By Jason Fittler

CSR has announced the composition of it's A$800m capital management initiative and a 3:1 share consolidation.

The special dividend (and associated franking benefit) was below our expectations but we believe today's announcement will focus attention on inherent valuation upside. CSR has announced the composition of it's previously announced A$800m capital management initiative, having completed the sales of Sucrogen and its Asian businesses.

This component of the capital management was below our expectations of A$200m-300m. This reduces the value of the franking credits, although in our view these were not represented in the share price.

Although the lower than anticipated special dividend, and associated franking benefits modestly disappoints us, we continue to view CSR as cheap at current levels.

Adjusting for capital management (53cps), CSR is trading at 12.2x the Financial Year 2012 earnings, which we view as attractive value given the below average earnings which we forecast in Financial Year 2012.

Our valuation ex-capital management is A$1.48, or A$2.01 including capital management, which is our target price and represents 17.5% upside from the current share price.

We retain our Buy recommendation.

For more information on CSR Ltd please contact us on 07 4771 4577.