisticated. SKG’s leadership on this front would help drive this part of the US business on.

[moorsie2] 06/3/2018 12:25

market now expecting a bid above 36...

Soundbuy - I expect Investecs 38 to be euros not pounds

[soundbuy] 06/3/2018 09:58

That seems about right...........

[soundbuy] 06/3/2018 09:57

Investec see £38 and bits based on previous acquisition premiums in sector.....

[moorsie2] 06/3/2018 08:51

Market seems to be quite blind here and only valuing the company at the GS note of £30 yesterday. So no knowledge of whether IP will go hostile and if so at what price. I would not be surprised to see this go to 36 or so on hostile offer..

[swedeee] 06/3/2018 08:49

Quite a rise off that bud rejection! Lovely stuff

[soundbuy] 06/3/2018 07:08

Always said it would be Int. Paper.....

Can't do the share price any harm short term.........

Opening salvo?

[swedeee] 05/3/2018 16:15

from GS;

“We continue to prefer the structural thesis of packaging over pulp/paper. The key elements in our view are: (1) pulp prices rallied to all-time highs throughout 2017 and we expect prices to fall as supply outgrows demand in 2018; (2) 2017 was a year of margin squeeze for packaging producers, however we expect them to benefit from already achieved price increases as well as strong demand; (3) online retail in our view is positive for volumes and margins. [ . .201;.] This is combined with most of our pulp-exposed coverage trading at or close to peak multiples despite pulp prices being at all-time highs, and our top packaging exposed picks screen inexpensive in comparison while having a more positive outlook.”

[soundbuy] 05/3/2018 09:58

Goldman Sachs Buy

Old PT: 2,700.00p New PT 3,000.00p Retains

[soundbuy] 02/3/2018 13:37

Mondi reads well..........

[moorsie2] 27/2/2018 11:23

upward trend here - will soon get to 27+

[soundbuy] 23/2/2018 16:16

Don't see that everyday............

[moorsie2] 15/2/2018 09:26

Bank of America Meryll Lynch have a note out with a 30stg price target. So a strong buy..

[ygor705] 07/2/2018 13:54

Full year numbers more or less in line with consensus forecasts and trend for next year confirmed by 4th qtr figures. Good increase in the dividend as well. Expect share price to strengthen once this bout of panic blows itself out.

[soundbuy] 07/2/2018 10:32

Hmmm..........6% off the day's high.....

Some comment HT FT AV

Goodbody.

Smurfit Kappa has reported Q4 EBITDA of €351m which is slightly ahead (1%) of both our forecasts and consensus of €346m. Key variances were a stronger than expected outturn in Europe (a reflection of growing momentum on cost recovery) and lower central costs, which more than offset a challenging final quarter for the Americas (currency and slower volume growth in some countries), see enclosed detailed tables. Also of note is the 12% increase in the final dividend to 64.5c, ahead of our expectations of 60c.



Of note is the commentary around recent announcements for €60/tonne increases
in European kraftliner / testliner prices, “the majority of which will be implemented
in February”. Given this momentum in Europe coupled with an expected improvement in the Americas (supported by restructuring and recent investments)
we are comfortable with our recently increased FY18 EBITDA forecasts of €1.4bn, which is slightly ahead of consensus. As Smurfit Kappa is the most geared to such positive pricing dynamics, it continues to be our preferred pick in the sector.


In terms of the European operations, the key points are: (i) Steady mid-single
digit corrugated box volume growth for three consecutive quarters; (ii) further
recovery on corrugated box prices which we believe are now +5% from the lows at
the start of 2017; (iii) this has all led to an inflection point for margins which were
up circa 140bps in Q4 (-10bps Q1, -170bps Q2 and -30bps Q3).


Compared to our expectations the Americas had a more challenging final quarter,
a function of higher recovered fibre prices, adverse currency movements, higher
imported containerboard prices into Latin America where the business is short and
a slowdown in volume growth. The latter is reflected in FY corrugated volume
growth of 2% versus a consistent 3% for Q1-Q3. Encouragingly management has
indicated that trends have improved in the YTD. In addition, the region will benefit
from restructuring measures (incurred a €12m charge in Q4) and recent
investments which will decrease the group’s dependence on containerboard
imports into Latin America. All of which supports a better outturn in 2018.


Davy

SKG’s Q4 results mark an inflection point in the profitability of its European operations. This reflects on-going improvement in box prices, driven by strong demand and tight containerboard supplies. With the latest increases in containerboard prices set to be implemented, further box price rises are likely. This should result in positive earnings momentum during 2018. This potential, combined with the options provided through the company’s capital allocation strategy, is not fully reflected in the valuation. We reiterate our ‘Outperform217; rating and 3300c price target.

[soundbuy] 07/2/2018 09:37

Well, after listening in I'll be looking to add again once I feel the mkts are on a more stable footing.........

[soundbuy] 07/2/2018 08:57

9am kick off.........

[soundbuy] 07/2/2018 08:55

Hmmm........dwelling on the Americas no doubt, ignoring the 140k.....ho hum....

[moorsie2] 07/2/2018 08:13

Totally agree SoundBuy

Europe seems to be going well with a strong momentum in Q4. Record results held back by a sluggish Americas but good to read demand is picking up there and their new mill upgrades will add 140k tons of integration benefit

This exceeds my expectations.

[soundbuy] 07/2/2018 07:55

Excellent Q4, hopefully bodes well going fwd.....

Final results reads well, see what the mkt makes of it.....

[soundbuy] 02/2/2018 15:48

Bucking the trend today.........

[soundbuy] 29/1/2018 16:39

Numis Add Old PT 2,600.00 New PT 2,800.00

[soundbuy] 23/1/2018 10:00

98k vol in 1st hr was fair going.....eased up since

Looking to take a postion in SMDS at around 460p ish........we'll see

With the dollar/tax cuts in US SKG must be looking increasingly attractive to the likes of International Paper.....was rumoured a while back......

[moorsie2] 23/1/2018 09:30

only 100k shares traded in the first hour and a half so not big volumes so far.

This was undervalued and at a significant discount to the other two paper packaging companies in the FTSE 100. Last broker report was a price target of 33 euros. Still only at 30.4 euros this morning

So price action is not surprising as investors seek undervalued but good assets.