Sirtex Medical Limited (ASX: SRX)

Substantial profitability scenario: Sirtex Medical Limited (ASX: SRX) announced the financial results for the first half year ended 31 December 2017 with a 13.2% rise in NPAT. The company recorded product revenues of $109.4 mn, down by 3.0% on year on year basis. The top-line trailed due to currency headwind in US during the same period, and changes in geographic mix associated with higher growth in lower priced markets across the APAC region. However, EBITDA grew by 16.8% in H1FY18 on YoY basis on the back of reduction in non-core expenditure coupled with stable product pricing during the same period. Reported NPAT was up by 13.2% reflecting a higher effective tax rate of 29.0% versus 23.5% in the previous corresponding period, driven by a reduction in accessible R&D tax credits commensurate with the targeted reduction in clinical and R&D activity during the period.

During 1HFY18, the company paid dividend of $16.7 Mn to shareholders. Additionally, the company bought back $27.1 Mn of its own shares, as a part of $30 Mn on market share buy-back, which completed in early September. Sirtex remains debt free with cash and cash equivalent of $92.8 Mn in 1HFY18, which was down by 6.2% due to share buy-back event during the period. In total, the company returned approximately $44 Mn to shareholders during the period. The company focusses on to prioritise initiatives to restore top-line growth and continuing to be prudent with its costs, to align more appropriately with growing its core SIR-spheres business segment, globally. The management guidance on reported EBITDA is in the range of $75 Mn to $85 Mn in the full financial year. SRX will also keep the market updated about the acquisition proposal from Varian Medical Systems that has recognised the long-term potential in SRX and has proposed for A$28.00 per share cash offer for Sirtex in late January.

The stock price has already climbed up by 71.5% in past 6 months and rallied up at 51.1% in last one month at the back of acquisition news; therefore, based on the trading scenario with price peaking towards 52-weeks’ high level, we retain our “HOLD” recommendation on the stock at current price of $27.60
 

Financial Performance Analysis (Source: Company Reports)

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