Tag: ASX:AMC

AMC has identified challenging conditions going into 1H18 at its 1Q trading
update and AGM.

Profit headwinds relate largely to Asia and Latin America, along with rising raw material costs.  AMC has guided to flat 1H EBIT, yet maintained FY18 guidance of around 5% EPS growth.

AMC trades on a forward yield of 3.6%, based on FY18 EBITDA of $1.6b.

We see the current sell-off as a buying opportunity and recommend investors cover with a $15.50 call option into June 2017, whilst keeping exposure to the February dividend.

On September 7th, AMC announced that they were in early takeover negotiations with US packaging firm Bemis Company.

The estimated value of the acquisition is in the AUD $5 billion range, which is not a quite 1/3 of AMC’s market capitialization of AUD $18 billion.

Shares of AMC have traded about 3% lower since the announcement and reached a 2-month low of $15.20 last Friday.

We believe the internal momentum indicators are approaching an oversold condition, and consider current prices a reasonable level for a buy/write strategy.

Amcor

AMC has delivered  FY17 operating earnings of $1.09 billion, up 3% on FY16. The Board declared a final dividend of $0.235.

Underlying net profit for the 12 months to June, came in at $700 million or 4.5% higher on the same time last year.

At 19x forward earnings, AMC is expensive.

However, earnings are defensive and the company should still achieve average EPS growth of 8% into FY18, (net profit in the range of $750 – $770 million), placing the stock of a forward yield of 3.7%.

We expect AMC to trade within a range of $15.00 to $16.50.

Amcor

Following the recent Algo Engine buy signal, Amcor has now formed a solid base at $15.40. We have an upside target of $16 – $16.50.

We recommend adding December covered calls to the Amcor holdings to increase cash-flow and enhance portfolio returns.

Our Algo Engine triggered a buy signal on Amcor as the stock forms a “higher low” pattern at or near $15.30.

Amcor reports earnings on the 22nd August, the market in looking for EPS growth of 8 – 10%.  The recent rally in the AUD may see forward guidance reduced slightly, if the AUD was to stay above $0.80.

We continue to like Amcor as a buy and hold portfolio position, complimented with a covered call option. We’re allowing moderate capital growth and when combining the dividend with the covered call option, we’re generate 10 – 12% annualised cashflow.

Amcor is trading on a high multiple of 19x forward earnings and a 3.8% dividend yield. However, the earnings are relatively defensive and we’re expecting 8% underlying EPS growth.

The stock should find support at or near $16 and is an appropriate consideration as a buy-write for client portfolios.