Goldman ups Mondi to 'buy' after recent selloff
Goldman Sachs has upgraded paper and packaging group Mondi to 'buy' from 'neutral', keeping the price target at 2,200p as it said the recent selloff offers an attractive entry point.
GS noted that since the third-quarter earnings on 11 October, the stock is down 11%, underperforming its coverage by 21%.
"Mondi remains the highest-return company in our coverage; recent containerboard price increases are a tailwind for 2018 earnings, as are annual contracts resetting at higher levels. In addition, we expect ongoing capex projects to underpin growth from 2019," the bank said.
It added that its base dividend forecast implies a 3% yield for 2017, which it reckons could be more than doubled through a potential special dividend announcement at the full-year results.
Goldman said key risks include higher-than-expected cost inflation, lower-than-expected economic growth and packaging prices, and adverse FX moves, especially ruble and rand.
At 0910 GMT, Mondi shares were up 1.8% to 1,860p.