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Glanbia an 'attractive' buy, says Merrion

GLANBIA is an "attractive" proposition for investors, who should expect double digit earnings per share growth in the medium term, a leading stockbroker said yesterday.

In a new report, Merrion Stockbrokers said it expects average earnings per share growth of 12.3pc over the next three years. EPS rebounded in 2010 by 24.1pc after slumping by 14.4pc in 2009.

Aoife Wyer, an analyst with Merrion, said the firm's nutritionals business should be a key driver of growth, worth 30pc of group revenue by 2014, up 7pc on current growth levels.

"The Global Nutritionals division has been the key driving force in Glanbia's expansion over the last five years. Within the division, the Performance Nutrition unit has performed particularly strongly, contributing more than double market growth rates in 2010

"Structurally higher margins from this division should boost the group margin by 70bps over the same period and will boost Glanbia's long term growth profile by circa 50bps per annum.

"Meanwhile average cheese prices have increased by more than 21pc year on year, which will boost top line growth in the US cheese unit," she said.

Ms Wyer also pointed to a resurgent Dairy Ireland business, with average milk prices now 11pc above 2009 levels.

Merrion is forecasting earnings per share to grow by 14.3pc this year, 9.8pc in 2012 and 12.8pc in 2013.

"Trading on a price to earnings ratio of 11 but offering average earnings per share growth of 12.3pc over the next three years, Glanbia's valuation looks attractive," she added.

Merrion currently has a "buy" rating on Glanbia and a target price of €5.75. The stock has been trading at all-time highs in recent weeks, but closed down 2.07pc at €4.72 yesterday.

Irish Independent