2012 half year result

Will be announced on 19 Apr, keen to see the figure.

Also below link is worth to read:

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http://counterinvest.wordpress.com/

Placing a value on API – Australian Pharmaceutical Industries
Posted April 9, 2012 by counterinvest
Categories: API: Australian Pharmaceutical Industries, ASX - Australian Stock Exchange
Tags: Australian Pharmaceutical, best value, best value stocks, Cameron Scharl, dividend, dividend stocks, finding value, generate cash flow, generating cash flow, good value stock, growth stock, high dividend, high dividend yield, Highest Dividend Yield, penny stocks, revenue versus market capitalisation, stock market, unrecognised value, value, value investing, value stock
Australian Pharmaceuticals Industries (API) are currently undervalued compared to the rest of the stock exchange with a Price Earnings Ratio of 6.49 times earnings. At the time of writing, the API share price was 30.5 cents and had a market capitalisation of $148.871 Million.

Following are the qualities to consider before buying this stock:
1. Management Quality
2. Net Assets
3. Cash Flow

Australian Pharmaceutical Industries is involved in the following industries:
1. Wholesale Distribution to the Retail Pharmacy industry (37% market share)
2. Retail Pharmacies
3. Retail Cosmetic

The Retail cosmetic business has struggled over recent years and has been improved by better management, clear objectives and an improvement program that will complete by 2016. This will add to cash flow now and when increasing stores in the future.

Net Asset Elements

The Net Assets of the organisation, minus Intangible Assets are $447.406 Million. The share price based on net assets is 91.66 cents.
The Current Market Capitalisation is $148.871 Million.
This is an under valuation of $298.535 Million.

Cash Flow Elements

Revenue decreased $280.317 Million in the previous year due to overall economic conditions and Pfizer going direct with sales. This is the greatest risk for API. If this continues with other drug manufacturers then there is a risk that revenues and profits will deteriorate over a period of time. At this stage it is considered a neutral threat.

API will realise up to $30 Million in cost efficiencies by merging IT systems across all businesses and will reflect upon earnings in the future. On 488,100,000 shares on issue, that is 6.1 cents additional per share. This will increase earning per share to 10.8 cents per share or a Price Earnings Ratio 2.82 times earnings.

The management of API state that they should be of equal value to Sigma Pharmaceuticals (SIP). Both are different business models now that Sigma Pharmaceuticals (SIP) have sold their third-party manufacturing business to Aspen Pharma of South Africa. A concentration on cost savings and the set up of additional Priceline stores, via a franchise model, will see this organisation improve earnings and eventually, improve its share price.

The retail sector is currently struggling, with companies like Myer and David Jones with low Price Earnings Ratios around 10 times earnings. At a worst case scenario, if API was to move to this level of Price Earnings Ratio, the share price based on current earnings is 47 cents.

In summary, based on a Net Asset Valuation, excluding intangible assets, this business is worth 91.66 cents. Based on current industry valuations, the share price is to be a minimum of 47 cents. Valuation between $0.47 to $0.92.

These values will increase given cost efficiencies and improvement in economic conditions in the next couple of years.

Written by Cameron Scharl

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