The combination of Amcor and Bemis creates the largest plastic packaging company in the world, Morgans notes, with the deal significantly enhancing Amcor’s presence in North America.
Nevertheless, the broker remains concerned about the fall in return on funds employed (ROFE). ROFE is estimated to fall to 16% in FY22 from 19% in FY18.
The acquisition will therefore be dilutive to returns, despite assumptions that management will deliver on the cost synergy targets. Morgans maintains a Hold rating and raises the target to $15.55 from $14.14.
Target price is $15.55.Current Price is $15.70. Difference: ($0.15) – (brackets indicate current price is over target). If AMC meets the Morgans target it will return approximately -1% (excluding dividends, fees and charges – negative figures indicate an expected loss).