Reckitt Benckiser has been supported in a downbeat market by a positive broker note pointing to the Cilit Bang group's good track record and prospects.
Starting coverage of the company with an add recommendation and £56 target price, analysts at Numis said:
The record has been exemplary: 14 consecutive years of above-industry average growth and consistently strong free cash flow. The new strategy implemented in February 2012 has justifiably been well-received. Adverse foreign exchange movements will mask continuing underlying progress in 2014, but the effect is predominantly translational and this should remain an excellent stock for medium term funds.
Under the new strategy implemented by the current chief executive in February 2012 (designed to shape another decade of market out-performance), there has been an emphasis on higher margin health and hygiene operations and on boosting emerging market sales.
Reckitt Benckiser Pharma [is] a non-core business whose future will be detailed with the first half results on 28 July. A de-merger appears probable. RBP could be worth £4 plus per Reckitt share but there are currently many information gaps (e.g. how much debt is assigned to it?)
Further M&A is a possibility - the interest in Merck's OTC assets in April proved that Reckitt retains major ambitions.
Reckitt shares are currently 10p better at £50.15.
