DECHRA PHARMACEUTICALS (DPH)

[BullDog]

I have half an eye on Dechra Pharmaceuticals, DPH. The share price has dropped considerably from it's year high and the downwards momentum seems to be continuing. I can find little useful information on the company, which surprises me given it is a pretty large concern these days. A FTSE100 company. There's apparently no active short sellers in the stock and I can see nothing really but good news, nothing obviously bad. Animal medicine strikes me as being a very good business to be in for a number of reasons.

It's not a stock for income investors, but I would be interested in hearing other's views on this stock. I am tempted to take a small position in DPH, it's risky though whilst the downward momentum persists in the share price. Thanks for the input.

https://www.dechra.com/

[bungeejumper]

Thanks for the memory. I looked at Dechra about five years ago, but for some reason I decided not to do it. Drat, I could have had a five bagger.

Okay, it's a straight-down-the-line veterinary pharmaceuticals company, with some big competitors in the States. Current p/e of 74 is down on the 100 or so from last September. At which time Investors Chronicle was advising to hold at 4,747p. It's currently 3,878p.

Looks like a covid story to me. This FT commentary from around that time seems to nail the story in macro terms. The share price had shot up by 70% or more during the covid lockdown, because so many people were buying dogs - but the valuation overshoot had to end some time, and once the first signs emerged of a general return to work, that was enough to put the skids under the bulls.

https://www.ft.com/content/bfd83cb2-1fa ... ba9b57a841 . (Or google it under "dogged by its own success".)

Last month, the company forecast on-target sales for the year to June 2022, but the US has been reporting steep falls in vet visits, which seems to be what has driven the slide since mid-December. It all seems entirely logical to me. But then, what do I know? I didn't buy it five years ago, did I?

BJ

[BullDog]

Thanks BJ. Have a rec

[simoan]

I’ve never looked at Dechra because it’s never appeared on any of my screens. I think I can see why…

Last full year Capex was so high it made Free Cashflow negative, I’d need to understand why but It was so negative but I assume they made a sizeable acquisition. That aside, based on FY21 the FCF yield is < 2%. Other profitability metrics are not up to scratch for me - 5 year average ROCE = 5.3% (ROE is similar) and operating margin < 10%.

All the best, Si

[BullDog]

I’ve never looked at Dechra because it’s never appeared on any of my screens. I think I can see why…

Last full year Capex was so high it made Free Cashflow negative, I’d need to understand why but It was so negative but I assume they made a sizeable acquisition. That aside, based on FY21 the FCF yield is < 2%. Other profitability metrics are not up to scratch for me - 5 year average ROCE = 5.3% (ROE is similar) and operating margin < 10%.

All the best, Si

Thank you. I very much appreciate your input.

Indeed, DPH is a long time serial acquirer of animal pharmaceutical companies or product rights. It has a reasonable track record in this as far as I can see. But I don't have any experience of corporate finance beyond running a couple of small one man limited companies.

Thanks again.

[monabri]

Person discharging managerial responsibilities (PDMR) - Anthony Griffin MD of Dechra Veterinary Products for Europe & Executive Director
Apr 21 Sells £963k of shares at £38.52 avg.
Sep21 Sells £875k of shares at £50.01 avg.

- Only "buys" are small beer, one at £5k and one at just under £20k.

- Debt is being managed ok.

- Metrics - ROCE - looks to be improving from ~5% to 8% over the last 3 years but not that enticing (ditto ROE at 8%).

- divi yield won't be of interest to the HYP board!

- PER very high...great things expected but it will hurt if they don't deliver.

- cash flow per share did turn negative year ending June 21 (lots of CapEx - much higher than normal - wonder why?).

- the number of shares in issue has been trickling up

- Gross margins are "nice" but Operating margins are 10% (best look at 5 yr avgs)

https://financials.morningstar.com/rati ... t=xlon:dph

- I don't see "opportunity".

[BullDog]

Thank you monabri, take a rec

[simoan]

- I don't see "opportunity"

I’m not sure I would go that far as maybe the future is looking better than the historic numbers show. It seems they did make a £100m acquisition in FY21. Maybe it could transform profitability? Still on a forecast FY22 PER of 33, so still not cheap though.

If I were looking to invest in animal medicine I’d take a serious look at Idexx in the US which is held by Fundsmith. Even more expensive but much better profitability metrics.

All the best, Si

[yorkshirelad1]

Bid for Dechra 13 April 2023

RNS (13 April 2023 17:30): https://www.investegate.co.uk/dechra-pharmaceutcls/rns/statement-re-possible-offer/202304131732101812W/
Market close 14 April 2023: (https://www.sharecast.com/news/market-report-close/london-close-stocks-higher-despite-us-retail-sales-slide--13015616.html): " “On London’s equity markets, shares in Dechra Pharmaceuticals surged 33.07% after the company revealed overnight that it was in talks with EQT, a Swedish private equity firm, about a possible £4.6bn takeover.”"

FT (Sat 15 April 2023): "Shares in Dechra Pharmaceuticals soared on Friday after the UK veterinary medicine group said it was in takeover talks with Swedish buyout firm EQT, as the private equity industry seeks a bigger share of the booming petcare market. EQT has offered to pay 4,070p a share for Dechra, which also makes medicine for livestock, in a deal that would value the company at £4.6bn. Dechra said it would be prepared to recommend an offer at that price to shareholders."
https://www.ft.com/content/ef7de40e-e1fc-47a7-8a95-78f8606225c6 (paywalled)
http://archive.today/2023.04.14-105548/https://www.ft.com/content/ef7de40e-e1fc-47a7-8a95-78f8606225c6

Company: https://www.dechra.com/investors/possible-offer

(I have a holding of Dechra, having been thinking about it for a while, purchased two weeks ago. Sometimes ....)

[BullDog]

Bid for Dechra 13 April 2023

RNS (13 April 2023 17:30): https://www.investegate.co.uk/dechra-pharmaceutcls/rns/statement-re-possible-offer/202304131732101812W/
Market close 14 April 2023: (https://www.sharecast.com/news/market-report-close/london-close-stocks-higher-despite-us-retail-sales-slide--13015616.html): " “On London’s equity markets, shares in Dechra Pharmaceuticals surged 33.07% after the company revealed overnight that it was in talks with EQT, a Swedish private equity firm, about a possible £4.6bn takeover.”"

FT (Sat 15 April 2023): "Shares in Dechra Pharmaceuticals soared on Friday after the UK veterinary medicine group said it was in takeover talks with Swedish buyout firm EQT, as the private equity industry seeks a bigger share of the booming petcare market. EQT has offered to pay 4,070p a share for Dechra, which also makes medicine for livestock, in a deal that would value the company at £4.6bn. Dechra said it would be prepared to recommend an offer at that price to shareholders."
https://www.ft.com/content/ef7de40e-e1fc-47a7-8a95-78f8606225c6 (paywalled)
http://archive.today/2023.04.14-105548/https://www.ft.com/content/ef7de40e-e1fc-47a7-8a95-78f8606225c6

Company: https://www.dechra.com/investors/possible-offer

(I have a holding of Dechra, having been thinking about it for a while, purchased two weeks ago. Sometimes ....)

Fantastic timing! Well done.

[monabri]

Original post 12th Feb 2022.

Slight profit over the year after the offer ..I think the offer should be seized upon. Original view in Feb 22 was not positive.



EQT are offering a good premium ( overpaying, I'd suggest).

[AsleepInYorkshire]

I have half an eye on Dechra Pharmaceuticals, DPH. The share price has dropped considerably from its year high and the downwards momentum seems to be continuing. I can find little useful information on the company, which surprises me given it is a pretty large concern these days. A FTSE100 company. There's apparently no active short sellers in the stock and I can see nothing really but good news, nothing obviously bad. Animal medicine strikes me as being a very good business to be in for a number of reasons.

It's not a stock for income investors, but I would be interested in hearing other's views on this stock. I am tempted to take a small position in DPH, it's risky though whilst the downward momentum persists in the share price. Thanks for the input.

https://www.dechra.com/

First thing that jumps into my mind is the number of cats and dogs being "given up" by owners who can't afford to keep them.

We've got two dogs. And I can assure you we'd sell our home before they went without. But I think we're the exception. Many don't understand the financial costs of any pets. We have two fish tank that cost a fortune. Two gerbils that eat better than Boris Johnson and our dogs, and our dogs eat better than we do

About 8 months ago I spoke with the manager of our local vets. They are an independent. What I heard didn't come as a surprise. They are struggling to keep their head above water, cannot attract vets although they pay above average, and their debtors list is horrendous.

When Pets at Home venture into "Vet's for Pets", it's time to think long and hard about anything connected with pets.

As far as Horses and Livestock are concerned any drug manufacturer is going to be up against the revenue of any particular livestock. I'm not an expert in that area but I'm [vaguely] aware (and stand to be corrected) that we in the UK are reducing livestock in this country, in pure numbers, with many farms looking at their carbon footprint and believe it or not the need to diversify into different stock with lower numbers but higher margins.

AiY(D)

[yorkshirelad1]

25 April 2023 Times: “Dechra Pharmaceuticals investor rejects £4.6bn offer"

A leading shareholder in Dechra Pharmaceuticals is opposing the £4.6 billion takeover approach for the veterinary drugs company. Newton Investment Management said this month’s £40.70-per-share offer from EQT, a Swedish private equity firm, was “opportunistic” and failed to reflect Dechra’s pipeline and recent dealmaking. Louise Kernohan, a equity portfolio manager at Newton, which is a top 30 investor in Dechra and owns about 0.5 per cent of the FTSE 250 company, said EQT’s offer was not “an appropriate or fair reflection” of Dechra’s value.

https://www.thetimes.co.uk/article/dechra-pharmaceuticals-investor-rejects-4-6bn-offer-lkb6l2st3 (paywalled)

Hmmmm ..... "Newton, which is a top 30 investor in Dechra and owns about 0.5 per cent of the FTSE 250 company": 0.5%: Wow. If it was Blackrock (~6%) or Aberdeen (~5%), it might get some attention. Even the nominee of stockbroker where I have my holding of DPH has ~1% of DPH.

Share price largely unmoved this morning (as at 09:22)