Suncorp Metway

Suncorp-Metway (SUN) has a retained Buy/Medium Risk rating and A$15.00 share price target from Australian Stockmarket analyst Macquarie Research Equities.

Suncorp-Metway (SUN) Ltd: Caution may place DRP underwrite on the agenda

Suncorp Metway Limited has an upgraded broker call from Hold to Buy, Medium Risk with a decreased share price target of $23.24 from $24 from sharemarket analyst Citigroup Investment Research. In time, the analyst expects Suncorp to upgrade its pre-tax integration synergy target from A$225m and a capital return may assist the end of the year. Strong general insurance reserving allows scope to support profits. The analyst alters their EPS for the company: FY07E: -11%; FY08E: +1% FY09E: +10%. These changes allow for the Promina acquisition including pre-tax synergies of A$275m, A$50m more than that currently promised by Suncorp, and the recently advised 12% 3Q07 drop in Qld CTP premium. The EPS growth profile is relatively lack lustre but at this price, the analyst still sees value.Valuation not too demanding: While the analyst could hardly describe Suncorp as cheap, it is currently trading on around 12.3x FY09E earnings and close to the analyst's new spot valuation of A$21.30ps. In a market that otherwise looks fairly fully valued, this does not appear particularly demanding. The fully franked dividend yield from Suncorp-Metway, potentially supported by capital returns, is also attractive and recent banking volume/risk product sales growth also appears encouraging. Integration risk significant: the analyst still believes that the Promina integration is likely to be tricky – it involves merging a centralised and decentralised culture – and there is risk of revenue fallout. But if there are hiccups, the impact is unlikely to be for a while and in the meantime the positive news should dominate.

Suncorp Metway (SUN) has a Neutral 2 Shares recommendation and a share price target of $22 from stock analyst UBS. The analyst have noted that the ACCC today released a Statement of Issues in relation to the proposed SUN/PMN merger. They view the release as a modest statement with no issues falling into the highest category of concern. The key concerns identified were 1) removal of a vigorous competitor 2) entry barriers in QLD CTP and 3) barriers to expansion in motor. UBS estimates that SUN is trading on a 12.8x FY08E PE.