Tag: ASX:AMC

After meeting price resistance at $15.00 yesterday, shares of Amcor have opened over 1% lower $14.80.

Earlier in the year, the firm’s multi-currency revenue stream was considered a tailwind. However, with the USD trading sharply higher against the AUD and the EURO, these trends are now seen as a headwind to market earnings forecasts.

This means that our 1H 2017 forecasts are expected to show a marginal fall in profits from US$ 310 million to just above UD$ 300 million, or about 6% lower on a reported USD basis. For the full year in FY 2017, our constant FX forecasts are unchanged at US$ 700 million, which implies 5% YoY growth.

As such, we expect Amcor shares to trade in a sideways pattern over the medium-term and look to buy on a pull back based on the Algo signal alerts. At this point, with the share price in the upper band of the 6-month range, we will sell the covered call option to enhance yield and reduce volatility.

The recent rally from $13.60 to $15.00 may be the best upside performance we see in Amcor for a while. Some analysts are downgrading Amcor from “outperform” to “neutral” as the company’s defensive revenue stream isn’t likely to expand as higher global interest rates affect their expense line and cost of capital calculation. This includes the impact of the USD appreciation against the EURO lowering EPS by about 5%.

With its large US and European asset base, Amcor has been able to maintain lower borrowing costs. However, with Weighted Average Capital Costs, (WACC), increasing from 6.6% to 7.1% in FY 17, bottom line profit growth may not be able to keep pace with rising interest rate. 

We see the price impact reflected in the lower high and lower low technical structure in the Amcor chart.  Whilst we don’t expect aggressive upside share price targets, we still feel owning AMC and selling covered calls to generate 10% annual cash flow from the dividend and call option premium makes sense.

The trading range is now $14 to $15.50 and investors should consider locking in gains at the top of the range, (or delivering the stock under the call option at $15.50 strike) and looking to buy the stock back on any pullbacks to $14.00.

Amcor is nearing full value based on FY17 earnings outlook.

FY17 revenue AUD$10b, EBIT $1.1b, EPS $0.71 and DPS of $0.58 places the stock on a forward yield of 3.8%. Underlying EPS growth forecast is 8%.

We look to sell covered calls into next year to enhance the yield.

Amcor (AMC.ASX) acquired Sonoco’s North American rigid plastics operation for $280m. The acquisition will be EPS accretive by 2 – 3%.  Amcor management expects to save $20m+ in synergy benefits.

FY17 Amcor should generate revenue of USD$9.7b, EBIT USD$1.1b, EPS growth of 8% and DPS of USD$0.44, placing the stock on a forward yield of 3.8%

We like AMC and see this as a suitable buy-write candidate for client portfolios. The stock trades ex-dividend tomorrow AUD$0.29.

Buy today and sell $17.00 calls into January.

Amcor (AMC.ASX) NPAT US$670m, EPS of $0.57 and final dividend of $0.22 CPS was inline with consensus. The numbers reflect a flat result on the same time last year, however, FY17 should see a return to underlying growth in the range of 5 – 7%.

FY17 revenue forecast of US$10b on EBIT of US$1.1b. EPS US$0.60 & DPS of US$0.55 placing AMC on a forward yield of 3.8%

We continue to see this as a buy on the dip story. Where we own AMC in the model from lower levels, we’ve been selling call options to enhance the yield.