SILVER BULLETS - Espirito Santo Investment Bank incorporating ...

THIRD QUARTER 2010
Reckitt Benckiser
Valuation Metrics 2008 2009 2010E 2011E 2012E
Recommendation: SELL Execution P/E 20.4 16.1 15.7 16.5 15.9
Fair Value: GBP 30.69 Reported P/E 20.4 15.6 15.7 16.6 16.0
EV / Sales 3.3 2.8 2.7 2.6 2.5
Share Price: GBP 31.32 EV / EBITDA 13.5 10.5 10.6 11.2 10.9
Upside / Downside -2.0% EV / EBIT 14.5 11.3 11.5 12.2 11.8
FCF Yield 5.0% 8.1% 6.9% 6.6% 6.9%
Previous Fair Value GBP 35.5 Dividend yield 2.6% 3.2% 3.6% 4.0% 4.4%
% change to fair value -13.5%
Bloomberg: RB/ LN Key ratios 2008 2009 2010E 2011E 2012E
T-One: RB.L
Model Published On: 01 July 2010 EBITDA margin 24.6% 26.7% 25.0% 23.5% 23.3%
EBIT margin 22.9% 24.9% 23.2% 21.7% 21.5%
Capex / Revenue 3.2% 1.9% 2.0% 2.2% 2.2%
Shares In Issue (Less Treasury) 728 Capex / Depreciation 1.93 1.06 1.12 1.22 1.23
Market Cap 22,807 Net Debt / EBITDA 0.7 -0.1 -0.5 -0.9 -1.1
Net Debt -1,016 EBITDA / Net Interest 52.0 -66.1 -29.4 -19.8
Adjustments For Associates & Minorities 0 ROE 34% 36% 31% 27% 25%
Enterprise Value 21,791
Net Pension Deficit 0
P&L Summary 2008 2009 2010E 2011E 2012E
Forthcoming Catalysts Revenue 6,563 7,753 8,188 8,239 8,590
% change 24.6% 18.1% 5.6% 0.6% 4.3%
Half year results 26 July 2010 EBITDA 1,612 2,070 2,048 1,938 2,003
% change 25.6% 28.4% -1.1% -5.4% 3.3%
% margin 24.6% 26.7% 25.0% 23.5% 23.3%
Depreciation & Amortisation -107 -139 -147 -148 -154
EBIT 1,505 1,931 1,902 1,790 1,849
% change 26.5% 28.3% -1.5% -5.9% 3.3%
Execution Analyst % margin 22.9% 24.9% 23.2% 21.7% 21.5%
James Edwardes Jones Associates 0 0 0 0 0
(44) 20 7456 1697 Operating Profit 1,505 1,931 1,902 1,790 1,849
james.edwardesjones@execution-noble.com Net Financials -31 1 31 66 101
Other Pre-tax Income 0 0 0 0 0
Pre Tax Profit 1,474 1,932 1,933 1,856 1,950
Income Tax Expense -361 -474 -483 -483 -526
Minority Interests 0 0 0 0 0
Revenue Breakdown Net Income 1,113 1,458 1,449 1,374 1,423
Execution net income 1,113 1,418 1,449 1,384 1,433
Reported EPS 153.7 200.3 199.0 188.6 195.4
Execution EPS 153.7 194.8 199.0 190.0 196.8
DPS 80.00 100.00 113.00 126.56 139.22
Payout Ratio 52.0% 49.9% 56.8% 67.1% 71.2%
Shares In Issue (Less Treasury) 724 728 728 728 728
Cash Flow Summary 2008 2009 2010E 2011E 2012E
EBITDA 1,612 2,070 2,048 1,938 2,003
Taxes Paid -280 -371 -378 -378 -412
Operating Profit Breakdown Interest Paid / Received -27 -4 31 66 101
Margin Trends
Margin
28%
26%
24%
22%
20%
Developing
Markets
23%
North America
and Australia
29%
Pharma
11%
Developing
Markets
15%
North America
and Australia
29%
Pharma
5%
Europe
43%
Europe
45%
2008 2009 2010E 2011E 2012E
EBITDA margin EBIT margin
Change in Working Capital -36 247 -30 -10 -10
Associate & Minority Dividends 0 0 0 0 0
Other Operating Cash Flow 89 46 65 71 79
Operating cash flow 1,358 1,988 1,736 1,688 1,760
Capital Expenditure -207 -147 -165 -180 -189
Free Cash Flow 1,151 1,841 1,571 1,508 1,571
Acquisitions & Disposals -1,081 0 0 0 0
Dividends Paid To Shareholders -441 -648 -775 -872 -969
Equity Raised / Bought Back -237 163 0 0 0
Other Financing Cash Flow -333 -40 0 0 0
Net Cash Flow -941 1,316 796 636 602
Balance Sheet Summary 2008 2009 2010E 2011E 2012E
Cash & Equivalents 417 351 351 351 351
Tangible Fixed Assets 637 639 657 689 724
Goodwill & Intangibles 6,454 6,090 6,090 6,090 6,090
Associates & Financial Investments 0 0 0 0 0
Other Assets 1,674 1,581 1,660 1,670 1,734
Total Assets 9,182 8,661 8,759 8,800 8,899
Interest Bearing Debt 1,575 136 -665 -1,302 -1,905
Other Liabilities 1,719 3,878 4,744 4,925 5,169
Total Liabilities 3,294 4,014 4,078 3,623 3,264
Shareholders' Equity 3,292 4,012 4,678 5,175 5,633
Minority Interests 2 2 2 2 2
Total Equity 3,294 4,014 4,680 5,177 5,635
Net Debt 1,096 -220 -1,016 -1,653 -2,256
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