‘Wind of Change’ Blowing at Amtel

Deutsche Bank analysts have upgraded their rating for Amtel-Vredestein from Hold to Buy, suggesting a 12-month target price of $7.97. “We forecast the pre-tax profits (EBITDA) margin to improve from 12 per cent at present to 15 per cent in 2009 on better retail margins and the cost benefits of producing premium tyres domestically,” the analysts reported.

Deutsche Bank predicts company revenues will grow at a compound annual growth (CAGR) rate of 8 per cent to $1.6 billion in the next eight years. By 2015 EBITDA is predicted to grow to as much as $241 million on the back of increasing sales of Vredestein tyres in Russia and expanding retail operations.

“The stock, in our view, has been severely oversold since its 2005 IPO, as the company did not achieve the announced goals. We believe that Alfa Group, which accumulated a blocking stake in Amtel at the end of 2006 and which is well-known for its ability to turn troubled companies around, will help Amtel realize maximum value from its strategy and improve financial situation,” the analysts conclude.