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RTNominal down27.950 -0.600 (-2.102%)
Research Report

26/11/2019 17:50

{I-bank focus}Global expansion in the making for Mengniu

[ET Net News Agency, 26 November 2019] China Mengniu Dairy (02319) announced the
proposal to acquire 100% shares of Lion Dairy & Drinks (LDD), a leading Australia-based
branded dairy and beverage company, for AUD600mn (or HK$3,187mn).
UBS Global Research cited management on the conference call indicating that synergies
generated from this acquisition would be mainly from (1) moving some of Mengniu's
outsourced premium Ultra-high temperate (UHT) milk production to LDD, and (2) fixing LDD's
loss-making white milk category by increasing Mengniu's raw milk procurement, leveraging
an unveiling new technology.
The research house os positive on this deal, given the potential to leverage LDD's solid
supply chain network in the long term and reasonable valuation. UBS anticipates the
combination of two recent acquisitions (LDD & Bellamy's) could fill in the top-line gap of
Junlebao in 2020, but their earnings impact could be limited at 2%.
UBS maintained its "neutral" call on Mengniu, with a target price of HK$31.42. (KL)

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