Morgan Stanley upgrades to Overweight from Equal-weight, believing an opportunity now exists to buy a quality operator at cyclical lows. AP Eagers has become bigger and more relevant now it has merged with Automotive Holdings.
The broker also envisages more synergies will emerge from consolidating the footprint and advertising/promotions but does not include these items in its estimate for synergies of $115m. Target is raised to $12.80 from $7.00. Industry view: In-Line.
Target price is $12.80.Current Price is $10.50. Difference: $2.30 – (brackets indicate current price is over target). If APE meets the Morgan Stanley target it will return approximately 18% (excluding dividends, fees and charges – negative figures indicate an expected loss).