EFTA02344660.pdf

From: Richard Kahn < Sent: Wednesday, January 25, 2017 2:32 PM To: jeffrey E. Subject: Fwd: General Motors Company: Making GM Our Top Pick, Price Target to $42 SFL purchased 97,525 shares on =2/9/2010 cost basis 36.77 stock=37.77 this am unrealized gain 97,525 morgan below has target =f 42 Richard =ahn HBRK Associates Inc. 575 Lexington =venue 4th Floor New York, NY 10022 tel =12-971-1306 fax 212-320-0381 cell =17-414-7584 Begin forwarded message: From: =/b>"Morgan Stanley" <[email protected]> Subject: =/b>General Motors =ompany: Making GM Our Top Pick, Price Target to $42 Date: =/b>January 25, 2017 at 12:16:57 AM =ST To: =/b><[email protected]> Reply-To: =/b><[email protected]> <http://www.morganstanley.com/img/cs/spacer.gif> =td class=""> = =/a> =td class=""> =td valign="middle" style="padding: 0cm 0cm 0cm 0cm" class=""> <http://www.morganstanley.com/> =Wealth = Management =/p> =/td> EFTA_R1_01313748 EFTA02344660  Subscription =otification =anuary 25, 2017 =o:p class=—> 4span> <http://www.morganstanley.com/img/cs/spacer.gif> = = =td class=""> =div style="font-size: 10.0pt; color: #666666; font-weight: normal" =lass=""> = = Download =eport = =/div> =/td> = = <http://www.morganstanley.com/img/cs/spacer.gif> General =otors Company: Making GM Our Top Pick, Price Target to $42 Adam Jonas, CFA — Morgan =tanley January 25, 2017 5:02 AM =MT We make =M our top pick in US autos as we update our model following =anagement's 2017 guidance targeting $6 to $6.50 of EPS. We =aise our 2017 est. to $6.32 from $6.09 on Brazil and a lower share =ount. 64% upside to $60 bull case. Key changes to our earnings forecast. Raising our 2017 EPS forecast by =% to $6.32 from $6.09 previously, leaving our estimate slightly above =he midpoint of the company's $6 to $6.50 target. Following this =ncrease, our 2017 and 2018 forecasts are 4% and 1% above consensus =espectively. Nearly all of our EPS forecast is driven by an incremental =1.5bn of share buybacks assumed, taking our combined return of capital =o $5bn for all of 2017 ($3bn buybacks, $2bn dividend). A modest =ncrease in our US mix assumption (more trucks, less cars) rounds out =ur upward forecast revision. Company targets $6bn of auto free cash =low in 2017. We see scope for $7bn of automotive FCF. Our forecast =ncludes $9.2bn of capex, does not include discretionary Pension and =PEB payments and assumes $0.5bn of working capital outflow. We forecast =M to accumulate in excess of $28bn of net auto cash by 2020, equal to =early 60% of GM's market cap. Is this the ideal time to invest =n auto stocks from a cyclical perspective? Not at all. Is the US auto =ycle at some form of a peak? Probably. Are we concerned about a =ear-term cyclical collapse in US auto sales? Due to a variety of =easons (automotive credit, safety-driven replacement demand) we are =ot. Something has to give as we believe the stock market cannot ignore =M's fundamental performance for much longer.Raising price =arget by 5% to $42 on higher earnings and removed cyclical discount to =ur valuation of DTAs. Roughly three quarters of the increase to our =arget is based on removing the 25% discount we had applied to our =aluation of GM's deferred tax assets which we value on a DCF at =7.2bn ($5/share) at a 9% WACC. While we see GM and its OEM peers =roducing substantially lower margins over time in the U This =lert is sent from: 2 EFTA_R1_01313749 EFTA02344661 =ndrew Atlas, =a href="mailto:[email protected]" =lass="">[email protected] Vp> =ou received this because you asked to be alerted to: GENERAL MOTORS COMPANY =br class=""> Please contact your FA if you want to unsubscribe from =he alerts. =/p> =span style="font-size: 10.Opt color: #666666" class=""> = =br class="webkit-block-placeholder"> =span style="font-size: 10.Opt; color: #666666" class=""> = =br class="webkit-block-placeholder"> =!-- end content --> 3 EFTA_R1_01313750 EFTA02344662