Probiotec Limited

PBP Details

Release of Escrow Shares: Probiotec Limited (ASX: PBP) is a contract manufacturer and packer in the Pharmaceutical and adjacent segments in Australia. On 17 December 2021, the company had notified regarding the release of 1,842,269 fully paid ordinary shares from escrow on 1 January 2022. Notably, 1,842,267 fully paid ordinary shares are still subject to escrow until 1 January 2023.

2021 AGM Highlights: On 24 November 2021, PBP held its 2021 Annual General Meeting (AGM), wherein, the management highlighted that during FY21, the company has delivered upon its strategic plans and has witnessed record revenue, earnings, and operating cash flow over the year.

• FY21 Results Update: For FY21, PBP reported revenue (pro forma) of $160.5 million, up 50% on the previous year. Further, the company reported NPAT (pro forma) of $13.7 million, up 76% on the previous year.
• Trading Update: For 4 months ended 31 Oct 2021, the company reported sales revenue of $56.7 million and EBITDA of $10.1 million.

Bottom-line Highlight (Source: Analysis by Kalkine Group)

Key Risks:

• COVID-19 Uncertainties: The company continues to witness challenging circumstances due to the COVID-19 pandemic and its associated restrictions.
• Regulatory Risk: The company is exposed to risks related to the delay in receiving necessary approvals from regulatory authorities.

Outlook: The company expects to deliver growth in FY22 earnings compared to FY21 proforma results, subject to trading conditions. In FY22, the company has already secured over $15 million from two key clients and is expected to win new contracts over the next three years.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Over the last six months, the stock has provided a return of 13.23%. The stock is trading close to its 52-week high price of $2.48. The stock has a support level of $2.15 and resistance of $2.39. The stock has been valued using the EV/Sales multiple based illustrative relative valuation method and arrived at a target price with a correction of high single-digit (in % terms). The company can trade at some discount to its peers, considering the uncertainty surrounding the COVID-19 pandemic, regulatory risk, stiff competition, etc. For the valuation peers such as EBOS Group Ltd (ASX: EBO), Mayne Pharma Group Ltd (ASX: MYX), AFT Pharmaceuticals Ltd (ASX: AFP) have been considered. Considering the decent stock performance in the last six months, current trading level, indicative downside in valuation, ongoing uncertainties surrounding COVID-19 pandemic, and key risks associated with the business, we suggest investors to book profit and give a “Sell” rating on the stock at the current market price of $2.35, as on 4 January 2022, 12:30 PM, (GMT+10), Sydney, Eastern Australia.

PBP Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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