Monday, July 22, 2013

Great way to play the Healthcare Market

Those looking into some catalyst might want to ponder over this name I read online on Barron’s.

Trinity Biotech (TRIB)

Price:  USD 19.36
Market Value: USD 392m
Est 2013 Revenue: USD 89m
Est 2013 Net Income: USD 18m
Est 2013 EPS: USD 0.80
Est 2014 EPS: USD 0.97
Est 2014 PE*: 15 (Stripped of cash)
Dividend Yield: 1.20%
Business: Trinity Biotech (TRIB), an Irish maker of medical-testing equipment.

  • Diabetes has reached epidemic proportions around the world. There are 250 mn diabetics living today, and by 2025 the number could soar to 380 mn.That has created a large opportunity for companies that make testing equipment to diagnose the disease. TRIB has seen strong demand for the Premier Hb9210, its diabetes-testing instrument, since it was launched in 2011. The Premier boasts noted advantages over existing devices, including speed, accuracy, and easy-to-use touch-screen technology.
  • In 2012, its first full year of sales, Trinity shipped 202 of the Premier devices, which sell to hospitals and labs for about USD25,000. This year, Trinity estimates it will ship 320 or more devices, aided by its recent entry into China, a potentially large market for the device, with an estimated 54 mn undiagnosed diabetics.
  • Trinity makes tests and clinical instruments that detect for Lyme disease, syphilis, legionella, diabetes and autoimmune disorders like lupus. The company is perhaps best known for its point-of-care tests for AIDS used in Africa and the U.S.Last year, clinical instrumentation accounted for 77% of revenue, with point-of-care testing chipping in the remainder.In addition to growth from Premier, Trinity could also benefit from its lineup of new rapid point-of-care tests. They include tests for syphilis, herpes, strep pneumonia and cryptosporidium, and are expected to come to the market this year. Sales could ramp up in 2014.
  • Trinity is also making progress with its point-of-care cardiac test to determine if a patient has had a heart attack. With an estimated world-wide market of USD1 billion a year, the potential is large. Trinity acquired the test in March 2012 when it bought Fiomi Diagnostics, and reported in April, that the test has begun clinical trials in Europe for regulatory approval. Approval, if it occurs, could come as soon as the end of this year.
  • Trinity has a solid balance sheet, with USD73 mn in net cash. Free cash flow for 2012 is USD17 mn. Management is committed to returning some of its cash to shareholders in the form of dividends and stock buybacks. According to industry, TRIB can be worth USD25 by the end of 2014.

Tuesday, July 16, 2013

Special Situation Ideas for week of 15-Jul-2013

Those looking into some catalyst might want to ponder over these names for the week. I have  done research on few of them, the other I have read online, on Barron’s and other publications.  These are def. is worth a serious look.

Utility sector: As usual, people think this is a boring sector to dwell into. However, as power plants switch from coal into a more renewable energy mix, there might be an potential M&A opportunities in this sector, specifically with those firms that are into renewable space. This is not the time for huge LBO’s of buyouts especially In the sector that’s regulated on the revenue side. However, some small and mid cap names are worth a look, at they not only bring a client base but help the acquirer reduce cost and increase margins. Some names do come to mind : Hawaiian Electric (HE) - Approx 5% yield and capturing and generating solar energy in addition to non-renewable. Portland Electric (POR): approx. 3.6% yield and huge in renewable sector; Avista Corp (AVA); approx. 4.6% yield and into wid, landfill Gas and Hydro.

Intuit (INTU): This technology company might be poised for a huge dividend increase. The firm just sold its financial services unit to Thomas Bravo for USD 1bn and plans to sell its healthcare business. With USD 2bn in cash and USD 500m in debt, the completion of second divestiture, might either propel the firm o return cash to shareholders of make accretive acquisition. Its worth a look!

Maple Leaf Foods (MFI): IN light of the recent Canadian M&A, this firm might be worth taking a look at. The company has not only been cited repeatedly as a takeover target, there were rumors it was  looking to divest. If not for takeover, the fundamentals of the firm support organic growth in food sector, given the demand and consumption. Also, 33% owned by M. McCain, the CEO and 11.4% owned by canadian activist - west face capital. There is a chance, the firm might get sold in the future.

Citigroup (C): There was a good article this week on Citigroup (C) , which I believe is worth a read . Some in industry believe the stock is worth USD 70s to low-USD 80s: Some of the key points it made were as follows:

·       Management change : 17-April-12, Chairman Michael O'Neill, a former Marine known for turn around in banks and  a new CEO, Michael Corbat, a former banker.
·         Truly global franchise, which is almost impossible to replicate: Citi is in 160 countries. All told, about 58% of Citigroup's revenue comes from outside North America. In contrast JPMorgan Chase (JPM) gets just 19% , while Bank of America (BAC), a mere 13%.
·          Bank is sitting on USD55 bn in deferred tax assets, or future tax write-offs, which will be increasingly valuable in using its capital more effectively. Helps improve earnings and create leeway for future stock buybacks and dividend increases.
·         Citi has received permission to buy back USD1.2 bn of its shares through the first quarter of next year, a relatively modest amount but an important symbolic victory.
·         Corbat plans to lift return on assets to 90 to 110 basis points from the 62 basis points recorded in 2012 (a basis point is one-hundredth of a percent). He's aiming to boost ROE to more than 10% from 5% in 2012, and to attain an efficiency ratio at Citi  in the mid-50% range, compared with 60% in 2012. Keeping with his promise, CEO has cut 11,000 jobs worldwide, sold or scaled back consumer-lending operations in Turkey, Romania, Paraguay, Uruguay, and Pakistan, and sold a consumer-finance unit in Brazil to focus on faster-growing business lines.  Also paid USD1bn to move past the financial crisis claims from Freddie and Fannie.
·         Many believe the bank is overcapitalized. Additionally,  Latin America contributes 13% to overall revenue -- Citigroup's corporate and retail banking revenues are increasing at double-digit clips compared with domestic growth that's been flat, excluding Citi Holdings.
·         The level of problem assets in Citi Holdings , a.k.a. the bad bank stands at USD149 bn, well off its peak of about USD800 bn in 2008. Just unlocking the capital connected to Citi Holdings could add as much as USD10 a share to his price target of USD60.

Personal Note: I am still long HES CALLS expiring in Jan-14. In addition, I have still held on to my DELL LEAPS.