Suncorp-Metway Update

Suncorp-Metway has a $24 share price target and a retained Buy medium, Risk rating from Australian stocks analyst Citi Investment Research. Following today's update on the cost of the NSW storms the weekend before last, they lower their FY07E EPS another 3%. This is in addition to the 6% downgrade they posted last week. Suncorp's new belief is that it will hit the maximum retention for both Suncorp and Promina, whereas initially it thought the Suncorp retention was unlikely to be reached. So the new estimated loss of A$160m pre-tax is A$50m ahead of their initial expectations. This earnings downgrade reduces our spot valuation a further 3 cps to A$21.20ps but they retain our A$24.00ps target price and Buy, Medium risk call. Since its last update on 12 June, Promina's claims numbers have risen from 8,500 to 12,000, while the number of Suncorp/GIO claims is up from 3,000 to 7,000. Sentiment towards Suncorp's stock is poor but potential supports to profit include diversification benefits, the claims cost reduction project, a potential uplift to integration synergies and further reserve releases including ~A$170m pre-tax from lowering the probability of sufficiency to 90%. Add this to the strong possibility of a capital return later in the year. A catalyst for Suncorp-Metway stocks is currently lacking but may come as early as the full year results in August.

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!