Abcam Share Discussion Threads

[dgh11] 16/1/2006 16:07

maybe 3-4 fridges is too small - but you need to find the product - and don't forget that as warehouses go - a fridge with 17,000 products in it is better than 10 acres of buildig with 17,000 items in it!

barrier to entry is more likely to be knowledge, volume and loyalty of customers - with over 1000 regular visitors they have a "sticky" website

rgds
d

[saltedcrab] 16/1/2006 13:47

groiwing at 50%a year PE falls very rapidly. ACQUISITONS PROMISED...

[wjccghcc] 16/1/2006 13:19

Deal CR :-)

I'm sure you're right short-term. I just have doubts as to the longer-term when margins are that high and they have very little propietary stuff. Yes they certainly spotted a niche and succeeded in exploiting it but this is hardly Amazon where you need huge warehouses and wide product availability. The good ol' 3 fridges will do :-)

If they were on a PE of 15 I'd be right with you, on a PE of 26 I'm not so sure.

[cockneyrebel] 16/1/2006 12:55

PS WJCC - I'll buy you the 4 fridges, you set the business up :-)

CR

[cockneyrebel] 16/1/2006 12:53

looks interesting to me WJCC - I bought in today having had my eye on them for a little while.

High valuation but high growth, and I do think the company is offering something that the market needs and isn't being supplied.

I doubt it's the easiest thing to do either, unless you're an expert in the field and th factthe market has lacked anyone providing a decent service like this suggests it isn't that free and easy to do.

Looks like one of those that could get great momentum behind it I'd say, tho there are the risks of this being a new and small business. The fact thay sale sales will be up atleast 50% this year is confident and bodes well for further years.

Might not be the sort of thing to put the house on but a small proportion in the portfolio looks a worthy investment for a bit of higher risk/reward imo.

CR

[wjccghcc] 16/1/2006 09:29

3 or 4 fridges doesn't fill me with confidence as to high barriers to entry. Clearly they've seen an opportunity in the market and exploited it well, but given most of the product is sourced from third parties, what's to stop someone else doing exactly the same if the margins are attractive enough?

[dgh11] 15/1/2006 17:43

Hi Jones3

I actually visited Abcam before christmas, as I wanted to understand the business that looked to be very promising, but had no research reports available other than the Placing Document.

From my discussions with one of the directors, which only covered non-price sensitive data as they were coming up to the close season, I concluded that this business, while highly priced on a historic basis, was a very exciting business. The analysis of turnover growth for the years 2003-2005 indicated that they had a good model. The business is essentially simple, buying in the majority of their products, manufacturing some of the more popular antibodies, and selling them at consistently high margins of 56% for bought in items and 80% for manufactured product - albeit currently only 4% of sales. Their competitors are for most part small operations, and Abcam actually sources product from many of them, acting one supposes as a selling arm for companies that are primarily research centered.

The company's backoffice approach is to ensure efficiency in handling orders, and in my tour of the premises, I was impressed with the quiet efficiency of the company.

Stocks are held in 3 or 4 fridges, about 3 times the size of a domestic fridge, but kept at -80c. The despatch department was organised with obvious efficiency, (it needs to be if the achieved 70% same day despatch policy is to be maintained).

The company trades about 50% of sales in USA, and 50% ROW with UK and Europe taking about 14% each.

In the placing document, the directors advised that with the current growth at the time, sales for the year to June 2006 should not be less than £18.5m. On the historic growth pattern of sales, this looks likely to be exceeded. As the gross profit margins are high, a substantial proportion of sales growth will drop to the bottom line.

The key points for me were:

1. Simple business to understand (even if the product is unusual)
2. Superb customer information system via their integrated ordering web-site which encourages multiple re-visits by researchers. It aims to provide an easy way for any researcher to find the product they want and so tends to have remarkable customer loyalty. No other anti-body company is focussed in this way. The aim is to be a one-stop shop.
3. A simple customer reward system to encourage customer reviews to be posted to the site.
4. Lack of any similar competitors - although there are some 300 suppliers worldwide, they are mostly fragmented with the largest taking 15% of the global market in all types of antibodies.
5. Their market is currently about 800-900m usd worldwide estimated to be growing at 10% a year.
6. Some protection from inflation - as the prices will not be particularly sensitive to the purchaser.
7. Considerable protection from recession as the research bodies who purchase the products will usually have longer term projects.
8. Few compliance issues, as the company does not sell medical grade antibodies. (although that may happen in the future, it is a different scale of business)

I purchased a shareholding following my visit, as I estimated, that operational profits this year to 30th June could easily be just under £5m and year to 30th June 07 in the order of £7.5-8.0m. If I'm right, the interims (due out in a few weeks) will tend to bear that out.

Interestingly I note that SCSW in the January issue also think that profits for this year will be close to £5m (their guesstimate is £4.7m) - they haven't yet done a full report on Abcam though.

If they do report an operating profit of £4.7-4.98m then the PE will drop to about 25-23 for 2006 and to 15-16 for 2007 which is far more reasonable than its current level.

Hope this helps

d

[jones3] 05/1/2006 19:10

Cervelo - 12

Thank you for your response.

From what you say the supply side of the business would seem to be OK although I've no knowledge of how competitive the market is.

My impression is that the distributor companies generally are not all that large so there could be good opportunities for PRG in terms of acquisitions given their share valuation and the breadth of the market.

(For myself I feel we've got to the stage in share-price terms where it would be helpful to have some 'market guidance' from the company to save the share price getting too far ahead of events - but they're probably getting advice on the point.)

regards

J

[saltedcrab] 05/1/2006 12:46

ready to go go go

[cervelo] 31/12/2005 15:21

Jones3,

I am in the science business and have use Abcam products pretty regularly since very early in the company's life. I think a number of the antibodies that they sell are made primarily by outside researchers who then look to sell them on to other consumers via Abcam. Other parts of the portfolio will be acquired from other manufacturers and re-badged. A third area will be antibodies raised against proteins that Abcam deem to be commercially viable. Antibody production costs would vary depending upon the way they are made; either monoclonal or polyclonal. I suspect they would only need to sell a few units to cover production costs.

Hope that help.

C.

[roypat01] 30/12/2005 15:25

Os thanks for all the info.
i just switched on the monitor, found the goodnews.
i am just familiarzing with the stockmarket and e-mails etc.. hence input slow!

Wish you a happy new year.

ill be following the thread.
Roy.

[outsider] 30/12/2005 12:10

up 21p & no comments?

[jones3] 22/12/2005 13:56

Outsider

Thank you for the profile.The company seems to have a clearly defined business model.For myself (non scientific) I would like to know about the supply side of the product profile,namely the manufacturing and costs structure.

On the info available at the moment, my guess is that the share is at its present price on a real time per of around 20x - perhaps falling to 19x by the year end.In my view the rating is modest in relation to the business model and the growth rate demonstrated so far.

regards.

[outsider] 22/12/2005 07:50

Abcam's growing reputation has only been exceeded by the firm's actual growth over the last seven years, vindicating a business that was shunned by the VC community and had to famously resort to selling antibodies from a bucket of ice in the Cambridge colleges.

Dedicated to selling high-quality antibodies over the Internet, the Cambridge Science Park-based business recently listed on the London Stock Exchange's AIM list and raised over £10m giving it a market cap of over £57m.

An entrant in the Growth & Expansion category of the 2005 East of England Business Awards, the company's relentless development continues to attract major plaudits from UK business analysts and experts.

Last year's first place in Deloitte's East of England Technology Fast 50 was followed by a third place this year, its fourth consecutive year in the East of England league table and based on sales growth of 2,607 per cent.

Recognition has also come in the shape of the Sunday Times Microsoft Tech Track league table.

Abcam secured 39th place nationally for fastest growing unquoted technology companies, making it the third consecutive year that Abcam has been ranked in the top 40.

Abcam markets research-grade antibodies to academic and commercial users and is headquartered in Cambridge, UK, with a US office in Cambridge, Massachusetts.

In the year ending June 30, Abcam reported sales of £12.1m (2004: £6.72m) and pre-tax profits of £2.98m (£1.45m). The company expects sales in the financial year ending June 30, 2006, to be no less than £18.5m.

Abcam's principal founder and now managing director, Dr Jonathan Milner, left academia to set the company up in 1998 after himself and colleagues were frustrated in their search for quality antibodies, vital for much of their research.

The plan was to sell the best antibodies in the world with the most comprehensive, honest and up-to-date datasheets, fast delivery and helpful customer support.

The original business plan was rejected by VCs when it was looking for the funds necessary to build its all important website.

Dr Milner sought early investment from friends and family and some from local business angels which saw it through its first couple of years.

The initial lack of support left Dr Milner to roam the University of Cambridge labs with a bucket full of ice and antibodies in a desperate attempt to generate some cashflow.

Now, as well as its 5,000 sq ft base on the Science Park, it has another home in Cambridge, Massachusetts.

Abcam provides more than 7,600 products, which are shipped direct to over 60 countries, and employs between 40 and 50 staff.

[outsider] 21/12/2005 15:46

This excites too:

About Abcam
Abcam was founded in 1998 to supply bioscientists with specialist research products, particularly antibodies (essential tools, enabling them to analyse the components of living cells at the molecular level). The company has grown strongly to over 80 employees and now has customers in over 50 countries and it is now recognised as one of the leading companies in its field. The future is growth for Abcam as it continues to expand using its proven product development, marketing and customer service performance, including exciting areas such as Neuroscience, Nuclear Signaling and Stem Cells.

[outsider] 21/12/2005 12:11

As well as the growth in customers which will drive this forward, the actual online catalogue only lists 17,000 items at the moment.

So excitement from me, is that 1 million are potentially available:

Antibodies are proteins produced by white blood cells in response to the
introduction of a foreign body known as an antigen. Antibodies, which have a
wide variety of uses in research, diagnostics and therapeutics, are used by
bioscientists in research into disease and into the human genome, where they are
used to mark and identify specific cells and other living matter. The number of
human antibodies of use in research is potentially greater than one million.

[outsider] 21/12/2005 07:49

looks like we might be in the blue today, with early trades @ 220p & a new high.

[outsider] 20/12/2005 18:55

Slowlydoesit on www.finfoex has highlighted the margins, which I think is very useful, I hope he doesn't mind me repeating them here.

2003

Turnover... 3.5m
Pre-tax.....0.56m
Net profit margin.... 16%

------------------------------------

2004

Turnover....6.72m
Pretax..... 1.45m
Net profit margin.... 21.6%

-----------------------------------------

2005

Turnover........12.14m
Pretax.........2.98m
Net profit marging........24.5%

---------------------------------------------

2006

Turnover .........18.5m.......[Est. "not less than"]

------------------------------------------------

[outsider] 20/12/2005 11:03

Seems very little interest on this, but this is a niche player & leader competition seems to be old out of date paper catalogues.

Growth priced in, but seems to have a long way to grow to me.

[roypat01] 20/12/2005 11:02

on the move at last

[cezary] 08/11/2005 09:36

Abcam markets research-grade antibodies to academic and commercial users
and is headquartered in Cambridge, UK, with a US office in Cambridge,
Massachusetts. Its online catalogue of more than 17,000 products is
supported by continually updated technical data created by the Company.

* Abcam was founded in 1998 by Dr Jonathan Milner (Chief Executive Officer),
Dr David Cleevely (Chairman) and Prof Tony Kouzarides (Non-executive
Director).

* Abcam is rapidly growing, profitable and cash generative. In the year
ending 30 June 2005, Abcam reported sales of #12.1 million (2004: #6.72m)
and pre-tax profits of #2.98 million (2004: #1.45m). The Company expects
sales in the current financial year, ending 30 June 2006, to be no less
than #18.5 million and it intends to implement a progressive dividend
policy.

* As announced on 28 October 2005, #10 million, before expenses, has been
raised for Abcam via a placing of new shares at the price of 167 pence per
share (the "Placing Price"). A further #5.25 million, before expenses, has
been raised for selling shareholders via a placing of existing shares at
the Placing Price.

* At the Placing Price, the market capitalisation of Abcam is approximately
#57.5 million (post new money).

* The net proceeds of the placing available to Abcam will be used to develop
future growth opportunities including the expansion of the online
catalogue, the broadening of the customer base, the penetration of new
geographic markets and the possible acquisition of existing catalogues or
complementary product lines.

* Numis Securities Limited is the Company's nominated adviser and broker.