A price spike in September did not translate to the September quarter margin from AWAC, given the one-month lag in alumina pricing. As the current price is US$482/t , Credit Suisse increases its December quarter price realisation estimate for Alumina Ltd to US$450/t.
The broker does not believe the current prices is sustainable as supply interruptions should be temporary, although alumina should not return to the low US$300 range.
Credit Suisse does not recommend chasing the stock at the current price and downgrades to Neutral from Outperform. Nevertheless, dividend yields on a 12-month view are expected to be close to 8% and support the current price. Target is $1.90.
Sector: Materials.
Target price is $1.90.Current Price is $2.26. Difference: ($0.36) – (brackets indicate current price is over target). If AWC meets the Credit Suisse target it will return approximately -19% (excluding dividends, fees and charges – negative figures indicate an expected loss).
