Beiersdorf BEI
January 11, 2011 - 9:45pm EST by
max318
2011 2012
Price: 45.54 EPS $1.81 $1.77
Shares Out. (in M): 227 P/E 23.0x 23.5x
Market Cap (in $M): 7,246 P/FCF 15.0x 15.0x
Net Debt (in $M): -1,481 EBIT 638 594
TEV ($): 5,836 TEV/EBIT 11.9x 12.8x

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Description

Beiersdorf is a high-quality business - it is a global HPC company with strong brands (Eucerin & Nivea moisturizing cream, skin care, shampoo) and a significant EM presence.  It is overcapitalized and trading at a 1-3x EBITDA multiple discount to comps on temporarily depressed margins.  The discount stems from a recent earnings guide down related to near-term increases in marketing spending.  This is in response to moderate (and reversible) market share losses in 2010. 

Bob MacDonald, CEO of PG, has publicly stated as recently as last fall that PG would be interested in Beirsdorf.  This was before the 4Q fall in the stock price.  HPC acquisitions can have significant synergies (could be up to 10% of sales for BEI / PG, a doubling of BEI EBIT margins).  A near term sale is unlikely, however, because BEI's controlling shareholder (Maxingvest / Herz family) appears unwilling to sell (they are instead investing in new product growth).  PG has been a rumored suitor as far back as 2003, and their interest puts a floor on the risk to the stock.  If BEI's growth strategy misfires, there is likely to be increasing support within the family to sell.  Downside protection also comes from BEI's net cash position which is 22% of their market cap.  BEI could do something shareholder friendly with the cash, but it more likely to acquire in the near term.  Even if they paid a full multiple, an acquisition would still be accretive.

BEI's sales mix has a solid component in emerging market regions (45% between Lat Am, Asia, and Eastern Europe).  It also has an underperforming adhesives division (Tesa), which is 20% of sales and could be sold.  This division is significantly below company average margins.  BEI recently sold a small, non-core skin care brand (Juvena) and appears to be more open to divesting underperforming brands.  OR FP, EL, and Henkel trade at ~11x-13x fwd EBITDA on significantly higher margin structures (at 10 year peaks).  BEI's HSD% growth in emerging market regions should allow organic growth to continue and for it to lever its near-term elevation in SG&A spend by 2012.  Street estimates (below) are now conservative after coming down at the Dec 15th guidance event.  A halfway retracement of EBIT margins back to 2008 levels would put BEI at less than 9x FY12 EBITDA on beatable #'s.  A return to a 12x multiple would offer a 35% return to Euro 56 per share, with free options that the Herz family changes its attitude towards PG's overtures or does something accretive with its excess cash.

 

 

 

 

Beiersdorf

 

             
                 

Price

€41.54

             

Shrs Out Ex Treas

227

             

Mkt Cap

€9,421

             

Add:  Debt

€169

             

Add:  Minority Int

€10

             

Add:  Pension Underfunding

€81

             

Less:  Cash

€2,094

 

E 955M of cash is < 2 yr duration gov and corp bonds.

 

EV

€7,587

             
                 

   Note:  Net Cash

€1,925

             
                 
                 
 

FY 12/2005

FY 12/2006

FY 12/2007

FY 12/2008

FY 12/2009

FY 12/2010

FY 12/2011

FY 12/2012

Revs

€4,776

€5,120

€5,507

€5,971

€5,748

€6,146

€6,195

€6,436

     y/y growth

 

7.2%

7.6%

8.4%

-3.7%

6.9%

0.8%

3.9%

                 

Gross Profit

€3,118

€3,384

€3,677

€3,992

€3,866

     

     % Sales

65.3%

66.1%

66.8%

66.9%

67.3%

     
                 

Core EBIT after 1x

€531

€597

€684

€696

€587

€638

€594

€692

     % Sales

11.1%

11.7%

12.4%

11.7%

10.2%

10.4%

9.6%

10.8%

                 

Core EBITDA after 1x

€693

€780

€806

€810

€722

€804

€760

€856

                 

EBITDA - CapEx

€565

€666

€696

€649

€597

€642

€585

€666

FCF (NI + D&A - CapEx)

€363

€733

€449

€515

€384

€385

€362

€422

CapEx

-€128

-€114

-€110

-€161

-€125

-€162

-€175

-€190

Net Income

€329

€664

€437

€562

€374

€412

€397

€461

EPS

€1.45

€2.93

€2.15

€2.46

€1.65

€1.81

€1.77

€2.05

                 
                 

Multiples

       

 

     

EV / Revs

       

1.3x

1.2x

1.2x

1.2x

EV / EBIT

       

12.9x

11.9x

12.8x

11.0x

EV / EBITDA

       

10.5x

9.4x

10.0x

8.9x

EV / EBITDA - CapEx

       

12.7x

11.8x

13.0x

11.4x

Catalyst

Accretive acquisition (or share repurchase) with substantial net cash position.  Growth & marketing investments allow a resumption to DD% EBIT growth rates in 2012 (after a significant lowering of 2011 expectations on Dec 15th).  PG continues its public expressions of interest in BEI or controlling family shareholder becomes more open to a sale of the company.
    sort by    

    Description

    Beiersdorf is a high-quality business - it is a global HPC company with strong brands (Eucerin & Nivea moisturizing cream, skin care, shampoo) and a significant EM presence.  It is overcapitalized and trading at a 1-3x EBITDA multiple discount to comps on temporarily depressed margins.  The discount stems from a recent earnings guide down related to near-term increases in marketing spending.  This is in response to moderate (and reversible) market share losses in 2010. 

    Bob MacDonald, CEO of PG, has publicly stated as recently as last fall that PG would be interested in Beirsdorf.  This was before the 4Q fall in the stock price.  HPC acquisitions can have significant synergies (could be up to 10% of sales for BEI / PG, a doubling of BEI EBIT margins).  A near term sale is unlikely, however, because BEI's controlling shareholder (Maxingvest / Herz family) appears unwilling to sell (they are instead investing in new product growth).  PG has been a rumored suitor as far back as 2003, and their interest puts a floor on the risk to the stock.  If BEI's growth strategy misfires, there is likely to be increasing support within the family to sell.  Downside protection also comes from BEI's net cash position which is 22% of their market cap.  BEI could do something shareholder friendly with the cash, but it more likely to acquire in the near term.  Even if they paid a full multiple, an acquisition would still be accretive.

    BEI's sales mix has a solid component in emerging market regions (45% between Lat Am, Asia, and Eastern Europe).  It also has an underperforming adhesives division (Tesa), which is 20% of sales and could be sold.  This division is significantly below company average margins.  BEI recently sold a small, non-core skin care brand (Juvena) and appears to be more open to divesting underperforming brands.  OR FP, EL, and Henkel trade at ~11x-13x fwd EBITDA on significantly higher margin structures (at 10 year peaks).  BEI's HSD% growth in emerging market regions should allow organic growth to continue and for it to lever its near-term elevation in SG&A spend by 2012.  Street estimates (below) are now conservative after coming down at the Dec 15th guidance event.  A halfway retracement of EBIT margins back to 2008 levels would put BEI at less than 9x FY12 EBITDA on beatable #'s.  A return to a 12x multiple would offer a 35% return to Euro 56 per share, with free options that the Herz family changes its attitude towards PG's overtures or does something accretive with its excess cash.

     

     

     

     

    Beiersdorf

     

                 
                     

    Price

    €41.54

                 

    Shrs Out Ex Treas

    227

                 

    Mkt Cap

    €9,421

                 

    Add:  Debt

    €169

                 

    Add:  Minority Int

    €10

                 

    Add:  Pension Underfunding

    €81

                 

    Less:  Cash

    €2,094

     

    E 955M of cash is < 2 yr duration gov and corp bonds.

     

    EV

    €7,587

                 
                     

       Note:  Net Cash

    €1,925

                 
                     
                     
     

    FY 12/2005

    FY 12/2006

    FY 12/2007

    FY 12/2008

    FY 12/2009

    FY 12/2010

    FY 12/2011

    FY 12/2012

    Revs

    €4,776

    €5,120

    €5,507

    €5,971

    €5,748

    €6,146

    €6,195

    €6,436

         y/y growth

     

    7.2%

    7.6%

    8.4%

    -3.7%

    6.9%

    0.8%

    3.9%

                     

    Gross Profit

    €3,118

    €3,384

    €3,677

    €3,992

    €3,866

         

         % Sales

    65.3%

    66.1%

    66.8%

    66.9%

    67.3%

         
                     

    Core EBIT after 1x

    €531

    €597

    €684

    €696

    €587

    €638

    €594

    €692

         % Sales

    11.1%

    11.7%

    12.4%

    11.7%

    10.2%

    10.4%

    9.6%

    10.8%

                     

    Core EBITDA after 1x

    €693

    €780

    €806

    €810

    €722

    €804

    €760

    €856

                     

    EBITDA - CapEx

    €565

    €666

    €696

    €649

    €597

    €642

    €585

    €666

    FCF (NI + D&A - CapEx)

    €363

    €733

    €449

    €515

    €384

    €385

    €362

    €422

    CapEx

    -€128

    -€114

    -€110

    -€161

    -€125

    -€162

    -€175

    -€190

    Net Income

    €329

    €664

    €437

    €562

    €374

    €412

    €397

    €461

    EPS

    €1.45

    €2.93

    €2.15

    €2.46

    €1.65

    €1.81

    €1.77

    €2.05

                     
                     

    Multiples

           

     

         

    EV / Revs

           

    1.3x

    1.2x

    1.2x

    1.2x

    EV / EBIT

           

    12.9x

    11.9x

    12.8x

    11.0x

    EV / EBITDA

           

    10.5x

    9.4x

    10.0x

    8.9x

    EV / EBITDA - CapEx

           

    12.7x

    11.8x

    13.0x

    11.4x

    Catalyst

    Accretive acquisition (or share repurchase) with substantial net cash position.  Growth & marketing investments allow a resumption to DD% EBIT growth rates in 2012 (after a significant lowering of 2011 expectations on Dec 15th).  PG continues its public expressions of interest in BEI or controlling family shareholder becomes more open to a sale of the company.

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