Ann: Change in substantial holding , page-4

From Today's AFR:



Warrnambool Cheese & Butter Factory is worth $5.08 a share under a takeover scenario, according to RBS Morgans.

Investors and analysts have been quick to value Warrnambool Cheese as a takeover target, after rival diary processor Murray Goulburn Co-operative lifted its stake to 16.3 per cent.

Murray Goulburn has also publicly stated it would continue buying shares on market at $4.60 a share until it reached a 19.9 per cent holding. The move comes soon after Bega Cheese increased its Warrnambool Cheese holding to 17 per cent.

“In our view, WCB is clearly in play,” RBS Morgans analyst Belinda Moore told clients. “It will be interesting to see which company is successful in acquiring WCB and will there be a bidding war.”

Recent dairy transactions have been done at 11.3-times historical earnings and 8.7-times forecast earnings on an enterprise value to earnings before interest, tax, depreciation and amortisation basis.

But Moore said these types of multiples were for large diversified dairy companies with strong retail brands. As such, she reckons Warrnambool Cheese should be valued at 8-times 2014 financial year earnings, or $5.08 a share.

”However given dairy prices have risen strongly in recent months, our FY14 forecasts could prove conservative,” Moore said.

“Therefore there may be upside to the potential takeover price for WCB. In addition, any offer could be sweetened by utilising WCB’s excess franking credits (about A$0.60 per share). This could be utilised in the form of a special dividend to shareholders, providing tax relief and limiting capital gains tax liabilities.”


Source: RBS Morgans