Broker snap: Britvic could see upside from US franchising, says Nomura

19th Feb 2013 10:15

Nomura has resumed coverage of soft drinks group Britvic with a 'buy' rating, saying it sees upside from US franchising and if the AG Barr merger is revisited.The broker said that while the macro outlook in key Great Britain market "looks challenging for 2013", the first quarter has got off to a good start. Revenues were up 4.8% across the group, "which creates some cushion for softer conditions in later quarters".Nomura said that Britvic's US franchise story "appears to be delivering". If the Fruit Shoot brand becomes as big in the US as it is in the UK, the broker believes that it can ascribe a value per share of 200p to the franchise."With a roll-out now underway in 30 states, we have now the confidence to factor in some value from this (30p per share) into our target price."Meanwhile, the merger proposal between Britvic and AG Barr lapsed after it was announced last week that the tie-up was referred by the Office of Fair Trading to the Competition Commission (CC). Nomura said: "Both Barr and Britvic have indicated that they would like to pursue the proposed merger still; we have allocated a likelihood here of 30% and have included in our target price the value of the Britvic shareholders' share of the £40m synergies disclosed for the merger, based on this assumption (30p per share)."The new 480p target price for the shares comprises 420p value for the discounted cash flow of the core businesses, 30p for the US roll-out of Fruit Shoot as well as 30p for the possible merger synergies with AG Barr.Shares were up 0.3% at 396.2p by 10:30 on Tuesday.BC