Dechra's animal spirits undiminished

Tip Updates 

Dechra's animal spirits undiminished

BUY

Tip Update: Buy at 2322p

Tip style
GROWTH
Risk rating
MEDIUM
Timescale
LONG TERM
Our previous tip
We said BUY at 1699p on 10 Jul 2017
Tip performance to date
+37%

Last time out, we noted that while Dechra (DPH) “may have the financial firepower to keep shopping…acquisition opportunities are becoming few and far between”. Well, the fast-expanding veterinary pharmaceuticals group has identified two in the form of Dutch animal pharmaceuticals firm AST Farma and European animal-focused company, Le Vet.

The total consideration for these acquisitions is €304m (£266m), made up of a 75 per cent cash component with the remainder in new Dechra shares. To part-fund the deals, the group is to raise £105m through a placing of 5.1m new shares at 2,050p apiece, which represents around 5.5 per cent on its existing share capital. The group will also initiate a drawdown on a new banking facility.

IC View

At 2,322p, the shares are 37 per cent in advance of last July’s buy call and the historic price/earnings premium to peers has further widened. But the group has demonstrated an ability to drive earnings through well-targeted acquisitions and effective execution of its strategic objectives. We remain in the buyers’ circle. Buy.

Last IC View: Buy, 1,970p, 4 Sep 2017

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