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A s c e n t e x i t , s u b s t a n t i a l v a l u e u n l o c k i n g …
Strides has sold its subsidiary (94% holding) Ascent Pharmahealth to
Watson Pharmaceuticals for AU$353 million (US$370 million) in cash.
Ascent Pharmahealth was valued at AU$375 million. Ascent clocked
US$128 million in CY10. The management has indicated sales of Ascent
Pharma for CY11 are around US$154 million in CY11E and EBITDA is
US$19 million. Hence, the deal works out to ~2.5x sales and ~20x
EV/EBITDA, which we believe is a great bargain for the company. Strides
raked in almost 3.2x in profits if we consider the total acquisition cost of
~US$113 million through 2008-10.
ƒ Singapore facility to be transferred along with300 employees
Strides has had a presence in the Australasia market through Ascent
Pharmahealth. Ascent owns a manufacturing facility in Jurong,
Singapore, which would be transferred to Watson. Ascent sells over
400 drugs encompassing generic, OTC and skincare products,
products with well established consumer brands and organic
skincare products in eight countries. The company has staff strength
of approximately 300 employees in Australia and Southeast Asia.
ƒ Cleansing of balance sheet
We expect the company to receive cash of around US$310 million
post taxation. Of this, US$250 million would be used to repay the
debt including FCCBs of US$117 million (debt of US$80 million and
US$37 million for YTM) due in June 2012. Post transaction cost and
executive option, the remaining cash would be used to fund the fast
growing Specialities business. We expect the gross debt to come
down to | 1100 crore from the current level of ~| 2625 crore, which
could save around ~| 55 crore of interest for CY12.
V a l u a t i o n
Exit from low margin Ascent Pharmahealth (with better bargain) is a move
in the right direction as it will improve the focus on its core specialties
business. The immediate cash inflow will ease pressure on the balance
sheet substantially. We have upgraded the target price from | 439 to
| 521 based on upward revision of the multiple from 9x to 11x and after
applying the same on a revised CY12E EPS of | 47.4.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
A s c e n t e x i t , s u b s t a n t i a l v a l u e u n l o c k i n g …
Strides has sold its subsidiary (94% holding) Ascent Pharmahealth to
Watson Pharmaceuticals for AU$353 million (US$370 million) in cash.
Ascent Pharmahealth was valued at AU$375 million. Ascent clocked
US$128 million in CY10. The management has indicated sales of Ascent
Pharma for CY11 are around US$154 million in CY11E and EBITDA is
US$19 million. Hence, the deal works out to ~2.5x sales and ~20x
EV/EBITDA, which we believe is a great bargain for the company. Strides
raked in almost 3.2x in profits if we consider the total acquisition cost of
~US$113 million through 2008-10.
ƒ Singapore facility to be transferred along with300 employees
Strides has had a presence in the Australasia market through Ascent
Pharmahealth. Ascent owns a manufacturing facility in Jurong,
Singapore, which would be transferred to Watson. Ascent sells over
400 drugs encompassing generic, OTC and skincare products,
products with well established consumer brands and organic
skincare products in eight countries. The company has staff strength
of approximately 300 employees in Australia and Southeast Asia.
ƒ Cleansing of balance sheet
We expect the company to receive cash of around US$310 million
post taxation. Of this, US$250 million would be used to repay the
debt including FCCBs of US$117 million (debt of US$80 million and
US$37 million for YTM) due in June 2012. Post transaction cost and
executive option, the remaining cash would be used to fund the fast
growing Specialities business. We expect the gross debt to come
down to | 1100 crore from the current level of ~| 2625 crore, which
could save around ~| 55 crore of interest for CY12.
V a l u a t i o n
Exit from low margin Ascent Pharmahealth (with better bargain) is a move
in the right direction as it will improve the focus on its core specialties
business. The immediate cash inflow will ease pressure on the balance
sheet substantially. We have upgraded the target price from | 439 to
| 521 based on upward revision of the multiple from 9x to 11x and after
applying the same on a revised CY12E EPS of | 47.4.
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