Abcam Share Discussion Threads

[fardistanthills] 22/7/2011 22:26

I don't understand this bit from the above IC note ?

... Abcam's markets are heavily regulated, so adding products in addition to antibodies and shipping them around the world on the existing platform could run into regulatory hurdles ...

What possible business is it of any regulator to limit the range of products ABCAM sells. Could someone please explain whether or not this is right. What am I missing?

[billy ray] 22/7/2011 13:49

Hi Rich

Yep, agree with you. I tend to take IC tips with a pinch of salt to be honest so not overly concerned (plus it was only a "short-term" tip). The high-ish PE had worried me a bit, but only so much that I might top-slice a bit at some point (maybe after the finals in September?). And the point about China to me sounds like a bull-point... OK, they may not have massive exposure just at the moment, but surely this provides great opportunities for growth? And as you say, lots of cash to (hopefully) use wisely. Plus, as you mentioned a while back, Jonathan Milner sounds like he's not the type to rest on his laurels, but will push the company forward.

[richscotsman] 22/7/2011 12:51

An interesting note Billy and some fair points. I still think that there is adequate momentum in growth to justify the price. The question is whether the £47m can be used to capture the Chinese market and distribution channels.

Rich

[billy ray] 22/7/2011 08:31

From this week's IC, just for info.
Cheers

Abcam's rating looking vulnerable
Created:21 July 2011Written by:Julian Hofmann
BULL POINTS:

■ Plenty of cash

■ Scope for dividend growth

BEAR POINTS:

■ Over-valued as an internet firm

■ Lacks "scale-ability"

■ Delays to US research funding

■ Little presence in China

One of the toughest decisions an investor has to make is when to call the top on a successful investment. Get out too early and further gains are lost; too late and risk giving back profits if unforeseen events hit the share price. Shares in medical services company Abcam present investors with precisely this dilemma; and it's not made any easier by Abcam's deserved reputation as a well-run company. However, shareholders who bought into Abcam five years ago would have seen their investments more than quadruple in value. That's excellent considering what has happened to the stock market indices during the same period, but ultimately that success only increases the scrutiny of Abcam's business model and its markets.

The rise in value has been so impressive that Abcam's share rating now bears little relation to any company in the healthcare or medical technology sectors and has more in common with internet distribution companies, such as Amazon or Asos. That comparison is flattering and reflects the excellent niche Abcam has developed in shipping antibodies to companies and research institutes who order via an online web site. However, it may ultimately prove to be a weakness as a straight comparison of business models reveals some crucial differences.


IC TIP RATING
Risk rating High
Timescale Short term
What do these mean? Find out in our guide to tip ratings


To begin with, Abcam's markets are heavily regulated, so adding products in addition to antibodies and shipping them around the world on the existing platform could run into regulatory hurdles. In contrast, Amazon can simply add a new line. This is what online retailers rather clumsily call "scale-ability" and it is an area where Abcam is comparatively deficient.

Second, Abcam is exposed to the vagaries of public spending in a way that affects no other internet distribution firm. This is the single biggest worry and the signs are that delays to research grants are starting to depress demand in the huge US antibody market.

Figures for US research spending compiled by broker Edison Investment Research suggest a slowdown in research grants without additional stimulus spending. The Recovery Act stimulus package, passed by Congress in 2009, accounted for a cumulative rise of $7.7bn in research grants as money flowed into disbursing bodies such as the National Institutes of Health (NIH) in 2009 and 2010. That period of spending coincides neatly with Abcam's time of greatest sales growth. But, without stimulus spending this year, NIH grants are forecast to increase by only $2.2bn to $32.2bn, Edison estimates.


ABCAM (ABC)

ORD PRICE: 420p MARKET VALUE:
£763m

TOUCH: 417-420p 12M HIGH: 470p LOW: 276p
DIVIDEND YIELD: 1.5% PE RATIO: 28
NET ASSET VALUE: 33p NET CASH: £47m



Year to 30 Jun Turnover (£m) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)
2008 36.6 8.0 3.4 1.1
2009 56.8 16.3 7.0 2.4
2010 71.1 25.8 10.8 4.0
2011* 84.4 31.8 12.9 5.3
2012* 98.6 37.4 15.1 6.5
% change +17 +18 +17 +23
Normal market size: 1,250

Matched bargain trading

Beta: 0.3

Edison Investment Research forecasts




More share tips and updates...


While it has a big exposure to mature markets (in addition to the US, 25 per cent of its sales come from the EU), Abcam has little presence in China, where research spending is rising rapidly but profit margins are lower. Currently, Abcam generates just 4 per cent of its sales in China, so it will need to expand there rapidly to help offset the dominance of US revenues in its income statement.


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

SHARE TIP SUMMARY:
SellTrue, Abcam's share price has stared from the top of mountains before only to reach higher peaks. So much so that its rating is approaching 28 times forecast earnings for 2011-12. That represents a massive premium to the healthcare sector and fails to reflect a basic risk that Abcam's sales could plateau far more quickly than the market assumes. True, the healthy cash pile could easily be used to reward investors for holding the shares, or to fund acquisitions in a fragmented sector. But, ironically, acquisition-drive growth would most likely depress the rating anyway. Meanwhile, the risks are such that it must be very tempting for those who can take fat profits to do so. Sell.

[richscotsman] 18/7/2011 22:51

Thanks Billy - have added the link to my favourites - prefer to try and do my own research but broker views are useful as well.

Rich

P.S. Nice part of the world - I have been lucky enough to be doing business in Inverness and Aberdeen lately so have managed to get about a bit.

[richscotsman] 15/7/2011 16:18

thanks Cambium - so potentially looking at 23%ish earnings growth when the acquisition is stripped out - that is not bad in my book.

Rich

[cambium] 15/7/2011 15:10

House broker numis have 31.5 and 12.4 for this year

[cambium] 15/7/2011 15:08

I've got consensus at 31.5 but investec have 31.8 and eps of 12.7

[billy ray] 15/7/2011 08:00

Hi Rich

Yep, looks like we'd be about 250th in the overall FTSE ranking as it stands... nice! As you mention, some good advantages of being on the main market, so I just wondered if this was something that ABC might be considering sooner rather than later. I understand there are some strict criteria that have to be met to be allowed onto the main market, but am sure ABC tick most, if not all, of the boxes already. AGM in November so might e-mail a question about this to the company for then, if it's not mentioned before.

Cheers

(ps - O/T: looks like Remp still has belief in SEA, nice to see him toppng up!!)

[billy ray] 15/7/2011 07:46

Good trading update. As always, they seem cautious as a result the general macro conditions, but still seem to be producing decent growth (non-antibody sales look to be going nicely). Recent pick-up in US sales also encouraging.
ABC seems to be doing very nicely despite the austerity measures of governments, will be interesting to see what happens once the general economic climate perks up a bit and research funding improves again (although not sure when this might be?).

ABCAM PLC

("Abcam" or "the Company")

Pre-Close Trading Update



Abcam plc (AIM: ABC), a global leader in the supply of protein research and detection tools, announces the following pre-close trading update ahead of its results for the year ended 30 June 2011.



The Board is pleased to report another successful trading period and it anticipates that profit before tax, and before costs incurred on the recent acquisition of MitoSciences, will be slightly ahead of current market expectations.



During the year we have also made further steps in our strategy to drive growth through the extension of geographic coverage, broadening the number and range of products in the catalogue, particularly those of non-antibody products, and through our M&A activities.



As other companies have reported, there has been more cautious spending amongst academic researchers in the US, arising, we believe, from uncertainty caused by central government negotiations around setting the National Institutes of Health budget. This has reduced the rate of US sales growth during the second half of our financial year, but we have seen some recovery in recent months.



Our online catalogue has continued to grow strongly, comprising over 73,652 products at the year end, and we achieved strong growth in non-primary antibody sales.

Tight cost control together with the impact of exchange rates has enabled us to improve both gross and operating margins (before MitoSciences acquisition costs) over those reported at the interim stage.

The Board believes that the Company is well placed to build on its position in the protein detection and regulation market and is excited by the potential this represents. Whilst our business has grown very strongly in recent years, we continue to be cautious as it is unclear to what extent any reduction in publicly funded research expenditure by Governments in the West, looking to address their fiscal deficits, may impact our business.



The Company will report its results for the year ending 30 June 2011 in mid September.

[richscotsman] 14/7/2011 23:50

Billy

This one is more interesting...



Obviously the FTSE 250 covers the main market listed shares from position 101 to 351 by market cap as adjusted periodically. I hadn't looked at the ranking for a while but the current market cap would put ABC well into the FTSE 250 if it went main market - I remember when it was hovering around the edges for quite a while. The plus side of being in the top end of FTSE is that the tracker funds buy in... i.e. you get a boost when you join and you get more fund recognition... maybe another 5-10 years and we will be straight into the FTSE 100?

Rich

[billy ray] 14/7/2011 09:03

Rich

Interesting comment about the FTSE 250... do you reckon we'll see Abcam on the main market any time soon? I don't remember reading anything in any RNS about the prospect of this, but may have missed it. Would be nice to be able to tuck this one away in an ISA.

Cheers

ps - couldn't access your last link I'm afraid, could you try again.. thanks!

[richscotsman] 13/7/2011 18:27

APAD - not that small these days..... if main market listed it would be FTSE250... that is fairly sizeable already! I think Abcam seems smaller because not many people outside the science world have heard of it.

Looking forward to the trading update.

Rich

[apad] 12/7/2011 17:28

rich ...
I did increase my holding this am @415, about 09:30.
I always resolve not do do anything until 11:00ish in a falling market, then give in to temptation!
ABC now 3% of portfolio.
Enough for a small cap.
apad

[richscotsman] 12/7/2011 16:46

Apad - something makes me think you have not made a mistake by buying here yesterday. Best of luck.

Rich

[apad] 12/7/2011 09:48

bamboo - I think there is a little room for ot here, so one comment and apologies to anyone irritated:
Georges Pompidou said of the three ways of losing money "technology is the most certain".
TRX looks to have great technology but will hoover up money to develop and protect it in a new market and to pay expensive salaries. Biocompatibles is a good comparative study.
A small holding and watch developments, especially international competition, is not a bad ploy in my view, but 1% of a portfolio would be enough for me. I'd like to see a better major shareholders list too - GSK has holdings in such as TRX.

rich...
Looks like I could have bought ABC for a penny or two cheaper this morning :-(
I'll have to set my buy alarms lower in this rubber ball market.
apad

[bamboo2] 12/7/2011 09:17

hi apad, have you looked at trx? having read your posts on shaa thread, i would be interested in your view. it's possibly another 'too early'.
i have bought a very small holding in advance of expected news flow and following on from recent positive share price chart. apols for ot.

[apad] 12/7/2011 08:54

I thought so too - so bought a few more (averaging up - took me ages to realize that this better than averaging down).
TDW mobbed this morning (blood on the sand) so had to buy on the 'phone at 415.xxxx.
Been looking at other bio type shares but there seems to be snags to most of them.
Liked AGY as it seems to have a business but I reckon it's too early for me - too many worries.
Anyone else got a favourite bio type with a real business - other than ABC!
apad

[richscotsman] 11/7/2011 23:35

and the share price is back down to the bottom of the band which it seems to have been moving up for the last many years - I'm not a chartist but this looks like a good buy in price....

[apad] 11/7/2011 09:40

q.....
Ta.
Good to see someone else using job vacancies as a metric.
I always check them when I'm worried about a share being overvalued.
They have always been reliable with RSW.
apad

[quickmind] 11/7/2011 08:39

ABC have job vacancies in Japan - haven't seen that for while!

[richscotsman] 07/7/2011 22:22

Cheers Billy...

Check this out



Mr Milner seems also to be behind/backing Cambridge Temperature Concepts - that was on the show with Theo (I am not going to try to spell his surname, him of the Dragon's Den theme). If I remember right it was Britain's Next Big Thing and Theo thought it had billion dollar turnover potential... I only saw a couple of the shows as my tv aerial blow off the roof mid-series! What I saw was some smart guy saying that he could equal IVF results with a £500 device temperature device - impressive... Mr Milner the next Mr Gates of the science world? Did anyone see any more of the series - the same one as the women designing habitat vases.... ouch

Rich

[billy ray] 06/7/2011 08:34

Hi Rich

Couldn't find a confirmed date for news on the website either, but last year's trading statement was 15th July, with full-year results released on 7th September. So am assuming something similar this year.

Only slight concern I have with ABC is the highish prospective PE/PEG ratios, although this has been the case for a while and it's not stopped the share price rising nicely. Unfortunately, high PE's put me off buying ASOS (ASC) for the last 2 years, and that's just kept rising (10-bagger!), so I suppose there's no reason ABC can't do the same, so long as the news flow remains postive.


Cheers

ps - not in any way blaming you for SEA by the way! You actually tipped it on here last summer when it was around 20p, so my fault entirely for being late to the party. Only had small amount in, and have traded in and out a bit to reduce my average, so no real harm done (and my gains on ABC have more than made up for it!!)