UDG UDG Healthcare breaking through the long term resistance line going back to mid June this year. Nice little uptrend breaking out. 34.5% increase in EPS pencilled in for 2018 puts it on a P/E of just over 26 BUT a PEG of just 0.78. Looking for last top here first at 965p. 😀😎
Good growth in revenues and profits. Dividend increase welcome. All the acquired businesses seem to be performing well adding to the diversity and revenues growth. Hope the market is pleased and surely not expecting much more.
I see your logic Wexboy but this is pretty much the same logic you employed back in 2014, excluding currency movements and who is to say what the Trump effect will bring on that score. Best of luck for 2017.
2016 The Great Irish Share Valuation Project (Part IV):
Company: UDG Healthcare (UDG:LN)
Last TGISVP Post: Here
Market Cap: GBP 1,653 M
Price: GBP 668p
Ugh, well that looks like a disastrous call!? Course, theres plenty of water under the bridge since (& fair value estimates obviously change), but I anticipated a substantial UDG price decline back in 2014 in reality, the shares almost doubled in the last few years! So, time to stick or twist? Trouble is, UDG Healthcares one of those suspect Irish stocks (which shall remain nameless here) which consistently report a significant gap between IFRS & adjusted earnings, and (perhaps more importantly) between adjusted operating profit & underlying Op FCF so which figures exactly should one focus on when attempting a valuation?! Not to mention UDGs colossal P/E multiple 27.7 times continuing adjusted diluted EPS, no less which doesnt remotely reflect the pedestrian underlying earnings growth weve actually seen in recent years. But lets back up here
And go back to 2015, which marked a decisive turning-point for UDG Healthcare in Q3, the company announced the 0.4 billion sale of its supply chain services division, the original core business of United Drug (inc. its Irish pharmaceutical wholesaling business). [The CEO Liam Fitzgerald marked the occasion by also pre-announcing his own early retirement, after leading the company for 15 years, to be replaced by COO Brendan McAtamney]. Thereby unveiling a higher margin & (supposedly) faster growth company, focusing on: i) sales, marketing & healthcare communications services, and ii) pharmaceutical contract packaging & clinical trials materials all intended to exploit the ongoing trend for healthcare companies to outsource non-core & specialist activities on an international basis.
Which has delivered a (totally transformed) 11.1% adjusted operating margin on continuing ops. revenue of 934 million unfortunately, we continue to see the same cash flow issue each year, on average a 20%+ shortfall in Op FCF (vs. adjusted operating profit) over 2015-16, implying an adjusted 8.6% margin is more appropriate in determining a suitable 0.875 Price/Sales multiple. [There will be a meaningful currency hit next year from a stronger dollar (UDG will report in dollars from now on), but I expect this to be broadly offset by underlying revenue growth & recent acquisitions]. Interest coverage remains within a reasonable range, based on 275 million of debt left outstanding but we can treat the effective sale proceeds, i.e. 384 million of surplus cash, as incremental value. As for earnings, UDGs two main divisions boast underlying 25%+ operating profit growth over the 2010-2015 period, but in reality their 2016 growth rate isnt much better than the sub-9% growth in underlying adjusted diluted EPS over the last 3 years bearing in mind UDG may still be in transition, plus the usual stability of its earnings, well basically split the difference in growth trajectories & assign what seems like a pretty balanced 15.0 Price/Earnings multiple:
(EUR 0.2861 Adj Dil EPS * 15.0 P/E + (943 M Rev * 0.875 P/S + 384 M Cash) / 247 M Shares) / 2 * 0.8438 EUR/GBP = GBP 387p
The numbers have changed, but I still reach the same conclusion UDGs as wildly over-valued as ever. It might be foolish setting this price target, because the outcomes probably binary Once theyre comfortable with an investment thesis, plus a valuation multiple/range, investors are loathe to change their minds so if necessary, companies often have the time/space to grow into any valuation eventually. Of course, if things start going horribly wrong, everybody & their mother suddenly wakes up & notices all kinds of issues the earnings gap, mediocre earnings growth (vs. the P/E), poor cash flow, a looming debt burden, etc. Of course, the latter doesnt apply here (for once), as UDGs in a comfortable net cash position (though doubtless its
UDG is one of Momentum Investor's major recommendations for this month with the opportunity for serious growth in its Ashfield Division. Its poorest performing sector -the old wholesale distribution business - is being sold off for E407.5m subject to regulatory approval - completion anticipated next June. This will put the company into a net cash position with a E500m borrowing facility and well able to make further acquisitions.
<b>Analysts Set Udg Healthcare PLC PT at $408.00 (LON:UDG)
March 21st, 2015 Updated Tues 25 March/2015 - Filed Under - by Samantha Reynolds</b>
Shares of Udg Healthcare PLC (LON:UDG) have earned a consensus recommendation of Buy from the seven brokerages that are covering the company, American Banking & Market News reports. Three analysts have rated the stock with a hold recommendation and four have issued a buy recommendation on the company. The average twelve-month price target among brokerages that have issued a report on the stock in the last year is GBX 408 ($6.02).
Udg Healthcare PLC (LON:UDG) opened at 465.70 on Wednesday. Udg Healthcare PLC has a 52-week low of GBX 315.20 and a 52-week high of GBX 479.03. The stocks 50-day moving average is GBX 445. and its 200-day moving average is GBX 378.. The companys market cap is £1.13 billion.
UDG has been the subject of a number of recent research reports. Analysts at N+1 Singer reiterated a hold rating on shares of Udg Healthcare PLC in a research note on Friday, March 6th. Analysts at Berenberg Bank raised their price target on shares of Udg Healthcare PLC from GBX 425 ($6.27) to GBX 455 ($6.71) and gave the company a hold rating in a research note on Thursday, February 12th. Analysts at Jefferies Group LLC reiterated a buy rating and set a GBX 400 ($5.90) price target on shares of Udg Healthcare PLC in a research note on Tuesday, February 3rd. Finally, analysts at Investec raised their price target on shares of Udg Healthcare PLC from GBX 340 ($5.02) to GBX 387 ($5.71) and gave the company a hold rating in a research note on Tuesday, February 3rd.
UDG Healthcare plc is an international provider of services to healthcare manufacturers and pharmaceutical retailers. It is engaged in supply chain, packaging, medical, regulatory, and sales and marketing services. The Company provides outsourced services. Aquilant is a provider of healthcare and scientific products and services, providing outsource sales, marketing, distribution and engineering for the medical and scientific sectors.
UPDATE 2 UDG Healthcare expects 5 8 pct rise in full year EPS
03 Feb 2015 - 11:11
Says reported EPS to be higher if current exchange rates persist
To take 10 mln euro restructuring charge this year
Sees 2 pct benefit to EPS from restructuring
Shares rise 5 pct to record high
(Adds details, analyst and CFO comments; updates share movement)
By Roshni Menon
Feb 3 (Reuters) UDG Healthcare Plc said it expected a 5-8 percent rise in adjusted full-year earnings per share on a constant-currency basis, and that reported EPS could be higher than this if exchange rates remained around current levels.
Shares in the FTSE-250 company, which provides outsourced sales and marketing, drug distribution and packaging services to healthcare companies, rose more than 5 percent to a record high of 417.5 pence in morning trade on Tuesday.
Dublin-based UDG, formerly known as United Drug, reports results in euros but makes about 70 percent of its profit in pounds and dollars. ...
The euro has fallen about 10 percent against the dollar and about 3 percent against the pound since the start of the company's 2015 financial year on Oct. 1.
"UDG has left enough room for upgrades through FY15 if positive momentum continues," Jefferies analysts said in a note.
The company reported adjusted earnings of 28.77 euro cents per share in the year ended Sept. 30. Average exchange rates were 82 pence and $1.36 to the euro, UDG said. ...
"At current exchange rates, we would expect a further 5-6 percent benefit on the bottom line, meaning guidance implies adjusted EPS growth of 10-13 percent for the full year," Berenberg analysts said in a note.
Chief Financial Officer Alan Ralph told Reuters the company would take a charge of about 10 million euros this year, related mainly to the restructuring of its healthcare communications business and for changes in its United Drug supply chain unit.
The restructuring is expected boost earnings per share by 2 percent in the current financial year and by an additional 1 to 2 percent the following year, Ralph added.
UDG shares were up 4.1 percent at 413 pence at 1035 GMT.
Shares of the company, which has a market value of about 970 million pounds ($1.46 billion), have gained more than 20 percent since the company reported full-year results in November. ($1 = 0.6641 pounds)
(Reporting by Roshni Menon in Bengaluru; Editing by Gopakumar Warrier and Ted Kerr) (([email protected]; within UK +44 20 7542 1810, outside UK +91 80 6749 1136; Reuters Messaging: [email protected];)
UDG Healthcare sees 5 8 pct rise in full year EPS
03 Feb 2015 - 08:30
(Corrects paragraph 1 to say UDG is based in Ireland, not UK)
Feb 3 (Reuters) Ireland's UDG Healthcare Plc said it had made a strong start to the year and expected adjusted full-year earnings per share to be 5-8 percent ahead of last year on a constant currency basis.
The healthcare services provider added that if current exchange rates were sustained for the year, reported EPS would be higher than this range. ...
UDG, which reports results in euros, stands to benefit from the recent strengthening of the dollar and sterling against the euro.
The company reported adjusted earnings of 28.77 euro cents per share in the year ended Sept. 30, 2014. ...
(Reporting by Roshni Menon in Bengaluru; Editing by Gopakumar Warrier) (([email protected]; within UK +44 20 7542 1810, outside UK +91 80 6749 1136; Reuters Messaging: [email protected];)
BRIEF UDG Healthcare says Q1 trading well ahead of prior year
03 Feb 2015 - 07:19
Feb 3 (Reuters) UDG Healthcare Plc
Has made a strong start to year with trading for quarter to 31 December 2014 well ahead of prior year
Expect constant currency adjusted diluted EPS (EPS) for year to 30 September 2015 to be between 5% and 8% ahead of last year
Source text for Eikon: ... Further company coverage: UDG.L
Strong Start to the Year and Full Year Guidance Issued
3 February 2015:
UDG Healthcare plc ("the Group"), a leading international provider of healthcare services issues the following trading update covering the period from 1 October to 31 December 2014. The company will hold its Annual General Meeting in Dublin at 12.00pm today.
Quarter to 31 December 2014
<b>The Group has made a strong start to the year with trading for the quarter to 31 December 2014 well ahead of the prior year.</b>
Some might consider UDG Healthcare to be the DCC of the healthcare/pharma outsourcing sector another acquisition machine. [Funnily enough, they're now competitors to some extent, and UDG's also migrated to a London-only listing - although it's retained the EUR as its reporting currency]. And that was probably true many years back. But UDG isnt so pretty when you look beneath the surface theres a lot more blood & guts Two big problems:
First, management continues to pursue diversification at all costs. This is particularly annoying from a geographic perspective, with UDG now boasting a third of profits come from the US all very well, if you prefer to ignore the fact theyre still a minnow in a very large lake. Now theyre even boasting of a Japanese presence hmmm, perhaps management first developed a sushi habit visiting NYC?!
And second, I had a sneaking suspicion I should take a harsher look at UDGs financials this year, and unfortunately this was justified. Theres a gigantic gap between IFRS & adjusted operating profit. The usual suspects are to blame amortization, write-downs, exceptional & acquisition-related expenses, etc. which I might accept on an isolated, or a case-by-case basis. But on average over the last 3 years, UDGs operating free cash flow is barely over 60% of adjusted operating profit (which management obviously prefers to highlight). A capex spend thats well in excess of depreciation is another culprit here, but Im far less certain now of the prudence or the ultimate payback on that investment so Im definitely not going to make an exception for it.
Frankly, the real (underlying) problem here may simply be a never-ending erosion of margins (& even volume), as governments, the healthcare industry & large pharma companies all grapple with containing costs which would certainly explain the problems as manifested above
Lets employ an approach similar to DCC but in this instance, Ill end up averaging out quite different perspectives & valuations. On the one hand, lets rely on adjusted diluted EPS noting UDGs stumbles in more recent years, and earnings growth of 11% & 7% in the past two years (respectively), I see no reason to raise my 10 P/E multiple. On the other hand, I note a 4.7% adjusted operating margin last year (& 4.6% the prior year) but as highlighted, this should be haircut by 39% to better reflect actual operating free cash flow. Thats an effective 2.8% margin, which Ill award a 0.25 P/S multiple. Now, this means underlying interest coverage isnt great either I should probably haircut my P/S valuation accordingly, with a negative debt adjustment. But Ill grant a free pass, this time round anyway, UDG could actually pay down a significant portion of debt with cash on hand (174 M). This all averages out to:
But investors are often happy to ignore underlying cash flows, and potentially diminishing returns, for long periods of time so I may prove wide of the mark here. But upon mature reflection, UDG Healthcare definitely looks wildly over-valued to me. Dont forget, as with all companies if things ever start going (seriously) wrong here, thats when investors will finally focus on the cash flow statement, see the lower underlying margins & potential interest coverage/debt risks, and join in as the share price spirals lower. Anyway, even if you still prefer a P/E valuation, how exactly do you justify UDGs current 16 P/E based on its recent & likely earnings growth? [And that multiple's based on adjusted diluted EPS - use actual diluted EPS, and you're talking about a 37 P/E!?]
Price Target: GBP 197p
For links, charts, file, and other companies, see the Wexboy investment blog.
2013 The Great Irish Share Valuation Project (Part IX)
Company: United Drug
Prior Post: Here
Price: GBP 275.8p
Long gone are the days when United Drug was a rock-solid earnings machine For years now, the emphasis has been on acquisitions, with United Drug funding them with debt which was comfortably under-pinned by predictable revenues & steady earnings. The credit crisis put paid to much of that confidence, with everybody pulling in their horns & hunkering down. The company also had to face up to ever-increasing pressure on its domestic Irish/UK revenues as government budgets & prospects turned increasingly sour.
Ive always suspected the CEO & his management team are more than enamoured with international expansion take a look & count the number of internationals in their latest results!? Presumably this is propelled by the usual desire to empire-build & play with the big boys I detect an absurd pride that over 25% of profits are now earned in the US (and over 70% outside Ireland). This means plenty of fun trips across the Atlantic for management, but shareholders should reflect more on United Drugs status in the US market an outsider & a minnow, perhaps? Im reminded of Greencore Groups (GNC:LN) poor shareholders theyre now enduring an even more quixotic push into North America
I really think sticking to a buy & build European strategy would have been the far more sensible option in both cases. Perhaps even more so for United Drug US healthcare may turn out to be a truly unpleasant sector to be in, for years to come.
Anyway, after 4 long years in a funk, the share price took off in mid-2012 & is up 55% since last year (far out-pacing my 20% upside target). Which happens to coincide exactly with the re-ignition of United Drugs acquisition machine they managed five of them in the second half of last year! So much for my reservations, clearly this is what investors are looking for Earnings growth remains relatively slow, however, at 11% last year & a projected 5-8% this year so I suspect were looking at the same old story here, i.e. acquisitions are required simply to compensate for the relentless pressure on core revenues & earnings. Ill stick with a 10 P/E ratio for the moment. Adjusted operating margins now 4.6%, which deserves a small bump-up to a 0.4 Price/Sales multiple, and a positive debt adjustment is also warranted to reflect additional debt capacity (for acquisitions). All this, plus the run-up in the share price, have left United Drug looking slightly over-valued at this point.
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