Since the third quarter earnings miss in mid-October, the shares have retreated by more than a fifth, leaving the valuation significantly below its peers, argues DB, which has upgraded the stock from ‘hold’ to ‘buy’.
DB reckons that a €750mln special dividend could be on the way on top of the €300mln normal dividend, which is more than 10% of the market capitalisation (roughly €10.2bn) at the current share price and more than half of the upside implied by DB’s price target of 2,150p.
The shares rose 2.3% to 1,860p on the upgrade.
Having jotted a few figures down on the back of an envelope, Deutsche Bank reckons underlying earnings (EBITDA) should approach €1.5bn next year and with larger acquisition targets proving too costly for the company at this stage of the stock market cycle, it sees “theoretic firepower for special dividends at €2bn or more”.
The bank acknowledges that Mondi will find it tough to boost its 20% returns and that new sales momentum from capital projects will only start to accrue in 2019, but it still reckons 7.5% year-on-year growth in adjusted earnings per share is possible next year.