EBO-Ebos

[Shareguy]

There may be an upside for Ebos.
https://www.afr.com/companies/retail/sigma-could-shed-customers-after-chemist-warehouse-merger-20231212-p5eqt6

Chemist Warehouse's proposed listing with Sigma Healthcare, creating an $8.8 billion listed retail giant, will likely lead to a loss of independent pharmacies buying from the company's wholesaler business and could be blocked by competition regulators.

Jefferies analyst David Stanton told clients in a note that most pharmacies use two wholesalers. Should this deal complete, Dr Stanton pharmacists who use Sigma as a wholesaler could look elsewhere.

"Independent pharmacies may switch wholesalers at the end of contracts, and in the short term may favour a different pharmacy wholesaler," Dr Stanton said.

"We believe there is the potential for loss of independent pharmacists in the medium term who use SIG as a wholesaler, as these pharmacists may not wish to use a combined entity that is a potential retail threat to their business."

Interesting thanks KW

[Shareguy]

•   The Australian Dataroom publication suggested Paragon Care has hired Rothschild & Co as a defence adviser among chatter in the market it has been in the cross hairs of EBOS. There's talk in the market that Paragon has bidders interested in the business at 40c a share. Paragon Care shares closed up 2.3 per cent to 22c on Wednesday. Earlier, Paragon had said that it had not received approaches from EBOS, while both groups declined to comment on Wednesday. Its market value is $147m. Paragon Care operates in the areas of specialty diagnostics, specialty devices, capital and consumables, and service and technology under brands such as Designs for Vision, Electro Medical Group, Specialist Medical Supplies and Immulab. Paragon Care's net profit has increased 61 per cent to $15.6m in the year to June, but its share price has failed to perform after its performance has disappointed investors in the past, particularly with its mergers and acquisitions strategy. EBO shares closed flat yesterday at NZ$35.21...25% off the highs earlier in the year. https://www.theaustralian.com.au

[winner (n)]

Increasing shareholding in Transmedic to 90%

Going to be "immediately marginally EPS accretive."......that's good

[Shareguy]

Stryker, the largest customer of EBOS' medtech distribution division (responsible for 20% of group EBITDA), yesterday announced double digit YoY revenue growth in Australia for the Dec-qtr, in-line with prior quarters. With the community pharmacy division lapping tough comps, EBOS' medtech/hospital division is increasingly taking over as a key growth driver. Stryker's update indicates that the good momentum seen in EBOS' medtech/hospital business is continuing....EBO closed yesterday at $37.48 and continues to trade in a fairly tight range of $35-$38.

[Shareguy]

Good result as expected. Its trading update for January suggests it is on track to deliver FY24e EBITDA c.2% ahead of consensus

[Shareguy]

The key in my mind is how they intend to replace the loss of CW contract from July 1 2024. Shares I think currently trading about right with a PE of 23. They have $300m of headroom for bolt ons. Increased divi still only represents a payout of 66 percent.

Craigs say


Loss of Chemist Warehouse contract looms large
Chemist Warehouse will cease being an EBOS customer on July 1, 2024. This will leave a hole in EBOS' business amounting to $2bn in revenue and $75m in EBITDA. To help offset this EBOS has several strategies: i) add c.$300m of new Community Pharmacy revenue from new accounts, which the 1H24 result suggests it is well on its way to achieving (ii) accelerate capital investment to support organic growth in other areas of the business, including Contract Logistics and Institutional Healthcare (note that 1H24 capex was elevated at $66m to fund construction of six new facilities which, when completed, will increase throughput capacity by c.25%) (iii) continue to look for bolt-on M&A, with one deal likely in SE Asia imminently and (iv) reduce operating costs by $25-50m, with most of these savings to be realised in FY25. While the sum total of these initiatives will not fill the $75m EBITDA hole left by Chemist Warehouse, we currently estimate EBITDA will decline by c.$36m in FY25e.

So need to find $36m...

[Shareguy]

The Australian saying overnight that Greencross takeover might be back on.

suggesting that TPG Capital may look to drop the price

[winner (n)]

Jeez EBO shareprice down to $33.59 ......lowest since mid 2021

Seems unloved at the moment

Time to buy some?

[Shareguy]

Speculation that EBOS could exit MSCI standard index at May rebalance.

[BlackPeter]

Speculation that EBOS could exit MSCI standard index at May rebalance.

Sounds like buy in May and store away ;

[Shareguy]

Just out from Craigs.

EBO – INDEX WATCH - The pricing period for the May MSCI rebalance ended yesterday - on CIP estimates, the market cap of SPK was above MSCI's Global Minimum Size Reference (i.e. the cutoff at which EBO is deleted) on 3 of 10 days. On 6 days, the market cap of SPK was below our estimated cutoff but within 1% of our estimate and well within the normal margin of error. It could easily go either way, but we would estimate a circa 35% chance that EBO remains in the index. The MSCI announcement will be made on the morning of 15 May NZT with the rebalance effective at market close on 31 May.

Also great article in Business Desk on how well the ceo is regarded and the compounded wealth that has been generated

Quote

Since Cullity had been Ebos' CEO, underlying earnings per share (EPS) increased from A90 cents in 2018 to A$1.48 in 2023.

Dividend per share (DPS) in 2018 was 69c, while in 2023 it was $1.10.

Fund manager claims good buying currently...

[Gerald]

Still some bad comparable results to wash through, assuming no CW revenue from June, full year should be fine then some down numbers? Probably a over simplified way to look at it, but the stock seems to trade in line with earnings direction, so why not wait another year for earnings to bottom before taking another look.

I'm sure winner or some others have some charts on valuation.

[Shareguy]

Big day tomorrow.

https://www.msci.com/index-methodology

[Shareguy]

Not good news. It's going to be deleted. Estimated 13m shares involved.

[Basil]

Any other changes in the MSCI rebalance ?