UPDATE: Credit Suisse Reiterates Outperform Rating, Raises PT on Sappi Limited

In a report published Friday, Credit Suisse Group reiterated its Outperform rating on Sappi Limited SPP, and slightly raised its price target from $4.15 to $4.45. Credit Suisse noted, “The economic backdrop is weak and graphic paper demand is declining. In this environment, we see Sappi delivering a better performance than the overall industry. The key to the relative improvement comes from the restructuring of its operations in Europe and South Africa, on track to deliver annual cost savings of US$130m by 2013. In addition, we see the announced product mix change (from coated fine to specialty) at the Alfeld mill in Germany delivering $20-30m to EBITDA from the end of 2013. Substantial investments in chemical cellulose should provide value added and earnings accretive top line growth from mid-2013 onwards, on our estimates. We expect cost control, increased chemical cellulose capacity and lower financing costs to deliver robust earnings growth in spite of overall challenging market conditions. From the latter part of 2013, as heavy capex draws to an end, we see a strong improvement in cash flow and significant debt reduction adding to the attraction of the share. We expect a dividend of 15c to be introduced for the fiscal year 2014 as net debt/EBITDA should be comfortably below 2x, on our estimates.” Sappi Limited closed on Thursday at $2.98.