德银-澳大利亚-纸制品与包装行业-2019年2月财报季预览-2019.2.1-23页_787kb

Paper & Packaging Industry Summary: February 2019 Reporting Season

Core Content Overview

The document provides a detailed analysis of the paper and packaging industry in Australasia, with a focus on three major companies: Amcor Ltd (AMC.AX), Orora (ORA.AX), and Pact Group (PGH.AX). It outlines expectations for their first-half 2019 results, valuation metrics, and key risks and outlooks for the sector.

Key Companies and Their Expectations

Amcor Ltd (AMC.AX)

• Reporting Date: Monday, February 11
• Underlying Net Profit (1H19E): US$336.8m (up 2% on pcp)
• Consensus Estimate: US$330m
• EBIT (1H19E): US$515.2m (flat on pcp)
• Consensus Estimate: US$517m
• Underlying EPS (1H19E): US$29.1c (up 2% on pcp)
• Dividend (1H19E): US$22.0cps (up 5% on pcp)
• Valuation: Target price of AUD16.15, currently trading at a 15% discount
• Rating: Buy

Outlook:

• Expected to meet market expectations
• Full year guidance likely to be reiterated for constant currency earnings and EBIT growth
• Earnings could be affected by hyperinflation accounting in Argentina
• Bemis acquisition remains a key driver for share price
• Flexibles and Rigid Plastics segments expected to show modest growth in the second half

Orora (ORA.AX)

• Reporting Date: Wednesday, February 13
• Underlying Net Profit (1H19E): AUD109.7m (up 4% on pcp)
• Consensus Estimate: AUD113m
• EBITDA (1H19E): AUD235.9m (up 4% on pcp)
• EBIT (1H19E): AUD171.1m (up 3% on pcp)
• Underlying EPS (1H19E): 9.0cps (up 4% on pcp)
• Dividend (1H19E): 6.5cps (30% franked, up 8% on pcp)
• Valuation: Target price of AUD3.35, currently trading at a 7% discount
• Rating: Hold

Outlook:

• Full year result could marginally disappoint due to lower-than-anticipated North American earnings
• North American demand remains flat; higher labor, freight, and paper costs impact performance
• EBITDA and EBIT expected to increase
• Cash conversion may decline due to increased capex and revised aluminium supply arrangements
• Company will provide updates on ERP integration, recent acquisitions, and M&A pipeline

Pact Group (PGH.AX)

• Reporting Date: Wednesday, February 20
• Underlying Net Profit (1H19E): AUD38.4m (down 24% on pcp)
• Consensus Estimate: AUD42m
• EBITDA (1H19E): AUD116.1m (down 4% on pcp)
• EBIT (1H19E): AUD73.6m (down 15% on pcp)
• Underlying EPS (1H19E): 11.4cps (down 31% on pcp)
• Dividend (1H19E): 9.0cps (65% franked, down 21.7% on pcp)
• Valuation: Target price of AUD5.60, currently trading at a 31% discount
• Rating: Buy

Outlook:

• Full year earnings guidance may be upgraded due to easing raw material costs
• Company will provide updates on acquisitions, transformation programs, and CEO search
• Australian earnings expected to decline by 37% due to higher resin and contract manufacturing costs
• International earnings to increase by 24% due to full 6-month contribution from Asian acquisitions
• Net debt to increase, and net operating cash flow to decline

Valuation and Risk Factors

Valuation Methodology

• DCF Valuation: Based on company-specific WACC, target debt/equity ratios, and terminal growth rates aligned with GDP
• Sum-of-the-Parts (SOTP) Valuation: Used for assessing divisions and business units

Key Risks

• Amcor:

  • Integration of recent acquisitions
  • Packaged food and beverage demand
  • Currency movements
  • Loss of major customers
  • Competitor behavior
  • Legislative changes

• Orora:

  • Ability to recover higher costs
  • Integration of acquisitions
  • ERP system delays
  • Changes in the competitive landscape
  • Regulatory risks

• Pact:

  • Loss of a major customer or contract
  • Changes in the competitive landscape
  • Currency movements
  • Legislative changes
  • Changes in industry sectors and consumer preferences

Financial Highlights

Amcor

• Sales Revenue (1H19E): US$4,646.6m (up 3% on pcp)
• EBITDA (1H19E): US$691.7m (flat on pcp)
• EBIT (1H19E): US$515.2m (flat on pcp)
• Net Profit (1H19E): US$281.8m (down 15% on pcp)
• EPS (1H19E): US$29.1c (up 2% on pcp)
• Net Debt (1H19E): US$4.2bn (down from previous period)

Orora

• Sales Revenue (1H19E): AUD2,246.6m (up 7% on pcp)
• EBITDA (1H19E): AUD235.9m (up 4% on pcp)
• EBIT (1H19E): AUD171.1m (up 3% on pcp)
• Net Profit (1H19E): AUD109.7m (up 6% on pcp)
• EPS (1H19E): 9.0cps (up 4% on pcp)
• Net Debt (1H19E): AUD872m (up from previous period)

Pact

• Sales Revenue (1H19E): AUD923.6m (up 14.3% on pcp)
• EBITDA (1H19E): AUD116.1m (down 3.8% on pcp)
• EBIT (1H19E): AUD73.6m (down 15.2% on pcp)
• Net Profit (1H19E): AUD38.4m (down 23.9% on pcp)
• EPS (1H19E): 11.4cps (down 30.6% on pcp)
• Net Debt (1H19E): AUD756m (up from previous period)

Valuation Metrics

Summary

• Amcor is expected to meet market expectations with a slight earnings increase, supported by the proposed Bemis acquisition and easing raw material costs. It is rated Buy.
• Orora may slightly disappoint due to flat North American demand and rising costs, but is expected to reiterate full-year guidance. It is rated Hold.
• Pact is expected to report a decline in earnings, but may upgrade full-year guidance due to easing costs. It is also rated Buy.
• The sector faces mixed conditions, with the potential for earnings growth in the second half of the year.
• Key risks include cost recovery, integration of acquisitions, currency movements, and regulatory changes.
• Valuation models suggest that all three companies are undervalued relative to their intrinsic worth.