Media Updates, page-8120

Just done some research and I’m taking this Media number with an extreme pinch of salt if not downright lie. This number to me is just a media sensationalism to generate fear and I would suspect again Citi was behind it. Here begins the debunking of truth basing on numbers.

If you read RB’s 2020 report just released last month you’ll find the below key facts

-Nutrition Business Rev £3.29b

-Infant Greater China 25% Rev =£ 822.5m=$1.48B Similar to A2M forecast Rev

-Total IFCN Rev is 85% of Nutrition = £2.797b

-Note 5 says after impairment loss they deemed the new IFCN recoverable business worth =£8.8b Actual asset value will be higher as recoverable value =Estimated asset value - transaction cost etc.

Now from the above calc we arrive the value RB in mind for their IF great China
- £822.5m / £2.797b x £8.8b = £ 2.588b = $4.68 b Aud

Now analyse the profit

-RB entire nutrition EBITA = 14.1% as per their presentation. With IF underperforming and Vitamin business outperforming on margin.

-So let’s tweak the EBIT for RB’s IFCN down a bit to 13%
- look at A2M 178.5m/677.4 = 26.4 % twice of Mead Johnson
- The A2M market cap is at $6.06B

So now the question is

A stagnating Mead Johnson IF business in China with a half the profit margin of A2 during the Covid is worth at least $4.68b in RB’s mind after asset write down. Do you think a 2x profitable business in rapid market expansion in China at the expense of Mead Johnson is fairly valued at $ 6.06b ? I think so , what about you ?

That’s what I have observed from media here, if you listen to the media and without proper research and calcs by yourself , you are most likely get duped. Media will tell you CBA is selling down on A2m and people will be panicking while in fact it’s Citi hiding behind. Of course it would be more than $2b , close to 5b is great than 2b! I wouldn’t be surprised the source would come from Citi HK ....Alas this media shxt is just way over the top. Credibility Reuters ah?