Dechra Pharmaceuticals Share Discussion Threads

[sarkasm] 15/9/2019 11:44

MIDAS SHARE TIPS UPDATE: Drugs for pets firm Dechra Pharmaceuticals booms

By Joanne Hart for The Mail on Sunday

Published: 11:30 BST, 15 September 2019 | Updated: 11:30 BST, 15 September 2019

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Dogs have always played an important role in Korean life. Once, they were a feature on restaurant menus. Today, they are more often seen at the end of a lead.

The shift is part of a broader trend across emerging markets, as pet ownership becomes something of a status symbol among aspiring consumers.

The more people own cats and dogs, the more they spend on looking after them, to the benefit of Dechra Pharmaceuticals, which makes and sells drugs for pets and other animals.
The more people own cats and dogs, the more they spend on looking after them, to the benefit of Dechra Pharmaceuticals, which makes and sells drugs for pets and other animals
+1

Drugs business: The more people own cats and dogs, the more they spend on looking after them

Midas originally recommended the stock in 2008, when it was £3.97. We recommended it again in 2015, by which time the price had surged to £9.85. Last Friday, the shares closed at £28.90, having almost tripled in the past four years alone.

Looking ahead, long-standing chief executive Ian Page is optimistic and recent figures suggest he has good reason to be.
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Dechra Pharmaceuticals: Latest price and charts

Annual results to June 30, released earlier this month, showed a 17.5 per cent increase in revenues to £482 million, a 27 per cent rise in underlying profits to £127 million and a 24 per cent hike in the dividend to 31.6p.

The company’s performance is all the more impressive, as many peers have struggled recently, and Dechra itself has had to cope with increasingly stringent regulation and potential issues around a No Deal Brexit.
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The group’s resilience derives largely from a simple but effective strategy: listening to what vets need and creating products that satisfy those needs, particularly in specialist areas.

Dechra’s best-selling drug, for example, is Vetoryl, used to treat dogs with Cushing’s disease, a hormonal disorder.

Initially, Dechra operated only in the UK. Today, it sells to vets around the world.

Just over 70 per cent of sales relate to pets, but the group generates strong growth from farm animal and horse products too. Dechra manufactures half the drugs that it sells and buys the rest from third-party producers.

Over time, Page would like to make more drugs in-house and the company has a strong pipeline, including a diabetes treatment for cats and dogs that can be injected weekly instead of daily – a clear bonus for pets and their owners.

Growth is also likely to come from more geographic expansion and well-chosen acquisitions, as Page has bought several businesses over the years and successfully integrated them into the business. Brokers forecast a continued increase in sales, profits and dividends next year and beyond.
MIDAS VERDICT

Dechra has come a long way since chief executive Ian Page took the helm in 2001, enjoying 17 years of consistent, double-digit earnings growth.

Investors who bought in 2008 – and later in 2015 – have done well and may choose to bank some profits.

But most analysts believe the stock could hit £33 in the next year or two so shareholders should retain most of their stock.

[bonzo] 02/9/2019 10:33

Main risk here is the company becoming a takeover target in its own right.

[steeplejack] 02/9/2019 06:54

"The Group has delivered another strong performance throughout the financial year. We have continued to outperform in almost all markets in which we operate and strategically it has also been an excellent year." Ian Page, Chief Executive Officer Sept 2nd 2019

[bonzo] 29/8/2019 12:05

Massive news here. This will transform the company in the long term.

[discodave45] 26/7/2019 01:29

Like the look of these.

[montyhedge] 03/6/2019 11:13

Well up with events, no room for disappointments.

[steeplejack] 25/3/2019 17:17

Analysts at JPMorgan Cazenove initiated coverage on Dechra Pharmaceuticals at 'overweight' on Monday, calling the veterinary products manufacturer a "diamond in the ruff".JPM, which sees animal health as an "attractive" healthcare subsector, said the industry was "fragmented" and felt Dechra was Dechra highly capable of creating "significant value" through mergers and acquisitions.The investment bank's analysts saw attraction in the animal health industry as a result of its strong demographic demand, increasing spend per pet, and increasing animal protein consumption.Low development costs are another appealing element for the analysts, with the FTSE 250 constituent only needing to reinvest around 5% of revenues, and the sector's "superior sustainability" when compared to human pharmaceuticals, with "far more modest genericisations".The analysts, which issued Dechra a twelve-month target price of £30, expect to see Dechra's core EPS grow 11% between 2020 and 2023E, driven by a combination of "strong growth in demand for pet medications" and 200bps worth of operating margin expansion."We see potential forecast upside from pipeline optionality and M&A. We set a Jun-20 PT of £30, 26x 2021E Core-PE, justified by the strong base business outlook, and upside optionality," concluded JPM.

[arja] 14/2/2019 09:47

chart looks interesting but best not to only day trade at present with the possibility of a hard brexit and resultant big fall in share prioes if it eventuates .

[steeplejack] 14/1/2019 19:34

Another decent update....hello....HELLOooo!

[modform] 19/10/2018 07:45

Decent trading update and another acquisition. Not a single post so far nice...

[steeplejack] 12/10/2018 08:20

Bought back in here.

[volsung] 11/10/2018 22:41

Surely a buy at 2000p?

[actiboomz] 12/9/2018 08:03

I’ve closed - it has been an easy gain :-) GLA who still holds

[actiboomz] 06/9/2018 14:22

Love it

Market is random (to me probably). GOG is likely to lose Southeastern contract - which accounts for about 12-17% of their Rev this Nov and yet, they went up 16% earlier today :-). Anyhow, I'm back here at 2250 - as I said again, no tears. Kames Cap went long a shy amount

[gbh2] 06/9/2018 09:53

It's a poor dividend when compared to GSK.

[steeplejack] 06/9/2018 09:12

I think the Times article very sound but they've used the "reported" eps calculation to arrive at a 71 PER.The more widely utilised figure is below.The shares are on a historic PE of around 30,still high but not crazy high.I sold out higher up after the figures but if they come back under £20,I'll consider getting back in. Strong financial performance: * Revenue growth of 13.9% to GBP407.1 million. * Underlying operating profit growth of 24.0% to GBP99.2 million. * Underlying EBIT margin expansion of 200 bps to 24.4%. * Underlying diluted EPS increased by 20.9% to 76.45 pence. * Full year dividend of 25.50 pence.

[montyhedge] 05/9/2018 14:51

Insanely high valuation still. Trading on 71 earnings multiple, what. This should be 950p

[wetdream] 04/9/2018 19:40

It shouldn’t happen to a vet supplier
The Times4 September 2018Miles Costello Tempus dechra pharmaceuticals
STEVEN G SMITH/EYEEM/GETTY IMAGES
Shares in Dechra lost more than a fifth of their value yesterday after the maker of veterinary drugs said that it had embarked on preparations for a no-deal Brexit.
Dechra said that it would be setting up a laboratory inside the eurozone to ensure its products met European Union guidelines if Britain quit without a mutual agreement on testing and drug approvals.
It said that the cost, at about £1.2 million, would be immaterial, but shareholders took fright at the potential fallout for Dechra once Britain is no longer a member of the bloc.
The shares closed 668p lower, or 21.4 per cent, at £24.52.
Dechra Pharmaceuticals suffered the sharpest ever one-day fall in its share price yesterday as investors took fright at an array of risks ranging from a hard Brexit to the changing face of the veterinary market.
It’s hard not to conclude that the drop, of more than 20 per cent, was overdone. There are many moving parts at Dechra, a supplier of products to veterinary practices across Europe and North America, but none appear to merit a fall such as that.
Dechra Pharmaceuticals traces its history back to 1819 when it was founded as Arnolds & Son, a business that made prosthetic limbs. Having moved into the veterinary market during the Crimean war, it has expanded through acquisitions and organic growth and now specialises in treatments such as vaccines and antibiotic sprays for pets, horses and “food-producing animals”, such as chickens and pigs, and produces specialist diet foods for animals. It operates in 50 countries, mainly in Europe and North America.
Dechra operates in a consolidating market. Veterinary practices are merging, mainly to create benefits of scale, at the fastest rate ever (especially in Britain). At the same time, suppliers, which it uses to get its products to vets, increasingly are concentrating on prioritising their discounted own-brand products. Distributors, particularly in North America, also are merging.
Dechra has been happy to get involved in this M&A activity. In the past 12 months it’s bought Rxvet, a pet products business in New Zealand, AST Farma, which also makes treatments for dogs and cats and the like in the Netherlands, and Le Vet, which operates in non-Dutch markets in the European Union.
Enlarged veterinary practices — and, indeed, bigger distributors — will have much more muscle in negotiating discounts for buying or selling on Dechra’s products in bulk. In practice, though, Dechra can live with this as it will be far cheaper to service a single big customer where before it may have been dealing with 25 or even 50 separate companies.
Then there’s Brexit. Dechra told its investors yesterday that it was implementing a plan based on a nodeal departure from the EU next March, under which the bloc would refuse to recognise products tested and authorised in Britain. Dechra is setting up an EU-based company so that there will be no technical barrier to trade. In addition, it is setting up a laboratory in the bloc, equipped with staff who can test products to ensure that they conform with EU guidelines if it turns out that they are required separately. This is a headache, but will cost Dechra only £200,000 up front, plus a one-off expense of £1 million and additional operating costs of £800,000 a year — peanuts for a business with annual revenues of more than £400 million and a profit margin of 24.4 per cent.
In short, none of this justifies the slump in its price; Dechra ended the day yesterday down 668p, or 21.4 per cent, at £24.52.
Its annual numbers were strong. Taking into account the contribution from acquisitions, there was doubledigit growth in both profits and revenues over the 12 months to the end of June. The United States, where there were no deals last year, increased its revenues by a healthy 18.2 per cent and the profitability of the consolidated businesses in Europe improved sharply.
Nevertheless Dechra shares are insanely highly rated, even after yesterday, trading on an earnings multiple of a whopping 71 times and with a dividend yield just shy of 1 per cent. The group is in good shape and seems well placed to adapt to its changing market; still, it’s as hard to justify buying the shares as it is to defend yesterday’s fall.

[investopia] 04/9/2018 09:57

hxxps://uk.webfg.com/news/broker-recommendations-/broker-tips-dechra-jd-wetherspoon-imperial-brands-british-american-tobacco--3466522.html

Although investors were unimpressed with Dechra's annual results and sent the shares galloping down, analysts at Jefferies liked the "impressive growth" in North America during the veterinary products manufacturer's last trading year.

Jefferies, which reiterated its 'buy' rating and 2,726p target price on the FTSE 250 resident on Monday, pointed to growth of 21.1% globally and a better-than-expected 18.2% sales growth in North America.

Analysts looked fondly on margins expanding "despite some headwinds from increased distributor consolidation and increased investments in sales force" and felt the outlook for 2019 "is positive and signals good progress from recent M&A".

Dechra's North American sales increase was driven primarily by the US but also with strong growth in Canada, where all growth was organic. American operating profit margins remained flat at 32.5%, while sales of Amoxi-Clav, Vetivex and Zycortal were particularly strong despite its Carprofen range being hit by competition with distributors.

In the EU growth of 11.4% came amid benefits from acquisitions as the group exited the contract manufacturing business through the year. Dechra performed ahead of the market in the majority of geographies.

Market dynamics could see further consolidation of distributors, Dechra suggested, with a faster change of veterinary distributors and increased marketing of veterinary distributors' own generic products.

While increased consolidation could see increased buying power of distributors, Jefferies felt Dechra's "high value, innovative portfolio means it is less exposed to these changes and there is value in increasing volumes through consolidated distributors".

[montyhedge] 03/9/2018 19:43

Always said this was a crazy valuation.

[actiboomz] 03/9/2018 15:16

I also got in at 2536, no tears.

[steeplejack] 03/9/2018 15:07

This is a well held stock with the likes of a Fidelity,Blackrock,Standard Life,Legal and General,Schroders all having sizeable stakes.What worries me is one or more of these institutions might be tempted to top slice.Even at £25,the stock presuming (eps of around 85p)is still on a multiple of around 30x.Difficult because it's obviously a good calibre company in a growth area but the climate is becoming more competitive and congested and the rating is pretty much up with events.