Jamieson Wellness has earned a repeat ‘Buy’ rating from analysts at Canaccord Genuity (TSX:CF, LSE:CF) after posting a first-quarter earnings beat.
For the quarter, the Canadian manufacturer, distributor, and marketer of natural health products reported earnings per share of $0.21 on revenue of $136.7 million, topping the analysts’ estimates of earnings per share of $0.18 on revenue of $125.8 million.
In a note to clients, the analysts highlighted that the company did not change its 2023 guidance despite the beat.
Its second-quarter guidance of $162.5 million to $173.3 million came in below the analysts’ forecast of $187.4 million.
“It appears part of the 1Q beat was thanks to earlier recognition of revenue we had projected for 2Q,” the analysts wrote.
Canaccord’s analysts also highlighted the acquisition of Jamieson’s key competitor Australian vitamin and mineral supplements (VMS) company Blackmores by Japanese beer maker Kirin Holdings for US$1.2 billion or A$95 per share.
“It is a sizable premium to where JWEL trades and we note that no other nutrition-focused peer trades above 20x trailing EBITDA,” they wrote.
“We speculate the premium purchase price is due to BKL's footprint in the attractive AsiaPac market as well as potential synergistic insights Kirin can bring through its close to 30% stake in US VMS company, Thorne HealthTech.”
In assessing Jamieson’s valuation, the analysts said they were excluding Blackmores’ sharp uptick post-Kirin announcement in an effort to be conservative.
“We have been valuing JWEL shares based on the average of where BKL has traded since the pandemic began,” they wrote. “This has increased from 15.5x as at February to 15.8x today and represents a 1.0-turn premium to where JWEL has traded over the same time frame.”
However, the analysts noted their increased target multiple has been offset by their lower adjusted EBITDA forecast, resulting in no change to their $42 price target.
“With an implied about 30% of potential upside from current levels, we reiterate our ‘Buy’ rating,” they concluded.
Jamieson shares were trading at C$31.94 on Tuesday.
Contact the author at emily.jarvie@proactiveinvestors.com
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