Uniphar ‘needs up to €150m of deals' to hit growth target
Uniphar
, the Dublin-listed diversified healthcare services group, will need to spend as much as €150 million on mergers and acquisitions to reach its medium-term earnings target, according to Deutsche Numis.
The brokerage has also downgraded its rating on the stock, from buy to hold, on valuation grounds following a surge in the share price this year. The stock is up 73 per cent so far this year, making it by far the top-performing stock on the Iseq All-Share index.
Uniphar's management, led by chief executive Ger Rabbette, expects to double earnings before interest, tax, depreciation and amortisation (Ebitda) to €200 million between 2022 and 2028. That is 'achievable, albeit challenging', said Deutsche analyst Kane Slutzkin in a report on the group.
The consensus view among analysts is that Uniphar's Ebitda will reach €170 million by then, based on estimates for organic growth. The balance will have to be delivered by better-than-expected organic earnings growth and merger and acquisition (M&A) deals.
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Uniphar will need to spend €120 million to €150 million on prudently priced deals to reach the earnings goal, Deutsche said.
The company would also need to see growth pick up in its supply chain and retail division, following a period of investment, it said. This includes 445 company-owned and franchised pharmacies operating under the Allcare, McCauley, Life and Hickey's brands. It has a 28 per cent share of the Irish market. Its wholesale business has a 54 per cent market share.
'A core part of our investment thesis has been the quality of the supply chain and retail business, which we believe the market had been slow to appreciate, as it consistently beat the company's low-single-digit organic [earnings growth] guidance,' said Mr Slutzkin in the report.
Uniphar would also need to sustain mid-teen percentage organic earnings growth in its pharma division, which works with drugmakers and biotech companies to bring innovative medicines to global markets and provides healthcare professionals with access to medicines they cannot source through traditional channels.
Deutsche said that Uniphar's other division, which distributes medical technology products across Europe, as the group's 'highest-quality' unit. 'Gaining share in existing markets, growing the basket of products per customer and expanding and leveraging its existing geographic footprint are the key drivers of high-single-digit organic growth expectations [over the medium term],' Mr Slutzkin said.
Uniphar, which floated in Dublin six years ago, said in a trading update last month that it has had a 'good start' to this year, following a 6.4 per cent increase in Ebitda last year, to €123.5 million.
A pharmacy brokerage business, Thera Pharmaceuticals, started a High Court
case
last month against Uniphar, claiming it is breaching an agreement and abusing its dominant position in the market. Uniphar has strongly rejected the claims.
Thera is part of the Navi Group, which Uniphar had agreed to buy in 2021, but was blocked from completing by the Competition and Consumer Protection Commission (CCPC).
Thera provides infrastructure allowing pharmacies to buy products from wholesalers.
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