Maintain their current and upside scenario targets of US$77.00 and US$106.00 respectively. GLTA
November 10, 2015
Concordia Healthcare Corp.
Q3 Preview - Expecting Strong YoY Growth
Our view:
While CXRX shares have rebounded from recent lows, we
continue to believe the weakness is unwarranted, particularly now that
the AMCo deal has been completed. As such, we would remain buyers
given current 2016E and 2017E P/E multiples of ~4.5x and ~4.0x (60%
discount to peers) and a ~21% forecast free cash flow yield.
Key points:
Reports Q3/15 AMC on November 12th, 8:30am CC November 13th.
Concordia will report its Q3/15 results after the market closes on
November 12th with a conference call scheduled the next morning at
8:30am. Dial 647-427-7450 or 888-231-8191 to join. The replay numbers
are 416-849-0833 or 855-859-2056. Reference number is 63897714.
Q3 revenue forecast of $90.7MM.
Our revenue forecast for the quarter is
$90.7MM vs. $36.4MM last year and the consensus of $94.1MM (FactSet:
8 analysts, range $90.7-$99.1MM). The large YoY increase is attributed to
the addition of the Covis portfolio and Zonegran.
Q3 EBITDA estimate of $67.5MM
. We are forecasting Q3/15 EBITDA of
$67.5MM vs. $20.3MM last year and consensus of $68.7MM (FactSet:
9 analysts, range $63.7-$73.0MM). The significant YoY increase is largely
due to M&A.
Expect Q3 cEPS of $1.27.
As indicated previously, cash EPS is a relatively
new metric that the company has started to report. We are forecasting
Q3/15 cash EPS levels of $1.27 vs. $0.57 - our estimate - last year and
consensus of $1.32 (FactSet: 7 analysts, range $0.1.27-$1.37).
First Full Q of Covis.
While the Q3/2015 results will not include any
AMCo operations as the deal closed in October, Q3 will represent the first
full quarter with Covis. As such, YoY growth will appear significant with
EBITDA expected to more than triple. CXRX shares continue to trade at
a material discount to peers based on 2016/2017E P/E multiples of 4.5x
and 4.0x vs comps currently trading at 13.3x and 10.8x, equating to a
~60% discount. Having said this, EV/EBITDA multiples are likely a more
appropriate yardstick for CXRX at this time given its significant debt load.
Even so, the discount to peers remains significant with CXRX at 2016E and
2017E EV/EBITDA multiples of 8.0x and 7.6x vs comps at 10.6x and 9.1x.
We also note that CXRX shares trade at a forecast free cash flow yield of
~21%. We expect these discounts to moderate over time as the company
pays down debt and investors become more comfortable with the new,
post-AMCo company. As such, we remain buyers at these levels.