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SUN $12.59

Recommendation change

  1. Henrik

    635 posts.
    For those playing the dividend play SUN goes ex. div. early September. (Count your clear 45 days back from 9.Sep.)
    SUN looks good around around $12
    Instalment warrants could be an attractive option.
    Look at SUNIGH
    ==========================================

    From Macquarie:
    Following the release of the first half result in late February, we downgraded its Suncorp-Metway recommendation. This was on the grounds that fear of a material increase in the cost of claims in the Queensland motor vehicle compulsory third party would dampen sentiment until the release of the full year result.

    Scepticism surrounding Suncorp actually achieving the integration benefits from GIO would also add to this negative sentiment.

    We are increasingly confident that the full year result (due in August) will alleviate the concerns. We have obtained commentary from various participants in the Queensland compulsory third party market that suggests claims costs are better than originally estimated.

    We believe further downside in the Queensland market is limited and the worst case will be an increase of $25m in Suncorp’s reserves for future claims.

    Given the proximity to the release of the full year result, the fact investment market downgrades are well and truly in the market and that the stock is trading well below our $14.50 valuation, we have upgraded our short term recommendation to Buy.

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