Broker snap: Panmure upgrades PZ Cussons after Rafferty's Garden acquisition

2nd Jul 2013 09:49

Panmure Gordon has upgraded its rating for consumer-products group PZ Cussons (PZC) from 'hold' to 'buy' after the company announced the purchase of Rafferty's Garden on Tuesday."The shares have pulled back lately to around the 350p level from c.400p, and we think this represents an attractive entry point," the broker said, as it raised its target price for the stock from 400p to 411p.Rafferty's Garden, a leading brand in the Australian wet baby food market, has been snapped up by the Imperial Leather and Carex owner for £42.2m.Panmure said that this was an "attractive entry" into the food and nutrition market in the Asia Pacific region."Rafferty's Garden has taken the Australia baby food market by storm over the past six years, selling nutritious products in convenient pouches. From Heinz having a dominant position in the market, Rafferty's Garden is now the leader in the wet category with a c.40% market share and a growing share in the infant dry and snacks market."The broker said that the with the acquired company being in the early stages of developing an export business to countries in South-East Asia, it will fit in well with PZC - the leading baby toiletries firm in Indonesia - and help with its international roll-out.Panmure expects the deal to be 2.0% accretive to PZC's earnings per share (EPS) in the first full year of ownership and has upped its current full-year (ending May 2014) EPS forecast from 18.49p to 18.85p and the 2015 estimate from 20.55p to 20.94p.As for the PZC's full-year results due on July 23rd, the broker expects a return to good growth following a difficult year in 2012. Profit before tax and EPS are pencilled in to both increase by 13.8% to £105m and 16.77p, respectively.The stock was up 1.97% at 362p by 09:55 on Tuesday.