Tag: ASX:AMC

Amcor strong share price movement suggests investors are
pricing in an earnings upgrade, but we think a significant EPS upgrade
is unlikely and investors should now take profit or sell covered calls.

Stock price is up 5% from the recent signal low.

Amcor is now under Algo Engine buy conditions, following the higher low formation at $15.75.

Looking out to FY20 we have Amcor generating a combined revenue of $13.5bn, EBIT $1.65bn, delivering 8% EPS growth and trading on a 4.4% yield.

We see value at $15, however, with the defensive nature of the Amcor business, buying interest is likely to build closer to $15.50.

Amcor will begin the integration process of the Bemis acquisition and work through the synergy cost savings, which are targeted to deliver US$180mn in savings.

The euphoria of the “search for yield” in the market, (especially in the last few months following US yields trading lower), has seen Amcor’s share price trade at a premium to global peers. We like the long-term prospects of the company and feel AMC’s relatively defensive earnings profile will remain attractive in uncertain markets.

We suggest adding this one to your watch list and we’ll highlight on the blog when the stock switches from sell to buy conditions.

Our target is to buy AMC closer to $15.00

Amcor has released the scheme booklet for its all-stock acquisition of Bemis with the transaction unanimously recommended by the Boards of both companies.

The Bemis transaction is expected to be completed on 15 May 2019.

AMC reported a solid 1H19 result in February and forecast underlying EPS growth of 3 – 4% supported by US$180m in cost synergies to be realized from the merger over the next 3 years.

Amcor trades on a 4.5% forward yield.  In FY20 we expect the combined revenue to exceed US$14b and EBIT to increase to US$1.7b.

We remain buyers at or near $14.50.

AMC reported 1H19 sales of US$4.6bn, EBITDA of US$678mn and underlying NPAT of US$330mn.

These numbers reflect a relatively flat outcome, based on the same time last year. The key for growth will be the integration of the Bemis business and the $180mn in cost synergies.

Amcor should return to a 3 – 6% EPS growth environment from next year, this supports the 4.4% dividend yield.

In our “Opportunities in Review” webinar series, Amcor was identified as a high conviction buy with an upside target of $14.50.

The stock has rallied $1.00 from the original entry level and we continue to see a re-rating occur, which will see the stock price above $14.00.

Amcor reports half year earnings on the 11th of February. We feel the result may beat the market’s low expectations.

Amcor goes ex-div $0.265 on the 27th of February.  Adding a March $14.25 call option generates a further $0.15 per share of income.

Amcor has been a high conviction buy strategy based on the likelihood of hedge funds covering their short positions in the stock ahead of the Bemis takeover being finalised.

As illustrated on the chart below, the upside target for Amcor is $14.50+.

Amcor