Kering: Oddo still on hold
(CercleFinance.com) - Oddo completed an analysis this morning following recent press articles mentioning the proposal that Kering appears to have made to Richemont at the start of 2021 for a cash and paper offer, a proposal that does not seem to have been followed up.
The analyst underlines that Richemont's Chairman publicly reiterated during recent meetings with the financial community that the group remains open to cooperation but is definitely not up for sale.
Both companies do not seem to suffer from any shortfall in size at this stage, with each appearing to have the means to develop their key franchises, Oddo says.
The broker also points out that a Kering offer would necessarily include a significant paper component, which would result in a substantial increase in the number of Kering shares in issue.
These items indicate that, assuming that Richemont is open to such a combination - and this does not seem likely at this stage - the possibility of a deal depends on both parties being able to agree on a relative Richemont/Kering valuation level. The broker believes that this agreement seems very difficult to reach today, given the respective trends of the two shares over the recent past. It would clearly be too early today to negotiate such a combination, analysts say.
Analysts remain cautious about Kering (Neutral rating, target price 563 euros - current price c. 570 euros, -1%) because they believe that Gucci will remain in a transitional phase over the next few quarters and are reluctant to count on a return to growth in line with that of sector majors.
Regarding Richemont, analysts believe that the recent re-rating is based on the expectation of a sustainable change in the status of its Jewellery division (structural growth as high as that of soft luxury majors) and on a visible improvement in the situation of YNAP and other businesses (Underperform rating, target price of 68 Swiss francs: current price c. 91 Swiss francs, -0.7%).
Copyright (c) 2021 CercleFinance.com. All rights reserved.
The information and analyses distributed by Cercle Finance are only intended as decision-making support for investors. Cercle Finance's responsibility may not be entailed, either directly or indirectly following the use of such information and analyses by readers. Any non-professional investor is recommended to consult a professional advisor before making any investment decision. This indicative information in no way constitutes any invitation to sell or buy securities.
The analyst underlines that Richemont's Chairman publicly reiterated during recent meetings with the financial community that the group remains open to cooperation but is definitely not up for sale.
Both companies do not seem to suffer from any shortfall in size at this stage, with each appearing to have the means to develop their key franchises, Oddo says.
The broker also points out that a Kering offer would necessarily include a significant paper component, which would result in a substantial increase in the number of Kering shares in issue.
These items indicate that, assuming that Richemont is open to such a combination - and this does not seem likely at this stage - the possibility of a deal depends on both parties being able to agree on a relative Richemont/Kering valuation level. The broker believes that this agreement seems very difficult to reach today, given the respective trends of the two shares over the recent past. It would clearly be too early today to negotiate such a combination, analysts say.
Analysts remain cautious about Kering (Neutral rating, target price 563 euros - current price c. 570 euros, -1%) because they believe that Gucci will remain in a transitional phase over the next few quarters and are reluctant to count on a return to growth in line with that of sector majors.
Regarding Richemont, analysts believe that the recent re-rating is based on the expectation of a sustainable change in the status of its Jewellery division (structural growth as high as that of soft luxury majors) and on a visible improvement in the situation of YNAP and other businesses (Underperform rating, target price of 68 Swiss francs: current price c. 91 Swiss francs, -0.7%).
Copyright (c) 2021 CercleFinance.com. All rights reserved.
The information and analyses distributed by Cercle Finance are only intended as decision-making support for investors. Cercle Finance's responsibility may not be entailed, either directly or indirectly following the use of such information and analyses by readers. Any non-professional investor is recommended to consult a professional advisor before making any investment decision. This indicative information in no way constitutes any invitation to sell or buy securities.