TC have an "Outperform" call on PBP, but no price target. They have a DCF valuation of $2.13. PBP closed yesterday at $1.91.
Our View: We retain our Outperform rating and forecasts. We believe that underlying demand is strong, FY21 will benefit from past acquisitions and cost synergies. The business may also be able to bolt on further accretive acquisitions. Recent contract wins should feed into FY21 results as these contracts ramp up. We have derived a DCF valuation of $2.13.
In late April Probiotec announced that it had been fully operational during the COVID-19 crisis and continues to trade strongly. FY20 guidance was re-iterated with sales expected to be excess of $100m and EBITDA of between $16-$17m. There has been minimal supply chain disruption despite some press suggesting ingredient access problems out of China and India. Probiotec had seen meaningful uplift in orders for coughs, cold/flu, analgesics and immunity products.
Recent update and our analysis
Late April update and our analysis
--- click on link above for the full update ---
Disclosure: I don't hold any PBP shares.
TC’s Recommendation: Outperform
We upgrade to an Outperform recommendation (from Hold) noting as a contract pharmaceutical and OTC medicine manufacturer – Probiotec is very likely to be enjoying strong demand for many of its products. The share price fall has also improved the absolute valuation. We also note that the recent structural reform to allow widespread bulk billing via telemedicine (and prescriptions) is a positive development.
The February pre-flagged result was driven via both acquired sales growth and organic sales growth (+17%) in the traditional business. Recently acquired business added $6.9m of revenue to the total $44.1m.
Key Points – from February result
Revenue and EBITDA
Changes to forecasts
[click on the link at the top of this straw for more]