Ardagh Group S.A. (NYSE: ARD) - Strong Buy Recommendation - $22.50 Event Price Target

The 25-day quiet period on underwriter analyses that began with the March 15, 2017 IPO of Ardagh Group will come to an end on April 9, allowing the firm's IPO underwriters to publish reports and recommendations of the company on April 10.

Ardagh Group's share price will likely see a temporary increase as a result of the release of underwriter reports, according to our firm's research.

In a tricky IPO environment ARD outperformed and has continued to perform very well on the market. Backed by a very powerful group of underwriters, ARD could have significant support coming into the expiration of its quiet period. A likely release of positive research reports once restrictions are lifted could yield a ~3% increase in stock price.

We previously highlighted this event on our IPO Insights platform.

Early Market Performance

ARD went public on 3.14.2017, pricing at $19, close to the high end of its proposed range $17-$20. The company was able to raise $308M by offering 16.2M shares. First day return was an impressive 20.6%, followed by a slight -7.6% pullback in the after-market.

Shares now trade at $21.30 (market 4/3/17).

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Business Overview: Maker of Rigid Packaging Solutions

According to its company website and SEC Filings, Ardagh Group S.A. manufactures and markets value-added rigid packaging solutions to over 2,000 clients across over 80 countries, with the primary markets in North America, Europe, and Brazil. Their metal and glass containers are made mainly for the food and beverage industry, which Ardagh describes as being characterized by stable, consumer-driven demand.

End-use categories for their products include beer, wine, spirits, soft drinks, juice, flavored waters, and energy drinks, in addition to food, seafood, and nutrition.

The company also supplies the chemical, paint, personal care, general household, and pharmaceutical industries.

The product portfolio includes oval, rectangular, and conical shaped aluminum, and steel cans for both single and multi-serve use; steel and aluminum aerosols; glass jars and bottles; kegs; single-serve bowls, and customized products such as coffee cans, peanut cans, rectangular steel boxes, and cigar boxes.

Ardagh Group has approximately 23,500 employees, 109 production facilities across 22 countries, 74 metal production facilities, and 35 glass production facilities.

Ardagh Group S.A. was formerly known as Ardagh Glass Group S.A. and changed its name to Ardagh Group S.A. in January 2011. The company was incorporated in 1995 and is based in Luxembourg. It has production facilities in the Americas, Europe, and the Asia Pacific.

Management Team

CEO Ian Curley joined Ardagh Group in June 2016 and became Group Chief Executive Officer in September 2016. Prior to joining the company, Mr. Curley was Group Chief Financial Officer of Smurfit Kappa Group. He is a Fellow of the Institute of Chartered Management Accountants (Ireland).

Chairman and Director Paul Colson began his career at Price Waterhouse in London and Dublin. He is a Chartered Accountant. He founded the accounting firm Yeoman International in 1980, and he has been involved with Fanad Fisheries, and Sterile Technologies. He has been involved with Ardagh Group since 1998.

Competitors: Anchor Glass, Crown Holdings, Ball Corporation, and Others

Ardagh Group faces competition in both the metal and glass packaging categories. These companies include Anchor Glass, Owens-Illinois (NYSE:OI), Verallia, Vidrala, Silgan Holdings (Nasdaq:SLGN), Crown Holdings (NYSE:CCK), and Ball Corporation (NYSE:BLL).

Using last twelve months' sales, ARD is priced (price-to-sales) in line with its industry average of 1.1.

Conclusion: Powerful Underwriters Could Boost Share Price at Quiet Period Expiration

Ardagh's IPO underwriters could likely seek to publish positive reports on Ardagh's recent strong growth with the conclusion of the quiet period. This far reaching and influential team includes: Citigroup Global Markets, Deutsche Bank Securities, Goldman Sachs, Barclays Capital, Credit Suisse Securities, J&E Davy, J.P. Morgan Securities, and Wells Fargo Securities.

Ardagh has not only performed well on the market but continues to be valued reasonably with regards to its competitor group.

Event driven investors could consider this an opportunity for a short-term trade or a longer-term hold for a promising company.

We suggest buying ARD shares prior to the IPO quiet period expiration date of April 9.