Mondi rallies on Smurfit read-across, Credit Suisse upgrade

Mondi, which announced a bumper special dividend last week, rose on Tuesday as news that Smurfit Kappa has rejected a takeover proposal from International Paper and an upgrade by Credit Suisse provided a boost.

CS upped the stock to 'outperform' from 'neutral' and lifted the price target to 2,345p from 2,220p, saying that it's attractively priced. It noted the shares have basically flat-lined over the last 12 months, while earnings prospects and valuation metrics have improved materially.

The bank bumped up it 2018 earnings per share forecast by 6% and its estimate for 2019 by 7%, and introduced a 2020 EPS estimate of €1.89.

"Mondi's strong balance sheet and low cost asset base reduce risk as well as potential for accretive use of capital, adding attraction to the share, in our view. A favourable fundamental backdrop in Mondi's key packaging operations and strong earnings momentum heading into 2018 adds upside to market estimates."

Meanwhile, news that Smurfit has rejected an "unsolicited and highly opportunistic" takeover offer from International Paper was helping to prop up the rest of the sector, with DS Smith also a gainer.

Mike van Dulken, head of research at Accendo Markets, said the news had raised hopes of consolidation in the packaging sector, "one which may not top investors’ list of the most exciting stocks but which has, nonetheless, offered significant share price gains since the 2009 financial crisis lows".

At 0930 GMT, Mondi shares were up 5.1% to 2,003p, while Smurfit shares was 18% higher at 3,004p and DS Smith was up 4.5% to 500.20p.