CLOSING LONG SHIRE
We have made 21% since we bought this on Brexit Friday. The valuation was too cheap and the GBP exposure clearly a key driver.
With Theresa May now likely implemented as the new PM by the end of the week, a key uncertainty is removed and sterling rallies despite a likely rate cut later in the week suggesting most of the move is done for now.
Also with the news today on Lifitegrast, cons models 1bn USD of revs by 2020. Given the move into the event and the impact the treasury move and the sterling rally is having on the sector, 3% feels about right.
We where looking for a £5 PT by Autumn but with the recent move and current events we take this opportunity to step back from the bull and lock in some profits to revisit later.
UPDATE BUY SHIRE
GS PUSHING THIS MORNING
Tuesday • 28 June 2016 • 08:56
GS on SHIRE: It’s all about the growth and cash flow; reinstate at CL-Buy
Source of opportunity We believe Shire’s current valuation (10x 2017E P/E) is very attractive relative to its growth profile (9% revenue/15% EPS CAGR 2017-20E) and the cash generation outlook. We believe current Bloomberg consensus and valuation significantly underestimate: 1) synergy potential from the BXLT acquisition, 2) elongation of the ADHD and GI franchises from recent pipeline updates and in-licensing, 3) commercial opportunity for lifitegrast, and 4) mid-stage pipeline opportunities (SHP621/SHP625). Net-net, our revenue estimates to 2020E are 2%-6% ahead of consensus and our EPS are 10%-16% ahead. We reinstate Shire as a CL-Buy with a 6300p 12m price target.
One of our Top 3 FTSE names to own.
See our original thoughts at http://monacoalpha.com/ideas/update-shire-2/
WE REITERATE OUR BUY CALL
Tuesday • 14 June 2016 • 15:56
The recent sell off is unjustified and we feel it is due to the fact it is well owned.
From a fundamental perspective it trades on 12x next years earnings with a solid pipeline.
It is a massive USD play with 95% of their revenues being outside the UK so they benefit from the weaker pound.
Happy to BUY more here or open a position.
See our original thoughts at BUY SHIRE
TECHNICAL WEAKNESS; TRADING BUY
Friday • 13 May 2016 • 16:42
A lot of technical selling yesterday related to the tender arbitrage; by tendering your Baxter stock you get BXLT aprrox. 7% cheaper (VWAP period from yesterday to Monday). That put pressure on the spread.
However, they are only issuing 13.7m shares, and as a result allocations are likely to be light and flowback minimal. And in addition, the stock was weak on Wednesday suggesting many will be positioned for this and have to close out bears.
From a fundamental perspective we like SHP. It trades on 12x next years earnings with a solid pipeline. The deal closing at the end of the month should be a positive catalyst. And it is a massive USD play, and given recent data points on both sides of the Atlantic, cable should continue to weaken from here.