may

MAY – Divestment Momentum returns 30/1/04

MAY has confirmed that it remains in discussions with several parties for the sale of its pharmacy distribution business.

The stock has lagged since the withdrawal of New Clicks as a bidder; as there did not appear to any other obvious trade buyers.

MAY has also confirmed the departure of Pharmacy and Diagnostics head Stephen Roche who was replaced by a separate manager for each business - potentially making an exit from pharmacy easier.

We don't believe that MAY is a passive seller of assets should the right price be offered. With each divestment, the attraction for MAY is a re-rating toward pure injectable pharma multiples trade >25x.

We update shares on issue to reflect progress of current buyback, impact to EPS is 0.9% at FY04e and 3.5% at FY05.

Our NAV is based on modest break-up multiples which support a target price of A$3.87ps (previously $3.85) and our Buy//Medium Risk recommendation. We believe that it will take credible break-up momentum for MAY to realise a more favourable industry average multiple for the balance of the business