AMC

Amcor (AMC) has an upgraded broker call of Hold with a share price target of $7.40 from sharemarket analyst Citigroup Investment Research. Amcor's restructuring plans for its European Flexibles business were close to the analyst's expectations. More importantly, the analyst is now factoring in its estimate of the option value associated with potential private equity interest in Amcor. Restructuring: Amcor is undertaking a a long overdue shift to a smaller number of larger plants, with a greater presence in higher growth / lower cost markets of Eastern and Southern Europe. This is expected to deliver €30m EBIT benefit by F10 (~5% earnings uplift). Private Equity Could Afford to Pay $9.40 / Share: This is based on achieving a 15% IRR on a 4 year investment horizon, gearing the business to 73% net debt / EV, reducing costs by $120m, and achieving an exit multiple of 7.5x EV / EBITDA. Their $0.60 / share of "private equity" option value is based on a 25% probability of this scenario occurring. Pressures Remain – The analyst's view on Amcor's underlying businesses remain unchanged. The analysts are particularly concerned about the outlook for Amcor's domestic fibre packaging business, with the high AUD/USD likely to pressure some customers to relocate to lower cost Asian markets.

Amcor (AMC) has been given a Neutral 2 rating and a share price target of $6.75 by stock analyst UBS. They have a DCF based valuation of $6.45. They note that " the stock price is currently being underpinned by the continued public speculation of a possible takeover. In the absence of any bid, we expect the stock to fall back below $7.00. From the tour, we look for signs of an improving US PET industry structure and confidence in the turnaround in Mexico to drive a more positive view."