Tuesday tips round-up: Reckitt Benckiser, MITIE Group
Reckitt Benckiser has opted for the simplest of formulas to de-merge Reckitt Benckiser Pharmaceuticals, which is laudable. Investors will get one share in the new Indivior for each Reckitt Benckiser share previously held. Yet that does not necessarily mean that much value will be generated. The company has one product, Suboxone, an opioid addiction treatment, and it hopes to develop other forms of it or even new products. For now, however, profits are on the decline, after having fallen by 13% over the first nine months of the year.
FTSE 100
7,895.85
16:59 19/04/24
Mitie Group
116.00p
16:40 19/04/24
Reckitt Benckiser Group
4,167.00p
17:15 19/04/24
A fair valuation would suggest a market capitalisation of approximately £2.7bn for Invidior, whereas the rest of the firm could fetch about £34bn. Together their aggregate value is just below the company’s actual market capitalisation of £38bn. So yes, the de-merger has its merits, chiefly to allow for an easier valuation of the assets by any potential buyers, but don’t expect much more than that, writes the Financial Times’ Lex column.
More bad news at outsourcing giant MITIE was the last thing the market wanted to hear. That, however, is exactly what it got. For a third consecutive year the company took significant write-downs as a result of its exit from mechanical and electrical engineering. The firm was also forced to provision £45.7m linked to the exit from four contracts being carried out by its asset management side. Profits at property and healthcare also went into reverse.
On the positive side of things, the facilities management division saw decent revenue growth. The stock also has the support of a 4% dividend yield. Furthermore, it is selling on 12 times earnings, the order book is strong and next year’s revenues are secured. Even so, “I suspect the company will have to show further progress before they advance further, though. Best avoided for now," says The Times’s Tempus.