While the size ($750m) of the raising after the adverse ruling in the Business Interruption (BI) case surprised Morgans, the post-tax provision of -$865m appears conservative to the broker.
The company’s underlying earnings trajectory at October remains largely as the analyst expected, and the capital position is considered very robust.
Morgans lowers FY21 cash EPS by over -100% on the adverse finding, while future year earnings are reduced by around -9% on dilution from the raising and minor forecast changes.
The Hold rating is unchanged and the target price is decreased to $5.25 from $5.39.
Target price is $5.25.Current Price is $5.13. Difference: $0.12 – (brackets indicate current price is over target). If IAG meets the Morgans target it will return approximately 2% (excluding dividends, fees and charges – negative figures indicate an expected loss).