Concordia Healthcare Corp. T.CXR.R

CXR

[fdfd12]

forget about recognia, it says $18-$24.

In my opinion, there is GOOD and BAD with CXR.

THE GOOD

WIll do $6.50US which is $9CAN.
WIth a PE of 15, we get a TRUE price of $135CAN.
This is fair value TODAY.

THE BAD

WIth their 3.5B debt, they will only pay it off in 8 years (according to Andrew Mcreath).
Because of that, they will only have organic growth of 8% per year.
Sure they can buy small "tuck in acquisitions" as they have said, but a BIG MACHINE that CXR has been after buying AMCO, small tuck ins won't add much to the top or bottom line.

CONCLUSION:
CXR should be $135CAN and once there, will only move up about 10% until a good portion of the debt is paid off.
Then they can go after new MONSTERS.

any comments?

[cg16]

fdfd12, are you factoring in the 60 new drugs coming that aren't accounted for in the current guidance? did Mcreath factor those in? "tuck ins" + new drug sales + old drugs sold in new markets = good growth even while paying down debt. jmo

[fdfd12]

Why arenb't the 60 new ones accounted for?

[cg16]

("why aren't the 60 new ones accounted for")? are you suggesting that the sales performance and margin on the 60 drugs that aren't even launched yet are factored into the guidance? how would they predict that so early on? the other point about debt is that, as Mark "tucks in" acquistions, he will delever without paying any debt down. he will attack the debt in multiple

[sunshine7]

No company pays down debt to 0. If you can borrow money at 4% and ROI is 10% then that is good business sense. 2016 EPS is $9 (likely conservative) or total CD459M. With growth (8% organic plus opportunities), the debt is very manageable. Interest cost starts at CD338M and goes down as high cost bridge loans (9.5%) are paid first. Largest and longest loans are 4%ish. As debt ratio drops to less

[Marcel7]

Yes, a couple of comments. If your assumption is that they are paying down maximum debt each year and assuming the blended rate of around 7%, as they pay down debt they pay less interest. The savings on the interest would not be insignificant (if you are talking about roughly 300 million at over 9% or so for the highest cost debt). Since they will invariably pay down the highest cost debt first