The first half earnings fell -58% because of a sharp reduction in high-margin infant formula volumes and associated manufacturing efficiencies with low off-season dryer utilisation.
Nevertheless, Synlait Milk is trading on a record discount to book value for a business with hard assets and proven world-class manufacturing capability, the broker asserts.
UBS lowers estimates by -94% for FY21 and -18% for FY22, reflecting a temporary increase in manufacturing unit costs and lower basic ingredient price premiums. Buy rating retained. Target is reduced to NZ$5.55 from NZ$5.75.
Sector: Food, Beverage & Tobacco.
Current Price is $3.12. Target price not assessed.
S32 – SOUTH32 LIMITED Macquarie rates the stock as Outperform –
The divestment of the South Africa Energy Coal business, which has been loss-making over the past three years, is set to be completed. Macquarie notes this is a key catalyst as the sale simplifies the business.
Meanwhile, earnings upgrade momentum has improved because of stronger silver, nickel and manganese prices. A spot price scenario generates earnings largely in line with forecasts and Macquarie retains an Outperform rating and $3.10 target.
Sector: Materials.
Target price is $3.10.Current Price is $2.84. Difference: $0.26 – (brackets indicate current price is over target). If S32 meets the Macquarie target it will return approximately 8% (excluding dividends, fees and charges – negative figures indicate an expected loss).
