Gen­eral Mo­tors shares rise as JPMor­gan, Bar­clays ad­vise buy­ing shares

The Pak Banker - - Company& -

MICHI­GAN: Gen­eral Mo­tors Co., the au­tomaker onethird owned by the U.S. govern­ment, rose 2 per­cent af­ter an­a­lysts at JPMor­gan Chase & Co. and Bar­clays Plc rec­om­mended buy­ing the shares 40 days af­ter trad­ing be­gan.

An­a­lysts at Bank of Amer­ica Corp., Mor­gan Stan­ley, Cit­i­group Inc., Royal Bank of Canada and Credit Suisse Group AG also to­day ad­vised buy­ing shares of Detroit-based GM, which raised more than $20 bil­lion through an ini­tial pub­lic of­fer­ing of com­mon and pre­ferred shares last month.

Chief Ex­ec­u­tive Of­fi­cer Dan Ak­er­son, who led GM through the IPO 16 months af­ter it emerged from bank­ruptcy, has said the au­tomaker can make "sig­nif­i­cant" profit amid U.S. sales about 30 per­cent be­low the 16.8 mil­lion unit an­nual av­er­age from 2000 to 2007. Sales may rise to 12.9 mil­lion in the U.S. next year, Michelle Krebs, a se­nior an­a­lyst at Ed­, said yes­ter­day in an in­ter­view with Pimm Fox on Bloomberg Tele­vi­sion.

"As the econ­omy im­proves, the auto mar­ket will pick up and in­vestors are go­ing to boost ex­po­sure in the in­dus­try," Wal­ter Todd, who helps man­age about $900 mil­lion at Green­wood Cap­i­tal As­so­ci­ates in Green­wood, South Carolina, said in a tele­phone in­ter­view.

GM rose 72 cents, or 2.1 per­cent, to $35.32 at 4:15 p.m. in New York Stock Ex­change com­pos­ite trad­ing. The shares have gained 7 per­cent from the start of trad­ing Nov. 18.

GM is on a path to earn $5.9 bil­lion of earn­ings be­fore in­ter­est and taxes in North Amer­ica this year, Brian John­son, an an­a­lyst at Bar­clays Cap­i­tal in New York, wrote in a re­search note. Ebit in North Amer­ica was $4.94 bil­lion through Sept. 30.

De­ferred tax as­sets that stayed with GM through bank­ruptcy are worth $9.18 per share, wrote Adam Jonas, a New York-based an­a­lyst at Mor­gan Stan­ley. The as­sets were ac­cu­mu­lated in part as pre­de­ces­sor Gen­eral Mo­tors Corp. lost $82 bil­lion from 2005 to 2008, and they may al­low GM to avoid pay­ing U.S. cash taxes un­til 2018, Jonas wrote. Of 14 an­a­lysts sur­veyed by Bloomberg, 10 have a "buy" rat­ing on the shares, and four rate GM "hold." The av­er­age tar­get price is $43.45, ac­cord­ing to Bloomberg data.

GM de­buted at a "deep dis- count" to Ford and is trad­ing at 3.9 times earn­ings be­fore in­ter­est, taxes, de­pre­ci­a­tion, amor­ti­za­tion, and pen­sion in­come, wrote Christo­pher Ceraso, an an­a­lyst at Credit Suisse in New York. Ford trades at a mul­ti­ple of 5.5 times, he wrote.

"We think GM's cur­rent dis­count to Ford is jus­ti­fied, but that the gap will close ma­te­ri­ally in 2012 as GM's prod­uct cy­cle hits its stride and Ford's shifts to a lower gear," Ceraso wrote.

GM has said it plans to be­gin build­ing the Chevro­let Sonic small car next year. That will be fol­lowed by the Chevro­let Mal­ibu mid­size sedan in 2012 and Im­pala full­size sedan in 2013, ac­cord­ing to Hi­man­shu Pa­tel, an an­a­lyst at JPMor­gan.

The au­tomaker may gen­er­ate $4.3 bil­lion in free cash flow this year be­fore pen­sion pay­ments, wrote Pa­tel, who is based in New York. At that cash flow, GM could achieve its goal of wip­ing out debt and pen­sion li­a­bil­i­ties by 2013, he said.

GM's Euro­pean op­er­a­tions, which lost $1.2 bil­lion on an Ebit ba­sis in three quar­ters this year, may break even in 2012, wrote Bar­clays' John­son and Pa­tel of JPMor­gan. Mor­gan Stan­ley's Jonas said GM Europe may break even in 2011. "We do not be­lieve that GM Europe is likely to be profitable on a sus­tain­able ba­sis," Credit Suisse's Ceraso wrote. New York Stock Ex­change and Fi­nan­cial In­dus­try Reg­u­la­tory Author­ity rules pre­vent an­a­lysts at firms that man­age IPOs from re­leas­ing re­search for 40 days, ac­cord­ing to the Se­cu­ri­ties and Ex­change Com­mis­sion's web­site. -Bloomberg

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