Suncorp-Metway (SUN) Update

Suncorp-Metway (SUN) has a Neutral 2 rating and a price target of $23.20 per share from analyst UBS. Federal court has approved the merger and the prospectus has been lodged. In receiving Federal Court approval for the merger scheme, the SUN/PMN merger today satisfied all requirements to proceed. The merged group will begin trading on 20 March. SUN also released the prospectus for the $1.17b entitlements issue. There are two new SUN shares for each fifteen, at $15.50. The $15.50 issue price represents a 27% discount to the last traded price, and is 25% below the theoretical ex-entitlements price. The bookbuild will take place on the 15th, with trade recommencing on the 16th. A second bookbuild will occur on 13 April for renounced retail entitlements. They estimate that the merger will be slightly dilutionary (c0.5%) in FY09E. In our view, the merger would be EPS neutral if synergies are 7% above the company's $225m pre-tax estimate. Based on SUN's latest closing price of $21.25, the analyst estimates that the combined group is trading on a FY08E PE of 13.5x, a 3% discount to a weighted composite comparable. Post-merger risks to upside (synergies, releases, capital management) & downside (revenue attrition, integration costs). GI preference: (1) QBE (Buy 2, $34.35 PT: locked in growth, acquisition upside); (2) IAG (Buy 2, $7.05 PT: improved pers lines, offshore upside, SUN/PMN attrition); & (3) SUN. Our PT is SOTP based.

Suncorp-Metway Limited is listed on the Australian Stock Exchange (ASX) under stock code SUN. You can view their investor website here. SUN was listed on the ASX on 7 July, 1988. John Story is the chairman of Suncorp-Metway and the CEO is John Mulcahy. The Suncorp Group is one of Australia's leaders in banking, insurance, investment and superannuation. The Group focuses on retail consumers and small to medium businesses. Providing banking, insurance, superannuation and funds management products and services to the retail, corporate and commercial sectors. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade SUN. Check your charts and good luck with your share trading!