Julia
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Re: SUN - Suncorp-Metway
Here's editorial comment on SUN from FNArena below.
Another negative factor influencing this company is its loans to AFG and MFS.
"Suncorp Result Raises Serious Questions
FN Arena News - February 29 2008
By Chris Shaw
Given the company had previously outlined how recent storms would impact on its insurance earnings it is little surprise Suncorp-Metway (SUN) has delivered a profit result broadly in line with market expectations, at least in terms of headline numbers.
But looking deeper into the result gave both Citi and Macquarie reason to be less than positive on the group's outlook, both brokers downgrading the stock to Hold from Buy following further analysis of the released figures. For Macquarie the downgrade comes despite minor increases to earnings forecasts as it expects the market will look more closely at the banking division's outlook and possibly see a few things it doesn't like, particularly with respect to provisioning for bad debts and lower consumer credit quality.
Citi has taken a somewhat different approach in reaching a similar decision, focusing on the insurance division and lowering its forecasts both here and for the group overall to reflect expectations of lower reserve releases going forward. The other issue in the broker's view is the bank's need for capital, as evidenced by the decision to underwrite the dividend reinvestment plan.
Macquarie too notes this and points out management has indicated Tier 1 and Tier 2 capital requirements will likely see hybrid securities issued in coming months. Merrill Lynch expects the rate of reserve increases will slow going forward, it and UBS expecting margins to come under pressure as a result and for this to highlight the need for a capital raising of some kind.
The problem according to Merrills is the need for capital raisings comes at a difficult time in terms of the underlying market environment and the weak share price, so it is little surprise the stock is under pressure.
Having said that the broker argues the share price reaction to the result was too severe as it made only minor changes to forecasts and these don't justify the near 8% drop in the stock that followed the result. But UBS has lowered its earnings estimates by 10-11% post the announcement, so the share price reaction may reflect some catching up of market expectations.
In terms of earnings forecasts going forward UBS now has earnings per share (EPS) estimates of 91c for FY08 and 113c for FY09, while Merrills is forecasting 87c and 132c and Macquarie is at 107c and 157c respectively in terms of adjusted EPS. Thomson One Analytics shows median EPS estimates of 117c and 153c.
While only Macquarie and Citi adjusted ratings post the result price targets have been more widely adjusted, Credit Suisse dropping its target to $20.00 from $23.50 and UBS to $15.00 from $18.00. This brings down the average price target in the FNArena database to $17.99 from $18.87, ABN Amro still leading with its target of $21.35. It is worth noting the broker is yet to update its view post the profit result. Thomson One has a median price target on the shares of $18.00.
The database shows the stock is now rated as Buy four times, Hold five times and Underperform once, this by JP Morgan who simply sees too many issues surrounding the stock given the uncertain economic and financial market conditions, downside risk in insurance rates and the likely amount of reserve releases.
Shares in Suncorp-Metway today have continued their slide in line with a weak overall market and as at 11.50am were down 22c to $14.09."
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Here's editorial comment on SUN from FNArena below.
Another negative factor influencing this company is its loans to AFG and MFS.
"Suncorp Result Raises Serious Questions
FN Arena News - February 29 2008
By Chris Shaw
Given the company had previously outlined how recent storms would impact on its insurance earnings it is little surprise Suncorp-Metway (SUN) has delivered a profit result broadly in line with market expectations, at least in terms of headline numbers.
But looking deeper into the result gave both Citi and Macquarie reason to be less than positive on the group's outlook, both brokers downgrading the stock to Hold from Buy following further analysis of the released figures. For Macquarie the downgrade comes despite minor increases to earnings forecasts as it expects the market will look more closely at the banking division's outlook and possibly see a few things it doesn't like, particularly with respect to provisioning for bad debts and lower consumer credit quality.
Citi has taken a somewhat different approach in reaching a similar decision, focusing on the insurance division and lowering its forecasts both here and for the group overall to reflect expectations of lower reserve releases going forward. The other issue in the broker's view is the bank's need for capital, as evidenced by the decision to underwrite the dividend reinvestment plan.
Macquarie too notes this and points out management has indicated Tier 1 and Tier 2 capital requirements will likely see hybrid securities issued in coming months. Merrill Lynch expects the rate of reserve increases will slow going forward, it and UBS expecting margins to come under pressure as a result and for this to highlight the need for a capital raising of some kind.
The problem according to Merrills is the need for capital raisings comes at a difficult time in terms of the underlying market environment and the weak share price, so it is little surprise the stock is under pressure.
Having said that the broker argues the share price reaction to the result was too severe as it made only minor changes to forecasts and these don't justify the near 8% drop in the stock that followed the result. But UBS has lowered its earnings estimates by 10-11% post the announcement, so the share price reaction may reflect some catching up of market expectations.
In terms of earnings forecasts going forward UBS now has earnings per share (EPS) estimates of 91c for FY08 and 113c for FY09, while Merrills is forecasting 87c and 132c and Macquarie is at 107c and 157c respectively in terms of adjusted EPS. Thomson One Analytics shows median EPS estimates of 117c and 153c.
While only Macquarie and Citi adjusted ratings post the result price targets have been more widely adjusted, Credit Suisse dropping its target to $20.00 from $23.50 and UBS to $15.00 from $18.00. This brings down the average price target in the FNArena database to $17.99 from $18.87, ABN Amro still leading with its target of $21.35. It is worth noting the broker is yet to update its view post the profit result. Thomson One has a median price target on the shares of $18.00.
The database shows the stock is now rated as Buy four times, Hold five times and Underperform once, this by JP Morgan who simply sees too many issues surrounding the stock given the uncertain economic and financial market conditions, downside risk in insurance rates and the likely amount of reserve releases.
Shares in Suncorp-Metway today have continued their slide in line with a weak overall market and as at 11.50am were down 22c to $14.09."
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