Investors unsettled after IMF withdraws from discussions with GreeceLeading shares are - unsurprisingly - on the slide after the latest Greek developments saw the International Monetary Fund, one of its trio of lenders, leave the negotiating table.But there are some bright spots among a - so far - downbeat day. BT is up 2.2p at 449.05p despite watchdog Ofcom proposing controlling the prices the company can charge for some of its high speed business lines. Investors have been buoyed in recent days for the prospects of BT’s television service, following the launch of its Champions League plans.We raise our 12-month price target to 3,600p and reaffirm our view that Imperial offers the most attractive near-term risk-reward in US and European tobacco ahead of today’s Reynolds-Lorillard merger closing. We see potential earnings per share accretion of around 16%, suggesting pro forma 2016 earnings per share of 245p.We remain confident in our view of the transaction’s financial benefits, which reflect an expectation of: (i) close to $800m in EBITDA from the acquired business (post-synergy and pricing reinvestment) and an around 3.75% cost of financing; (ii) A related amortization tax shield; and (iii) Very modest refinancing of existing debt. For now...the market remains on the back foot and with many starting to fear the worst with regard to Greece, it will be wholly understandable if we spend the remainder of the day in a rather subdued mood. The FTCs decision to challenge Synergy’s merger with Steris has precipitated a sharp fall in the share price to a level we think looks compelling whether Synergy remains independent or not. If the merger completes, then a quick 20% plus return is possible. If not, then we expect Synergy to be more explicit in its growth ambitions, which in turn should lead to forecast upgrades. We therefore move the stock back onto the buy list. Continue reading...
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