Back in April, Imperial Leather-owner PZ Cussons (LSE:PZC) announced a review of its Africa operations that could yet lead to the FTSE 250-listed company ditching operations in the continent entirely.
Amid a plummeting Nigerian naira and wider macroeconomic uncertainty in the region, chief executive Jonathan Myers declared “a strategic review of our brands and geographies” in order to refocus “on where the business can be most competitive”.
While PZ Cussons (LSE:PZC)’ management said exiting Africa was not a foregone conclusion, Deutsche Bank analysts today warned that this option of keeping close ties with the continent “looks both increasingly unappealing and unlikely”.
Indeed, if Deutsche’s sum-of-the-parts valuation on PZ Cussons’ Africa assets is anything to go by, splitting it off is the logical course of action.
The bank’s analysts stated: “We believe that the current equity market valuation ascribes little value to the Africa business currently.
“Based on its 10-year average EV/EBIT multiple of 13.8x, we derive a value for Africa from the current shares of £19 million.
“This compares to our estimated £90 million to £150 million value from the potential sale of its African assets.”
Deutsche analysts added that a sale of PZ Cussons’ Africa asset would likely result in a rerating on the company’s shares.
As such, the bank retains a buy rating on the stock, but given the ongoing uncertainty in the business, the share price target has been reduced from 130p to 120p.
At the time of writing, PZ Cussons shares were swapping for 91.1p.