SUN – Citi rates the stock as Buy

Allowing for a small reduction in profit as a result of the sale of Capital SMART and ACM Parts to AMA Group ((AMA)), Citi reduces estimates for earnings per share in FY20 by -1%.

As motor claims frequency has reduced, Suncorp is not generating sufficient repair volumes to maximise the use of these shops. Therefore, Citi believes it makes sense to sell these on to another party.

The broker considers the dividend yield and relative value of the stock is attractive despite some short-term pressures. With new hazard allowances, earnings should also have lower downside risk compared with previous years.

Citi maintains a Buy rating and $14.50 target.

Sector: Insurance.

Target price is $14.50.Current Price is $13.62. Difference: $0.88 – (brackets indicate current price is over target). If SUN meets the Citi target it will return approximately 6% (excluding dividends, fees and charges – negative figures indicate an expected loss).

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