Thyssenkrupp: SG welcomes TATA Steel deal.
(CercleFinance.com) - This morning Société Générale (SG) examines the ThyssenKrupp case, after the German group yesterday announced the consolidation of its European steel business with that of the Indian group Tata Steel.
SG analysts approve of the deal, and confirm their buy rating on the ThyssenKrupp stock, in addition to their 12-month target price of 30.8 euros.
Analysts note that with yesterday's announcement of the memorandum of understanding, the much-awaited creation of the joint venture is on track and is set to be finalised by the end of 2018. Even though, of course, all the uncertainties - particularly those related to the due diligence procedure - are not lifted. Expected synergies (around 500 million euros by 2020) should boost the book value of the steel division in ThyssenKrupp's books by about one billion euros. And no asset impairment seems to be necessary. Finally, it is possible that the joint venture will eventually be floated.
In short, according to SG, this joint venture in steel manufacturing "is likely to create more value once demerged from the rest of Thyssenkrupp's remaining businesses," which are more related to mechanical engineering. Analysts now value ThyssenKrupp by a sum-of-the-parts valuation method: i.e. the steel joint venture (5.6 euros per share), and other businesses (30.6 euros per share). A holding discount of 15% is applied to their total, and this gives the target price.
Copyright (c) 2017 CercleFinance.com. All rights reserved.
The information and analyses distributed by Cercle Finance are only intended as decision-making support for investors. Cercle Finance's responsibility may not be entailed, either directly or indirectly following the use of such information and analyses by readers. Any non-professional investor is recommended to consult a professional advisor before making any investment decision. This indicative information in no way constitutes any invitation to sell or buy securities.
SG analysts approve of the deal, and confirm their buy rating on the ThyssenKrupp stock, in addition to their 12-month target price of 30.8 euros.
Analysts note that with yesterday's announcement of the memorandum of understanding, the much-awaited creation of the joint venture is on track and is set to be finalised by the end of 2018. Even though, of course, all the uncertainties - particularly those related to the due diligence procedure - are not lifted. Expected synergies (around 500 million euros by 2020) should boost the book value of the steel division in ThyssenKrupp's books by about one billion euros. And no asset impairment seems to be necessary. Finally, it is possible that the joint venture will eventually be floated.
In short, according to SG, this joint venture in steel manufacturing "is likely to create more value once demerged from the rest of Thyssenkrupp's remaining businesses," which are more related to mechanical engineering. Analysts now value ThyssenKrupp by a sum-of-the-parts valuation method: i.e. the steel joint venture (5.6 euros per share), and other businesses (30.6 euros per share). A holding discount of 15% is applied to their total, and this gives the target price.
Copyright (c) 2017 CercleFinance.com. All rights reserved.
The information and analyses distributed by Cercle Finance are only intended as decision-making support for investors. Cercle Finance's responsibility may not be entailed, either directly or indirectly following the use of such information and analyses by readers. Any non-professional investor is recommended to consult a professional advisor before making any investment decision. This indicative information in no way constitutes any invitation to sell or buy securities.