from Citywire 26 Mar 19
AJ Bell: Convatec in need of a shake-up
A management shake-up at medical equipment maker Convatec (CTEC) could be the start of a new way of thinking that could benefit investors, says AJ Bell.
Convatec has poached Genus’ boss Karim Bitar to be its new chief executive to lead its turnaround effort just as the former is also losing its chairman and deputy chairman.
‘Convatec desperately needs a new lease of life as it has been a serial disappointment for most of its time as a listed business,’ said analyst Russ Mould.
Last month, the group announced plans to invest $150 million over three years and Mould said ‘the scale of such investment was significantly greater than expected, despite having scope to deliver $120 million in annual savings by 2023, as well as improvements in revenue growth and profit margins’. |
This looks like a decent recovery stock. CEO buying some stock the other day and rumours of a potential bid.
when are the next set of numbers out though? Probably not for a while.... |
Market report:
Medical equipment maker Convatec was the standout gainer on the FSTE 250 after Sweden's Dagens Industri reported that Swedish private equity group EQT may consider a bid for the company. |
Peel Hunt upgrading from 'hold' to 'buy' ... tp 230p up from 150p |
Questor: ConvaTec has lost its momentum so we must stomach our loss and sell |
hi dbensimon,
yes i certainly think they present value at this price. |
Sure I am. Buy at this level for medium term. |
This board is very quiet....
Is anyone still left on Board? |
On my watchlist now. Wait for the next profit warning and then buy. |
Off the watchlist now. |
Still waiting
Barclays Capital today reaffirms its underweight investment rating on ConvaTec Group Plc (LON:CTEC) and cut its price target to 148p (from 150p). Story provided by StockMarketWire.com |
 One of Peel Hunt's stock picks for 2019
Convatec (CTEC)
The depressed share price at medical products company Convatec has led to a rise in the dividend yield but the poor sentiment is unfounded.
Analyst Amy Walker retained her ‘hold’ recommendation and target price of 170p on the stock.
She said that ‘low visibility on earnings momentum has depressed the share price, leading to a rise in the dividend yield’ but even if the group misses her ‘conservative’ growth forecasts by 7% to 11% the company could still ‘yield at least 3% at the current share price, at the bottom of its target pay-out range’.
Walker is not pessimistic about the outlook for the company, stating that the demand for the medical technology firm’s products were ‘unlikely to change materially from their mid-single digit market growth rates’.
She added that the company can ‘support a stable to growing dividend’ but the most likely driver of volatility is the share price ‘which declined more than 30% on the most recent profit warning’. |
Deutsche cuts target price to 130p from 180p - 'sell' |
Still watching.
Barclays initiates coverage with 'underweight' and tp 150p |
Numis upgrades Convatec to ‘buy’
Numis has upgraded medical technology company Convatec (CTEC) after an ‘unwarranted’ 35% fall in the share price.
Analyst Paul Cuddon upgraded his recommendation from ‘hold’ to ‘buy’ with a target price of 220p on the shares, which jumped 5.6% to 155p yesterday.
‘We do not think the loss of a chief executive and the decline in infusion devices warranted a 35% fall in Convatec’s share price, especially when the broader chronic care business is maintaining consistent 2% quarterly growth,’ he said.
‘We see full-year 2018 results, details on the self-help strategy and full-year 2019 outlook as key catalysts. The company trades on 10x enterprise value/earnings and offering sector leading free cashflow yield and so we upgrade to “buy”.’ |
Detail..
Medical products and technologies company ConvaTec fell on Friday as UBS downgraded the stock to 'neutral' from 'buy' and slashed the target price to 150p from 250p, pointing to a slowdown in the wound market - to which the group is over-exposed - and limited progress in the ostomy turnaround.
In addition, the bank highlighted concerns that EBIT margins will continue to decline, as investments are likely still required in internal controls, marketing and R&D, as well as capex.
UBS said it expects just 2% group organic sales growth in all future periods.
"We assume structural market share loss in Ostomy, with a 1% sales compound annual growth rate, ignoring significant investments aimed at delivering market growth of 5%. We also assume margins decline a further 100 basis points before stabilising at 22.5% from 2020, ignoring guidance of upside from 2020 from operating leverage and margin strategy to be announced in February 2019."
In its upside scenario, UBS sees fair value at 240p a share. However, without a CEO and after high senior staff turnover since IPO, it's hard to get comfort execution issues won't continue, it said.
Earlier this month, ConvaTec shares tumbled as it issued a profit and announced that CEO Paul Moraviec was stepping down. |
Downgrade from UBS 'neutral' from 'buy' ... TP 150p cut from 250p |
Peel Hunt 'hold' tp 170p cut from 220p |
ConvaTec Group, down 3.0%. HSBC downgraded the wound dressings maker to Hold from Buy.
Target 165p cut from 245p |
You could get free samples from the other companies to try whilst running down your prescription. I need to declare I currently work for a UK manufacturer and 15 yrs ago used to work for ConvaTec R&D. |
Erogenous, get your Stoma Nurse to source alternative products for you to try.
There are a number of manufacturers out there in the UK. |
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