Broker snap: US Lucozade launch could revive Glaxo

24th Jun 2010 11:43

If GlaxoSmithKline pulls the trigger and launches its Lucozade brand in the US, it could be the key to unlocking shareholder value and rectify the stock's underperformance relative to fellow pharmaceuticals giant AstraZeneca, Panmure Gordon reckons.The size of the US market for soft drinks is around $65bn, of which isotonic and energy drinks represent just 6% though, importantly, the market is growing fast."Without doubt, it is the world's most lucrative soft drinks market and GlaxoSmithKline's admission that it is very close to launching its Lucozade brand of isotonic and energy drinks in the US through a licensee could result in a transformation to the consumer healthcare business," Panmure analyst Savvas Neophytou suggests.Neophytou notes that the stock has "derated some 12.5% year to date" and has underperformed the FTSE 100 index by 8.2% and Astra by 16%. "To boot, the company's dividend yield of 6% is relatively secure and the company should benefit from tail winds given sterling's weakness this year against the US dollar,"The broker believes that with the majority of its patent expiries now out of the way, most of the risks are adequately reflected in the price. It has reiterated its "buy" recommendation and is sticking with its 1400p target price.