Gsk Share Discussion Threads

[jonjoneil] 20/6/2022 16:32

The value of GSK shares will be reduced after Haleon is taken out. I think consolidation is the process of reducing the number of GSK shares to bring the value of each new share to approximate the price immediately before the split. So you will have less GSK plus Haleon (to equal the value of your pre-split holding).
So, in theory, if you sold your Haleon shares immediately after issue, and brought new GSK with the proceeds you would end up with the same number of GSK shares that you had pre-split

I'm prepared to be corrected.

[maxplus2] 20/6/2022 15:46

Received this Corporate Action regarding GSK. What do they mean by consolidation?Consolidation of GSK shares at a rate yet to be determined, effective 19th July 2022.

[tradermichael] 20/6/2022 11:49

Thanks anhar!

[alphorn] 20/6/2022 11:49

It will be interesting to see how the (country) source of the income streams and the point of dividend payments pans out.

[anhar] 20/6/2022 11:45

I have little interest in capital valuations and fluctuating market prices or "valuations" here. In this situation I just have a general expectation, based on lengthy experience, that over time it will benefit me, despite as I said, the initial combined income being a lot less than old GSK. I accept that it may not work out that way, that's the risk I take, but doing nothing, in my strat, is nearly always the best approach in the end.

[tradermichael] 20/6/2022 11:30

Ok, so if it happens that one is overvalued and the other is below your target level of return, you sell out the undervalued one? Surely 'Day 1' valuations will be a bit skew before the market settles them down?

[tradermichael] 20/6/2022 10:46

anhar:

I have always liked your investment strategy (investing for dividend income). Sure, we'll end up with two companies in the FTSE100 but accompanied by a net cut in dividend. Its at what point after the 'split' do you consider ownership of two distinct companies in your valuations?

[anhar] 20/6/2022 10:34

TM: ...I hate demergers and consolidations!

I love 'em.

Speaking purely as an income investor with a large diversfied port, and most shares in it held very long term, I have found corporate actions like this to be overwhelmingly beneficial over time to my port income - and capital value too though that's not why I invest. And that's even the case in a demerger like here where the initial income from new GSK + Haleon will be substantially less than old GSK.

This is just from my personal strat viewpoint as an income player. It usually works out well provided investors have patience to hang on to the new corporate arrangements and don't make short term decisions based on some press or broker comment or whatever. Just do nothing is my approach and you are likely to be rewarded. Not every time, there are no certainties with equities but if I look back over the decades of income investing, this sort of thing has been much more beneficial than not, despite the odd poor outcome.

[keyno] 20/6/2022 09:17

Many thanks, Glorious. When you put it like that it is rather obvious...........

[geckotheglorious] 20/6/2022 09:01

Keyno
Post 29845
"I don't understand why H is being saddled with all the debt. It can't just be the prospect of jam tomorrow for Haleon, surely? What am I missing (apart from a bigger brain...............)? Would somebody be kind enough to explain?"

It's obvious why Haleon is being saddled with all the debt.
Haleon has most of the cash flow that pays the dividend.

New GSK, on its own doesn't have the predictable cashflow to cover both debt payments and divi - and given said cashflow is likely to be lumpy, it makes sense to saddle the cash cow with as much of the debt as possible leaving new GSK free to ramp up R&D spend - for this is what the company will now live or die on - R&D success and resultant moneyspinning blockbusters.

[tradermichael] 19/6/2022 18:05

Well, I've made a great deal of money on these over the years both from buying and selling and from the dividends that I have continually reinvested.

I would be happy to stay invested in new GSK if the dividend was not due for a cut, and I'm not keen on staying in Consumer Healthcare as a stand-alone company.

I'd be happy to sell out both entities for now, providing I can get above my break even.

I hate demergers and consolidations!

[lippy4] 19/6/2022 13:15

which one is going to pay the largest divi,gsk i expect so that is the answer..

[keyno] 19/6/2022 12:17

I think the article quoted above is from Proactive Investors. What it says to me is sell before split and buy back GSK only after split, for growth.

[sajad37] 18/6/2022 21:47

13:00
What investors need to know as GSK and Pfizer spin off Haleon

Some analysts see the valuation well short of the £50bn tabled by Unilever, while others reckon GSK will have divested itself of a major "headache"

GSK PLC -
Sensodyne is one of Haleon's big brands
When Haleon PLC is spun off from GSK PLC (LSE:GSK, NYSE:GSK) next month it is expected to be the biggest stock market listing of the past decade.

The indicative valuation is £42bn, which begs the question why did the UK drugs giant and its partner Pfizer turn down a £50bn offer from Unilever?

This, we’ll never ascertain. The deal affects thousands of private investors, many former GSK employees.

So, here’s what you need to know.

Timetable
July 6 – Approval for the demerger to be given by shareholders. A formality, the event is convenient for international investors as it is being staged at a hotel within the Terminal 5 complex at Heathrow.
July 15 – The first part of the separation process begins. This is being done via what’s called a scrip dividend, which means each GSK investor as of the close on the 14th gets shares in the consumer business. GSK will trade on July 15 without the entitlement to shares in Haleon. Its stock is also being consolidated, which means there will be fewer shares in issue. This is to ensure the impact on the share price of the Haleon demerger is mitigated.
July 18 – Haleon shares begin trading in London.
July 22 – Haleon’s stock will be listed in the US.
July 27 – GSK’s second quarter results. This will be the first glimpse of how the slimmed down GSK is performing.
November 10 (or sometime around then) - Pfizer’s ‘lock-up’; ends. So, this is a biggie. Normally, significant shareholders such as Pfizer would be asked not to sell equity for at least six months to allow normal trading patterns to be established post-demerger. In some instances, that lock-up period has been known to extend to 18 months or two years. Pfizer, which will own 32% of Haleon, will be released of that obligation in around four months. While the American drug giant has said it will beat an orderly retreat, the market will view the Pfizer stake as a stock overhang situation. This description imagines the shares are a rock and rubble overhang on a cliff wall that has the potential to dislodge then hit and hurt the climbers below. The stock overhang can hit and hurt the share price. From November 10 on (and probably well before), Haleon stock will be under pressure anticipating Pfizer’s exit.
What the brokers say
Barclays Capital has trawled through 400-odd-page prospectus and distilled its findings into a far less chunky 23-page overview.

Two things struck us from the note. The first, was the indicative valuation range, which, based on a price-to-earnings calculation used to assess companies in the consumer staples sector, comes up well short of the £50bn tentatively tabled by Unilever.

Barclays reckons Haleon shares, once listed on July 18, could be worth anywhere from 249p to 416p, which adds up to an equity valuation of £23bn-£38bn. This is based on valuations ‘multiplesR17; ranging from 15 to 25 times earnings.

The second interesting ‘takeaway̵7; from the note was the bank’s interaction with key shareholders on the issue organic sales growth – a major driver of the company’s valuation.

In the note, Barclays said there was “a degree of scepticism” among investors as to whether Haleon could actually hit the 4%-7% top-line target it has set itself. Indeed, it went on to say there was “significant pushback on our 4.7% medium-term growth forecast”.

Jefferies, the American bank that has a stellar reputation in the healthcare sector, has assessed the demerger from GSK’s investment perspective.

It believes that by spinning out Haleon, whose stock trade is painkillers such as Advil, the UK pharma group has divested itself of a headache (its words not mine).

It has based its ‘buy’ recommendation and £21 a share price target on GSK’s own medium-term growth forecasts – an average 6% increase in sales and 12%-14% compound annual growth in per share earnings.

“New GSK is underappreciated, as the number-two growth profile in EU large-caps,” Jefferies said in its note.

“We accept New GSK pipeline remains a work-in-progress, but catalysts are starting to emerge, and the vaccines franchise just keeps getting better.”

One thing to ponder
Those who hold GSK currently as income play (it yields 4.7% or thereabouts currently) will see a cut in the combined GSK/Haleon pay-out post-demerger.

It is estimated that GSK will distribute around 44p a share in Haleon 11p.

[keyno] 18/6/2022 11:00

I can't decide if Haleon will forever be the poor relation. I don't understand why H is being saddled with all the debt. It can't just be the prospect of jam tomorrow for Haleon, surely? What am I missing (apart from a bigger brain...............)? Would somebody be kind enough to explain?

Edit: Presumably the costs of the split and attendant overheads won't come cheap either.

[tradermichael] 17/6/2022 12:42

More useful (when you sell) is a ready way to calculate any capital gains vs your cost price. At the time of the 'split' you need to calculate the equivalent base costs for the two shares.

[gateside] 17/6/2022 12:07

Thanks anahr - I realise now that they are sales figures. My mistake!

Just trying to gauge a rough value of what my new holdings might be.

Hopefully GSK will now follow in the footsteps of AZN and becoming a good growth pharmaceutical company.

Plus as you mention, Haleon might be worth keeping for their dividend.

[anhar] 17/6/2022 11:44

Those are sales figures, not profits. On operating profits, Consumer Healthcare was (£m) 2,239 out of a total 9,176. On this basis new GSK coincidentally is also 3x Haleon.

However these are operating profits before certain other costs. Net profits will be distorted post-demerger by how debt is allocated to Haleon and many other matters. There is also the non-numerical emotional value put on these shares by changing market fads, for example Haleon might attract a potetial bid premium or be seen as more dependable than new GSK etc.

So I don't think the relative values of the two companies can be estimated with much accuracy at this stage. In any case, it doesn't reallly matter much in my view as they will both be large companies as mentioned above and as I've said I'm hanging on to both as an income investor.

[gateside] 17/6/2022 11:29

From 2021 Annual Results...

Pharmaceuticals £17.7 billion
Vaccines £6.8 billion
COVID-19 solutions £1.4 billion

Consumer Healthcare £9.6 billion

If I am correct, the value our new GSK shares will be worth approx 3 times that of our Haleon shares.

[gateside] 17/6/2022 11:04

Thanks TM.I'll have a look at their accounts at where profits come from. Tempted to sell Haleon and put all into GSK which will then be a pure pharmaceutical company.Hopefully it'll finally get the growth that AZN has achieved

[tradermichael] 17/6/2022 10:50

New GSK, in proportion to their relative current profits, I should think!

[gateside] 17/6/2022 10:45

Both will be large enough to remain in the FTSE100

Wondering which will end up being our largest holding, new GSK & Haleon?

[laurence llewelyn binliner] 17/6/2022 09:51

18.07.2022 - 1:1 New GSK:Haleon shares issued

19.07.2022 - After the close of day 1 trading, GSK consolidates its existing shares, returning the share price to around the same as before de-merger. This will ensure comparability of the company’s earnings per share and share price with previous periods.

[criticalthinker1] 16/6/2022 21:26

Trader just take a look at what GSK has reported as its pipeline! Getting very interesting. And some of those pipeline drugs are not officially purchased yet!