Shares in Unilever (LON:ULVR) have fallen into the red in London in today’s session, as UBS lowered its rating on the Lipton tea and Dove soap maker. The move came after the consumer goods company abandoned its plan to scrap its dual-headed structure and create a single holding company in the Netherlands following stiff opposition from investors.
As of 10:48 GMT, Unilever’s share price had lost 0.45 percent to 4,086.50p, underperforming the benchmark FTSE 100 index which has climbed into positive territory and currently stands 0.64 percent higher at 6,854.75 points. The group’s shares have lost less than one percent of their value over the past year, as compared with a near 12-percent dip in the Footsie.
UBS trims stance on Unilever
UBS lowered its rating on Unilever from ‘buy’ to ‘neutral’ today, while leaving its price target on the shares unchanged at 4,400p. Proactive Investors quoted the analysts as weighing on the FTSE 100 group’s move to scrap its relocation plans, arguing that while the board might come up with a new plan in the future, they thought that the “the removal of this optionality is unhelpful to the stock's valuation in the short term”.
“Longer-term, our sum of the parts analysis suggests up to £51 valuation in a food/home and personal care de-merger scenario, should Unilever simplify its structure and undertake further portfolio change,” the broker added.
Lack of top-line progress
Proactive Investors further quoted UBS as commenting that it was disappointed by the lack of progress in Unilever’s top-line. The broker estimates that the Anglo-Dutch group’s “inflation-adjusted organic sales growth has been deteriorating in recent years; either due to weaker-than-expected growth from its acquisitions, or slower performance in its core business”.