Alumina (AWC) Share Trading Recommendation

Submitted by Craig Strzelecki on 5 February, 2007 - 23:18

Alumina (AWC) have a Buy 2 share trading recommendation and a share price target of $7.30 from analyst UBS. AWC has reported an NPAT of A$569m inline with guidance. Guidance was $565-$585m; UBS was at $577m and the market was at $573m. AWC increased its ordinary dividend to 12cps ff (+20%) vs UBS at 10cps ff. The analyst believe the dividend could be lifted again should cash flow surprise on the upside but, notwithstanding, the rebasement provides a new floor for the dividend. AWC also announced they were looking at the potential for an off-market buyback. AWC has again provided NPAT sensitivity to changes in aluminium prices and the US$/A$ exchange rate relative to base FY 06 NPAT of A$569m. Based on AWC’s sensitivity guidance, UBS forecasts suggest that 2007 NPAT should be in the order of A$685m. Our current forecast of $774m appears high, and they will look to revise our numbers to be more in line with guidance. UBS remain positive on Alumina (AWC) underpinned by: 1) consensus aluminium forecasts remain low at cUS110c/lb vs the current price of US128c/lb implying the potential for upgrades; 2) We estimate that a buyback could be +2-3% accretive depending on size; 3) AWC is one of the only companies we cover that trades below replacement cost.

Alumina Limited is listed on the Australian Stock Exchange (ASX) under stock code AWC. You can view their investor website here. AWC was listed on the ASX on 31 October, 1961. Donald Marshall Morley is the chairman for Alumina and John Marlay the CEO. The company as a joint venture interest in bauxite mining, alumina refining, alumina based chemicals and aluminium smelting via its 40 per cent interest in the series of operating entities of Alcoa World Alumina & Chemicals. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade AWC. Check your charts and good luck with your share trading!