2iQ Insider Brief: Reckitt Benckiser Group (RB/: LN) Pernod Ricard (RI: FP) Cleanaway Waste Management (CWY: AU)

Desislav Delchev 5 November 2019

Reckitt Benckiser Group (RB/: LN)

12-month performance: -6%
Insider activity: Bullish
Buying pattern: Purchases from multiple directors
Recent news: Reduced full-year sales growth forecast

Reckitt Benckiser is a consumer goods company that owns a portfolio of health and hygiene brands. Its products, which include Nurofen painkillers, Dettol soaps, and Mucinex cough medication, are sold in nearly 200 countries and used by millions of people across the world every day. The stock is listed on the London Stock Exchange and currently has a market capitalisation of £42.3 billion.

Reckitt Benckiser disappointed investors in late October when it cut its full-year sales growth forecast for the second time this year. Blaming a drop in retail orders for Mucinex in the US, as well as a drop in demand for its Enfamil baby products in China, the group said that it now expects full-year, like-for-like sales growth of 0% to 2%, down from its previous target of 2% to 3%. New CEO Laxman Narsimhan, who joined from PepsiCo in September, described the company’s recent performance as “disappointing” but also said that the group’s current issues are “clear and addressable,” and that performance can be improved.
1 one                     Source: 2iQ Research

Looking at insider transaction activity, we think recent share price weakness has presented an attractive buying opportunity here. We say this because since the group’s recent trading update we have observed purchases from a number of directors, including COO of the group’s health division, Aditya Sehgal, who has spent nearly £150,000 on shares. This suggests that these insiders, who are likely to have a good understanding of the company’s future prospects, expect the shares to rise going forward. In our view, this is a bullish signal.

Pernod Ricard (RI: FP)

12-month performance: +21%
Insider activity: Bullish
Buying pattern: Purchases from multiple insiders
Recent news: Broker downgrades

Pernod Ricard is a French alcoholic beverages company. The group owns some of the most well-known brands within the alcoholic beverage industry, including Absolut vodka, Chivas Regal, Jameson, and Kahlua. The stock is listed on the Euronext Paris and currently has a market capitalisation of €43.9 billion.

We last covered Pernod Ricard in November 2018 when the shares were trading near €145. At the time, a number of brokers had recently cut their price targets for the stock, however, we noticed that top-level directors, including the Chairman and CEO Alexandre Ricard, were buying a substantial number of shares. As a result, we said that, in our view, the shares had the potential to keep rising. In hindsight, following the insider money could have resulted in a profitable trade, as the shares have risen as high as €179 since our last report.

2 two                    Source: 2iQ Research

Over the last two months, Pernod’s share price has pulled back a little on the back of slowing growth in China, and we think this share price weakness has created another buying opportunity. We say this because in late October, we observed a substantial purchase from family holding company Societe Paul Ricard (€23 million worth of shares) as well as a smaller purchase from ex-chair Daniele Ricard. Given that insiders are taking advantage of the recent share price weakness to boost their holdings, we think the outlook for stock remains favourable.

Cleanaway Waste Management (CWY: AU)

12-month performance: +5%
Insider activity: Bullish
Buying pattern: Purchases from multiple directors
Recent news: Profit warning

Cleanaway Waste Management is Australia’s largest waste management company. Employing over 6,000 people, the group serves a wide range of customers, including large multinationals as well as smaller businesses. The stock is listed on the Australian Stock Exchange and currently has a market capitalisation of AUD $3.8 billion

In late October, Cleanaway Waste Management shares experienced their largest intraday fall since July 2009 after the company advised that first-half earnings are expected to be in line with the same period last year. The group blamed the lack of earnings growth on lower economic activity, softness in commodity prices, and lower volumes in Queensland after the state government recently introduced a landfill levy. However, management said that pricing and cost reductions would help the group generate full-year earnings growth. As a result of the recent profit warning, the shares are currently around 27% below their 52-week high.

3 three
                   Source: 2iQ Research

Examining insider transaction activity, we think the recent pullback has created a buying opportunity. This is due to the fact that since the group’s most recent update four directors, including the Chairman, have stepped up to purchase CWY shares, which suggests that these insiders expect the shares to recover. Given that these directors are likely to have a good understanding of the company’s future prospects, we see their purchases as a bullish signal.






















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