Post by
Tobuyornot on Dec 01, 2015 8:25am
CIBC Waiting for AMCO -
What's The Event
As of November 29, we are initiating coverage of Concordia Healthcare with a Sector Performer rating and a 12- to 18-month price target of US$47, which is based on a 10x multiple of 2016E EV/EBITDA.
Implications
Concordia has a deal-driven management team that is highly capable of sourcing and executing acquisitions. Since its inception three years ago, Concordia has transformed into a diverse, fully integrated global specialty pharma company with over 200 products being sold in 100 countries.
AMCo is Concordia's first company acquisition, and a very large one at that. The transaction only closed on October 21. Given the size of the acquisition, and that we have yet to see one quarter where AMCo is included in Concordia's financials, we take a conservative stance for now. We will wait to see how the AMCo business performs as part of Concordia, and monitor how management executes the integration and pays down debt. Management has guided for 2016 revenue of $1.02 billion–$1.06 billion and EBITDA of $610 million– $640 million. Our estimates are just slightly below the low end of the range.
While we see merit in the model of acquiring legacy assets, using price as a growth driver, in the future we would like to see Concordia consider more products that have expanded market opportunity based on sensitivity to promotional spend, potential for expanded indications, and possibility for greater reimbursement.
Given Concordia's highly leveraged balance sheet, its business developments efforts will be constrained, and no significant acquisitions in 2016 are expected. Instead, management will likely be focused on debt reduction to reduce its net debt/EBITDA multiple to under 5.5x.
Concordia stock will largely reflect the performance of AMCo. We will re-evaluate our position once we gain more clarity on AMCo's drug portfolio, confidence on management's ability to grow a newly acquired business that operates primarily in Europe, and comfort that AMCo can provide the growth that Concordia expects.
Comment by
Stockcoachl on Dec 01, 2015 8:58am
This post has been removed in accordance with Community Policy
Comment by
cashflow98 on Dec 01, 2015 9:18am
Hi SC, I didn't say I agree...in fact I am very bullish. Much like Thompson's jet this thing is about to take off so get on board for the ride up...oh and purple happens to be my favourite colour !!!! Good luck with Reddit.
Comment by
fdfd12 on Dec 01, 2015 9:28am
Purple tie, lol good one Stockcoach
Comment by
Scruggstyle on Dec 01, 2015 9:59am
NOT Stockcoach. Look at the spelling. Obviously, just another childish game being played.
Comment by
Bullphighter on Dec 01, 2015 10:50am
So I am the only non moderator on the new page. SIX members stockie
Comment by
healthstock1234 on Dec 01, 2015 11:15am
Yes, I think they are preparing something because they delayed the payment of the debt.I think this will be after March because they need some months to start to integrate the activity and generate cash from operations.
Comment by
USNOOZEULOOZE on Dec 01, 2015 11:46am
This post has been removed in accordance with Community Policy
Comment by
sunshine7 on Dec 01, 2015 11:49am
Good point on issuing shares to get the debt down quickly. They tried that at the time of acquisition and was underwhelmed by the response at $65USD ($500M raised I think). Timing was the problem. By next financials, SP should be significantly higher and that will be the time to pull the trigger. Another 5M shares at $65USD should do the trick IMO.
Comment by
Tobuyornot on Dec 01, 2015 12:30pm
Key is putting a 10X multiple of 2016 earnings. This combined with conservative figures on AMCo earnings. There will be a BIG overhang at $65 US but I'll be very be happy in the progress towards.
Comment by
healthstock1234 on Dec 01, 2015 1:55pm
<The market is afraid of the size of the debt and the company's ability to pay down that debt. The market is also wondering about the new company they bought and well the new products will perform.. > The market is not represented by some persons who are speaking here.We do not know the market!! or it is only our supposition.