Alumina Limited (AWC) Update

Submitted by Craig Strzelecki on 12 April, 2007 - 17:53

Alumina Limited (AWC) has a Neutral 2 stock trading recommendation and a price target of $7.50 per share from analyst UBS. Alcoa reported Q1/07 EPS of US$0.79, slightly above consensus forecasts of US$0.76, and up from US$0.66 in the Q4/06. Management attributed the good performance to "productivity improvements in cost of goods and overheads" and a "focus on higher value-added solutions such as aerospace products, and productivity programs". Alcoa's Minority Interest line came in at US$115m (A$146m) which is generally a good proxy for AWC's NPAT. The analyst was previously projecting H1/07 NPAT of A$361m for AWC which would imply that Q2 earnings would have to be A$215m or 47% higher to reach our forecast. As a result, we have brought our 07 earnings down 7% to reflect lower production in Pinjarra, FX, and costs related to the Guinean strike. The stockmarket analyst expects that Alumina Limited's current off-market buyback program could support the stock in the near term, particularly through the pricing and scale-back periods. Additionally, aluminium prices have year to date held up at >US$1.25/lb which implies that consensus forecasts may be too low at cUS$1.10/lb. However, earnings valuations for AWC relative to BHP, RIO, Alcoa and Alcan remain high.

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!

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