Trading update highlights Salmosan generic BMK interim results, and FY2015 results, are expected to suffer through the impact of a Salmosan generic on sale in Chile. Pipeline delays add to the potential shortfall in revenues and profits. On the plus side, the new Breeding & Genetics division is performing strongly, even against FX headwinds.
Salmosan has an inevitable decline ahead, and the Chile situation is volatility in that trend. Nevertheless, continuing core investment activities to support R&D, vaccine manufacturing and its product pipeline underlines an exciting and sustainable growth story.
- Forecast revisions to FY15 and FY16. We reduce our Group sales revenue forecasts: FY2015, by 37% to £40m and FY2016, by 26% to £68m. Trading EBITDA is reduced to £0.2m (was £13m) and £11m (was £22m), respectively.
- New products portfolio is the future growth. BMK has, probably, aquaculture's strongest new product and technology pipeline, with 46 products across addressable markets totalling up to £400m pa.
- Technical Publishing (TPD) performed in-line, some project delay in Sustainability Science (SSD). The restructured TPD progressed well, in-line with management expectations. However, a number of SSD projects at the bid stage are delayed, but are expected to contribute in FY2016
- Enhanced growth trajectory underpins investment potential. Despite 2015's clear operational challenges, BMK's growth is above average for the sector, with CAGR ('16-'20) in revenues and adjusted PBT of >20% and >60%, respectively.
BMK is unique with no obvious comparators, and we believe that for high-growth companies the valuation method that best accommodates this transition is a discounted cash flow (DCF).
In light of the trading update and review of our earnings model we revise our fair value to 130 pence/share (from 150 pence).