One of the best performers on the local market in morning trade has been the Asaleo Care Ltd (ASX: AHY) share price.
At the time of writing the personal care and hygiene company's shares are up 7% to 99 cents.
Why is the Asaleo Care share price charging higher?
With no news out of the company, today's gain appears to be attributable to a broker note out of Credit Suisse this morning.
According to the note, the broker has upgraded Asaleo Care's shares to an outperform rating from neutral.
Its analysts have also given their price target a considerable lift, increasing it from 95 cents to a lofty $1.25. This price target implies potential upside of over 26% excluding dividends even after today's strong gain.
Speaking of which. In August the company elected to suspend its dividend after posting a $101.5 million statutory loss during the first half.
However, due to a significant decline in pulp prices, Credit Suisse expects Asaleo Care's performance to improve meaningfully in FY 2019, allowing its board to resume its dividend.
It has estimated a dividend of 4.6 cents in FY 2019, meaning its shares currently offer an estimated fully franked 4.6% dividend.
And based on the broker's earnings forecasts for next year, the company's shares are changing hands at approximately 18x forward earnings.
Should you invest?
While I do agree that falling pulp prices is likely to put Asaleo Care in a position to return to growth again next year, I feel that 18x forward earnings is about fair now.
As a result, I see more value in other areas of the retail sector in shares such as supermarket giant Coles Group Ltd (ASX: COL) and Super Retail Group Ltd (ASX: SUL). My favourite of the two for valuation and yield reasons is Super Retail at present.
