Credit Suisse sees potential for increased payouts at IAG, reiterates outperform

31st Oct 2016 11:19

(ShareCast News) - Credit Suisse reiterated its 'outperform' stance on shares of IAG Group, pointing to the carrier´s upcoming Capital Markets Day as a potential catalyst for confidence in the firm and its self-help measures.The Swiss broker´s analysts cut their estimate for the airline´s 2016 earnings before interest and tax by 4% to €2.5bn to reflect IAG´s own guidance but retained their target price of 469p for the stock.IAG´s CMD on 4 November would help build confidence around the resilience of British Airways´s top-line growth in its premium segment, the analysts emphasised.New BA chief Alex Cruz was also expected to unveil new self-help initiatives centred on increased efficiency at BA.Credit Suisse saw the potential for €1bn of opportunities from such measures.Furthermore, the company´s future cash distributions might become more compelling, althought that would depend on the resilience of the firm´s revenues, Credit Suisse said.Key to the outlook for the company´s future payouts was the £150m cap on BA´s requirement to top up its New Airways Pension Scheme, beyond its fixed £300m annual payments.Previously, the company had been obliged to match dividends with top-ups.Hence, Credit Suisse now expected cash distribution to shareholders to build as a theme, with an increase in the dividend payout from 25% to 35% possible "in due course".A lot of the targeted between €1.5bn and €2.5bn in annual free cash flows, equating to between 7.5% and 12.6% of the company´s market capitalisation, was "distributable", the broker said.