On Wednesday, Deutsche Bank adjusted its outlook on PZ Cussons PLC (PZC:LN), reducing the price target to GBP1.20 from the previous GBP1.30 while maintaining a Buy rating on the stock. The revision reflects considerations of the company's strategic review of its Africa division and the impact of currency devaluation.
PZ Cussons, known for its range of personal care and consumer products, had indicated earlier in April that it was reviewing its Africa operations, a move that could lead to various outcomes, including the retention of the status quo. However, the substantial devaluation of the Nigerian currency, the Naira, has made the option of inaction less attractive and highly improbable.
The equity market valuation currently places minimal value on the company's African business, according to Deutsche Bank's analysis. The bank estimates the African assets' worth between GBP90 million and GBP150 million, potentially obtainable through a sale. This valuation is significantly higher than the GBP19 million implied by the current share price when applying a 10-year average EV/EBIT multiple of 13.8x.
The analyst from Deutsche Bank noted that the shares of PZ Cussons, which are currently trading at approximately 8.5 times EV/EBIT, could experience a re-rate post any successful transaction or strategic shift. This perspective underpins the continuation of the Buy rating despite the decrease in the price target. The updated forecasts have necessitated the adjustment from 130p to 120p.
The strategic review and subsequent decisions by PZ Cussons are closely monitored by investors as they could significantly influence the company's financial structure and market valuation.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.