Nomura Securities Reiterates a 'Reduce' on Unilever (UN); M&A May Be Best Option

Nomura Securities reiterates a 'Reduce' on Unilever (NYSE: UN), PT lowered to EUR 20.5.

Nomura analyst, Alex Smith, says, "We reiterate our rating on the stock and cut the PT by 4% (more cautious on margins, higher interest costs, higher restructuring charges). The shares are currently trading on 10.3x ’12E EV/EBITDA and discounting >5.0% per annum medium-term sales growth together with 20bps per annum of margin expansion. We view large scale M&A as the best option for Unilever to generate the synergies needed to reinvest and drive growth and would regard an acquisition of Colgate (NYSE: CL) (source: Bloomberg and Guardian, 8 February 2011) at a 30% premium as being 4-10% accretive to our Unilever fair value. In terms of potential negative catalysts, we would point to H1 results due out on 4 Aug where we see risk of margin disappointment and would expect any weakness in the numbers to continue throughout 2011."

For more ratings news on Unilever click here and for the rating history of Unilever click here.

Shares of Unilever closed at $32.38 yesterday.

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