SECTOR – HEALTHCARE
RATING – BUY*
MARKET CAP – £18.3m
CURRENT PRICE – 49.7p#
TARGET PRICE – 100p
ANALYST –BARRY GIBB
Year-end Dec
2017A
2018E†
2019E†
2020E†
Revenue (£m)
16.1
18.4
22.0
24.4
EBITDA (£m)
1.9
2.2
3.4
4.7
Pre-tax Profit (£m)
0.1
0.5
2.3
3.3
EPS (p)
(1.0)
0.4
2.1
3.3
DPS (p)
0.0
0.0
0.0
0.0
Net Cash/(Debt) (£m)
(6.3)
6.8
7.2
8.9
P/E (x)
-
124.3
23.7
15.2
Dividend yield (%)
-
-
-
-
EV/EBITDA (x)
27.8
12.9
10.0
7.0
SOURCE: Northland Capital Partners Limited estimates. #Priced at market close, *Northland Capital Partners Limited acts as Nomad and Joint Broker to Venture Life Group and therefore this information should be viewed as a Marketing Communication. †Assumes proposed Transaction is approved at General Meeting of 6th August 2018
Delivering A Step Change In High Margin Brands Growth - Note Attached
NORTHLAND VIEW
- Venture Life (‘VLG’, ‘the Group’) is prioritising high margin Brands growth to drive profitability. The Group’s ready-made marketing, international distribution and manufacturing/development platform has already demonstrated its ability to revitalise and reinvigorate under-invested or unexploited self-care brands through the Group’s highly successful acquisition of UltraDEX®.
- VLG now proposes to acquire the complementary Dentyl Business (‘the ‘Acquisition’), as part of a broader transaction (the ‘Transaction’) that also intends to pay-down debt while building a significant cash ‘war chest’. This suggests management is confident in its ability to secure further value-creating Brand opportunities in the near future. Northland considers such a move could first materialise as early as Q119E.
- Given that the Dentyl Acquisition is expected to be earnings enhancing in its first full year, on gross margins similar to those presently enjoyed by the Brands division without any significant additions to the overall cost base, operating margins can be expected to rise sharply over the next couple of years.
- Valuation - Northland retains its share price target of 100p. Having assumed all resolutions to complete the Transaction are passed at the General Meeting scheduled for August 6th, investors will have funded what should become a step-change in Brands growth and, in turn, considerably improves the Group’s quality of earnings, operational visibility and financial leverage ratios. Achieving all this at the expense of just a modestly higher 2019E EV/EBITDA multiple is no mean feat. Northland considers this has yet to be reflected in the share price.
COMPANY DESCRIPTION
Venture Life Group plc is a consumer healthcare company. The Group develops, manufactures, and commercialises self-care products which target the ageing population.