Fair Value Estimate of GrainCorp’s United Malt Demerger AUD 5.00 per Share, but a No-Moat Business

The upcoming demerger of United Malt Group from GrainCorp allows shareholders to invest directly in the former parent's crown jewel. We expect United Malt will enjoy a stable earnings stream, solid profitability, and organic growth opportunities. The company is the fourth largest global malt processor and works with some of the world's largest breweries and distillers as well as fast growing craft producers. The demerger will enable shareholders to own this asset while having the option as to whether to own the remaining GrainCorp portfolio. Although management expects United Malt to face higher near-term costs related to public listing, we think this will be offset by longer-term savings.