LIBERUM: Mud & Muck - Genus, Cranswick, Origin Buys for 2020
In 2019 companies exposed to the protein sector performed strongly as the destruction of China’s pork herd drove demand and prices. By contrast, companies exposed to arable faming (fertilisers, crop chemicals etc) performed less well.
GNS CWK OGN
09 Jan 20
LIBERUM: Genus* - Helping China rebuild its pork industry
We lift our target price to 3450p and maintain a Buy rating. Short-term valuation metrics are clearly high but we think the risk to estimates is positive, driven by demand in China for genetics as it rebuilds its pork industry. In addition, we see four other key drivers that should sustain double digit EBIT CAGR for the foreseeable future.
28 Nov 19
LIBERUM: Genus* - Positive trading update with recovery underway in China
Genus has reported a positive trading update for the first four months of its year with good profit growth across the business and recovery evident in PIC China. The company is not signalling consensus estimate changes at this stage but we believe the risk is more likely positive with key profit drivers being: 1) PIC China, as Genus helps the Chinese pork industry rebuild; 2) reacceleration of growth in PIC N. America with the launch of Mollevang-influenced genetics; 3) rapid growth of Sexcel; and 4) the LT potential from PRRSv-resistant pigs.
14 Nov 19
LIBERUM: CEO Video: Stephen Wilson, Genus*
In these five videos Genus's CEO designate, Stephen Wilson, gives an update on African Swine Fever in China and how it's affecting Genus’s business, how the gene-editing R&D programme is progressing, what drove the 42% sexed semen volume growth in FY2019 and can it continue and what are his priorities for his first twelve months as CEO.
09 Sep 19
LIBERUM: Mud & Muck - Food price rises; Expect solid Origin Enterprises 3Q
The FAO global food price index has risen for a fifth consecutive month, driven by firming dairy and meat prices and, more recently, a rise in cereal prices. Drought conditions in Oceania are pushing up global milk prices, African Swine Fever is driving up meat prices and cereal prices have been pushed up by corn prices due to slow planting progress in the US.
Genus Origin Enterprises
07 Jun 19
LIBERUM: Genus* - CEO to step down in September
Genus has announced that its CEO of eight years, Karim Bitar, will step down from the Board as of 16th September 2019 in order to take up a position as CEO of the UK medical device company, ConvaTec. Under his leadership, Genus has significantly enhanced its position as a global leader in animal genetics, growing earnings with a CAGR of 8% and driving a re-rating of its shares from a PER of c.20x to c.30x.
25 Mar 19
LIBERUM: Genus* - Solid 1H19 despite ASF disease headwinds
Adj. group EBIT flat yoy is impressive given PIC Asian profits fell 40% (£3m) due to African Swine Fever in China. Had it not been for ASF, adj. operating profit would have risen 12% driven by soaring growth of sexed semen and beef genetics in ABS and market share gains in PIC Europe & Latin America.
28 Feb 19
LIBERUM: Genus* - 5% equity placing to enhance balance sheet flexibility
Genus has announced it has raised £68m through a placing of 5% of its issued share capital. The company was robustly financed (1.4x net debt / EBITDA as of June 2018) and we had forecast this ratio rising closer to 2.0x during FY19 following the Mollevang acquisition and planned uplift in capex.
07 Dec 18
LIBERUM: Genus* - Reassuring update notwithstanding ASF in China
The summary from the AGM statement is that Genus expects to perform in line with its growth expectations for the current financial year. This is despite further spread of African Swine Fever (ASF) in Chinese pigs which has led to lower PIC profits in the region.
15 Nov 18
PIC caution drives 4% downgrade, medium-term outlook remains bright
We have updated forecasts following Genus’ FY results on 6th September, assuming a more conservative short-term stance on Genus PIC (incl. China JV performance), with continued expected headwinds from the ASF outbreak in China, trade disputes and Latin America FX. We note that the share price has fallen by 12% since our downgrade to Hold on 22nd August, ahead of FY results. Although we expect improving returns over the medium term, we reiterate our Hold recommendation with a reduced target price of 2,371p (from 2,469p, -4.0%).
25 Sep 18
LIBERUM: Genus* - Strong FY18; Market swings bring short-term caution yet LT opportunities
Another strong year, in line with market expectations. FY18 revenues were +6% yoy in l.c. with adj PBT +9% to give adj EPS +15% and div +10%. ABS was the main contributor to growth while EU & LatAm PIC displayed strong royalty expansion (+32% and +15% yoy).
06 Sep 18
LIBERUM: Genus - CMD confirms LT path for high-growth; Addressing merger worries
The Genus CMD outlined expectations for a double-digit operating profit growth CAGR through FY23E supported by market share and profit growth opportunities in both divisions (PIC & ABS). We have received various investor queries concerning recent consolidation in the dairy genetics industry with Genus moving to joint #2 (from #1).
27 Jun 18
Advanced Medical Solutions (AMS LN) In line prelims, FX will drag on top line | Burford Capital (BUR LN) Very strong results, Buy recommendation reinstated | EKF Diagnostics (EKF LN) Strong results, ready for next leg of growth | EMIS Group (EMIS LN) In line update, needs plan for growth | Futura Medical (FUM LN) FY2017 results broadly in line, continued MED2002 progress | Genus (GNS LN) Forecast update post H1 2018 results | Research Highlights Some of our value add over the last 12 months | StatPro Group (SOG LN) Encouraging underlying growth in Revolution ARR | Summit Therapeutics (SUMM LN) Novel antibiotics with the potential to target gonorrhoea identified
GNS AMS BUR EKF EMIS FUM SOG SUMM
14 Mar 18
Avingtrans (AVG LN) Good progress on integration; FY19 PBT raised 13% | Devro (DVO LN) Upgrading to Buy on valuation and recovery grounds | Genus (GNS LN) H1’s in line with expectations: solid ABS performance | Vernalis (VER LN) Tuzistra® XR scrips below guidance: evaluating strategic options
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28 Feb 18
LIBERUM: Genus - EU & Chinese pigs and sexed semen
We provide an update ahead of 1H18 results. We believe Genus should be a core holding for LT investors and see scope to add c.£40m to its current £60m EBIT in five years via the Genus Sexed Semen launch and share expansion in Chinese & EU pig markets. Furthermore, gene editing gives scope for another wave of growth from next decade.
14 Feb 18
N+1 Singer - Genus - Trading in line with expectations
Today’s AGM trading update highlights trading in line with expectations for the financial year to date, against a backdrop of generally favourable pricing. We upgraded our forecasts on 30th October, mainly in anticipation of improved trading in Genus ABS. We reiterate our Buy recommendation.
16 Nov 17
LIBERUM: Genus* - Important European strategic development in porcine
Genus has entered into a strategic relationship with the Danish independent pig breeding company, Mollevang, to commence in July 2018. Earlier this year Mollevang broke away from the DanAvl (Danbred) breeding system that has been the largest supplier of porcine genetics in Europe.
15 Nov 17
N+1 Singer - Genus - Forecast update and upgrade to Buy
We have updated forecasts, mainly to reflect improved trading conditions in the Dairy market (illustrated by a stronger than expected Genus ABS performance in H2 2017) and expected R&D expenditure on the Genus PIC gene editing programme. The net result is an upgrade to FY2018-19 adj PBT of 3.9% and 5.6% respectively. Although data is limited on the PRRSv gene editing programme, it has captured the market’s imagination since the results release in September and propelled the share price above our previous target price. We upgrade our target price from 1,844p to 2,485p and upgrade our recommendation from Hold to Buy.
30 Oct 17
LIBERUM: Genus - Bullish on bovine
Genus FY17 adj EPS was flat yoy in local currency (+14% reported), yet this was almost solely driven by a 12% step-up in R&D. For FY18/20E, we expect Genus to deliver a ~double-digit 3-year forward EPS CAGR. We see further structural (royalty) growth opportunities in PIC, but even more exciting, we expect ABS profit margins to return to mid-teens.
13 Sep 17
LIBERUM: Genus* - FY17 strong with new contracts and more strategic progress
Genus delivered another year of strong progress, in line with management expectations and slightly ahead of our estimates. Adj EPS was flat yoy in l.c. at 69.4p due to the planned step-up in R&D (+12% yoy). In reported terms adj EPS grew by 14% yoy driven by: 1) PIC profits +22% yoy with royalty volumes growing in all regions; 2) ABS turning back to yoy growth with sales volumes +8% yoy in 2H17 and; 3) FX positives.
07 Sep 17
N+1 Singer - Genus - Solid FY results helped by FX; continued strong trading in Genus PIC
FY results are solid and slightly ahead of our forecasts, helped by a £7m positive FX impact on profit. Trading in Genus ABS improved as expected in H2, supported in particular by a stronger performance in Europe and LatAm, whilst the strong trading in Genus PIC continued through H2, with strong royalty growth in Asia in particular China. The proposed 10% dividend increase for the FY is in line with our expectations.
07 Sep 17
LIBERUM: Genus* - Exceptional gain: NMR withdraws from Milk Pension Fund
National Milk Records (NMR) has proposed to withdraw itself from the Milk Pension Fund (MPF). The Milk Pension Fund is a multi-employer scheme where Genus is the principal employer and all parties are jointly and severally liable. NMR will make a one-off lump sum cash payment of £10.1m to the MPF.
01 Jun 17
LIBERUM: Genus* - Favourable injunction; GSS due for launch in US & beyond
Genus has received a favourable verdict from the US injunction sought against Sexing Technologies (ST) on March 31st which we believe will support the share price. The judge has granted a permanent injunction including that ST cannot enforce anti-competitive provisions in its agreement with Genus.
03 Apr 17
N+1 Singer - T2 Trend spotting - Strategy update
In our second edition of “Trend spotting” we note how in the last three weeks the defensive rotation trend has gathered pace and further evidence has emerged of the “relative fading” in the UK economy. However we now see early signs of the “risk on” trend starting to reassert itself in equity markets and we look at small cap laggards plus European exposure as ways to play this.
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31 Mar 17
N+1 Singer - All creatures great and small - An overview of the animal health sector
Animal Health is a vast market with multiple long-term growth characteristics and opportunities. In this report we have outlined valuations, M&A activity and the key growth drivers in two animal health subsectors: companion animal health and livestock health. Although the commercial positioning of the eight companies covered in this report (Animalcare, Anpario, Benchmark Holdings, CVS Group, Dechra, ECO Animal Health, Genus and Pets at Home) differ significantly, all have exposure to positive market trends.
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02 Mar 17
LIBERUM: Genus PLC* - FY17 outlook on track despite mixed market conditions
Genus released a trading update together with its AGM covering the first 4 months to Nov of its FY17. Revenues grew modestly yoy in l.c. on continued growth in China porcine, solid demand in EU PIC and volume growth in IVB.
17 Nov 16
LIBERUM: Genus – Further upside rests on gene editing
Genus shares are up c.30% in three months. The move is justified by solid trading (EPS +10% in l.c. in FY16) and impressive strategic progress. We outlined the potential from sorted semen, IVF in cattle & gene editing in our July report.
09 Sep 16
LIBERUM: Genus – Strong FY16 results; new Chinese royalty contracts
Genus's adj. FY2016 EPS rose 7% to 60.7p beating our forecast by 6%. In constant currencies EPS rose 10% making FY16 Genus's 2nd year of double digit profit growth in a row. Progress was driven by porcine, especially in Asia, where op. profit rose >300%. By contrast, bovine profits fell.
08 Sep 16
N+1 Singer - Genus - FY2016 results in line; new guidance suggests flat earnings in FY2017
Genus FY results are in line with expectations, with the expected YoY weakness in Genus ABS offset by a stronger performance from Genus PIC and Genus Asia. New guidance for 2017 has been issued, with an expected increase in R&D expenditure projected to result in broadly flat earnings YoY in constant currency. We retain our recent Sell recommendation on valuation grounds.
08 Sep 16
VSA Agri Monthly
This month saw a UK-listed stock operating in the African agriculture sector with a market capitalisation of just US$26m attract a US$65m funding package from CDC Group, the UK’s development finance institution. As we said at the time this is an extremely significant (and unexpected) deal for Zambeef Products (ZAM LN), which had otherwise been poised to deliver significant dilution to its investors (c50%) to satisfy an outstanding put option on its poultry joint ventures with RCL Foods (RCL SJ). In this issue we have taken a look at the African agriculture sector more widely and asked whether this deal signals a revival of investor interest in the sector as a whole or just a specific bright point in what has been a pretty disappointing sector for public equity investors over the last few years.
GNS NWF ZAM RE/
31 Aug 16
LIBERUM: Genus* - Final court verdicts: Genus will launch its own technology
Genus has received final court verdicts from its US court case against Sexing Technologies (ST) which underpin our forecasts and should support the share price. $2m damages are brought against Genus as are demands for $1.75 per straw royalties to ST when Genus commercialises its technology. These are for the two patents the jury found valid and infringed by Genus.
15 Aug 16
VSA Morning Agri Comment
Animal genetics firm Genus (GNS LN) has delivered its third update on the ongoing US anti-trust court case against Inguran LLC (Sexing Technologies) Jury has found that GNS should pay a total of US$2.0m in damages for breach of confidentiality obligations and breach of the two Sexing Technologies patents. GNS will also be required to pay an ongoing royalty of US$1.75 per straw on commercialisation of its own sexed semen processing technology. Following the finding that Sexing Technologies was wilfully maintaining a monopoly, GNS is now seeking an injunction from the court to allow early termination of its 2012 semen sorting agreement (ninety days’ notice).
15 Aug 16
LIBERUM: Genus* - Second set of US court case verdicts are less favourable
Genus has received the second set of jury verdicts in its court case against Sexing Technologies relating to sexed semen technology. These are not in Genus's favour. The jury has decided that Genus infringed two of ST's patents and that it had materially breached the confidentiality obligations under the 2012 contract between the two companies.
12 Aug 16
LIBERUM: Genus* - First US court case decisions; more to come
Genus has received the first jury verdicts in its court case against Sexing Technologies relating to sexed semen technology. The jury has found that Sexing Technologies wilfully maintained monopoly power in the market for sexed semen processing in the US since July 2012 but that Genus has not proved that it had suffered injury as a result.
11 Aug 16
VSA Morning Agri Comment
Animal genetics firm Genus (GNS LN) has delivered its first update on the ongoing US anti-trust court case against Inguran LLC (Sexing Technologies). Jury has found that GNS has proved Inguran has wilfully maintained monopoly power in the market for sexed bovine semen processing in the US since July 2012. Jury has found that GNS has not proved that it suffered injury as a result of this monopoly power. Jury is expected to deliver on additional claims ‘shortly’. These are Sexing Technologies’ counter claims relating to two of its US patents and claims that GNS breached confidentiality obligations under the 2012 semen sorting agreement between the parties. A verdict on damages, if applicable, is to be decided later this week.
11 Aug 16
VSA Agri Monthly
Leading Brexiteer Andrea Leadsom was appointed Secretary of State for the Department of Environment, Food and Rural Affairs (DEFRA) this month. Perhaps one of the most unenviable jobs in the new UK government, given the importance of EU subsidies to the country’s farming sector. Agra Europe estimated last year that up to 90% of UK farms would not survive without them.
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28 Jul 16
LIBERUM: Genus PLC - Sexed Semen Court Case: Encouraging summary judgements
Genus ABS has received rulings on the sought summary judgements relating to its legal action against Sexing Technologies. The preliminary motions look supportive ahead of the three-week trial starting on the 1st August.
27 Jul 16
LIBERUM: Genus - Second gene editing licence signed, this time in bovine
Genus has signed a second exclusive, worldwide licence for patents and know how using gene editing. This time the application is for use in cattle to provide resilience against Bovine Respiratory Disease, an infection which causes lung disease in cattle and is often fatal.
27 Jul 16
LIBERUM: Genus - Expanding returns from ag biotech
We are raising Genus to Buy with a new 1750p TP. The shares have not been immune from Brexit but Genus's business should be fairly immune. Only c.10% sales are generated in the UK and weaker sterling should a drive at least a 7% translation boost to profits which is reflected in our forecasts.
01 Jul 16
LIBERUM: Genus - Strategic alliance in gene editing CRISPR-cas9 technology
Genus is continuing to build a robust gene editing platform. Last year it announced it had developed pigs resistant to Porcine Reproductive and Respiratory Syndrome Virus (PRRSv) and had the exclusive global license to develop this further.
18 May 16
Minor downgrade on persistent dairy market weakness: remains a Hold
As a result of the shift in the expected Genus PIC mix towards royalty contracts and persistent dairy market weakness, we have lowered our revenue forecasts for FY2016-18. We have also increased forecast R&D expenditure and reduced margin expectations in Genus ABS to reflect the weak dairy market conditions: we note that the US dairy farming industry is forecast to incur losses through the remainder of this calendar year. However, trading in Genus PIC remains strong and we have increased our medium term forecasts for Genus Asia, especially China where porcine profitability improved sharply in H1. Our recommendation remains Hold with a revised target price of 1,429p (from 1,442p).
10 Mar 16
Solid growth & new R&D excitements
Genus’s strategy is bearing fruit. Porcine is growing profits in all regions with EU profits jumping 24% due to structural changes and Asian profits +180% helped by strong pig prices and new contracts. Bovine had a tough 6m with weak milk prices but cost cutting & price rises will drive a better 2H. Progress in Genus’s sorted semen and in-vitro fertilisation is very encouraging. The opportunity of gene editing has the potential to be transformational to Genus’s LT growth outlook and is driving up R&D spend.
29 Feb 16
Solid 1H; FY guidance confirmed; investing in LT growth
Genus's 1H EPS grew 5% in l.c. to 28.8p, in line with our 28.7p estimate. In porcine, growth was strong across all geographies with a marked pick up in Europe and China. Bovine, by contrast, saw profits fall due to weak dairy markets but cost reduction efforts and strategic investments should enable improvement in 2H. The outlook is robust. Genus expects FY profits in line with expectations. Initiatives to drive longer-term growth gathering pace: IVB sales & profits doubled in 1H; a new royalty contract was signed in China porcine; the sorted semen project made progress; Genus has developed pigs resistant to PRRSv and a new bull stud was completed in India. The strong share price performance drove us to reduce our rating on Genus to a Hold late last year, but we continue view Genus as an attractive LT investment.
23 Feb 16
H1’s: strong PIC performance but ABS impacted by weak dairy trends
The global trends highlighted in the Nov ’15 trading update have persisted, with Genus reporting a negative impact on Genus ABS from weak dairy market conditions but a continued strong performance by Genus PIC supported by increased pig production in key markets incl. the USA. Trading in Genus Asia has continued to strengthen, improving trading conditions across the region including China. We retain a Hold recommendation on valuation grounds.
23 Feb 16
Augean (AUG LN) Site purchase to support ANSS contract | Croda International (CRDA LN) Impressive FY results, 100p special dividend confirmed | Dotdigital Group (DOTD LN) Matching ambition with delivery | Genus (GNS LN) H1’s: strong PIC performance but ABS impacted by weak dairy trends | Oxford BioMedica (OXB LN) Proposed £8.1m placing provides cash resources into H2 2016 | Spectris (SXS LN) Bolt-on acquisition of CAS Clean Air Service
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23 Feb 16
Development of disease resistant pigs
Genus has announced it has developed pigs resistant to Porcine Reproductive and Respiratory Syndrome Virus (PRRSv) in collaboration with the University of Missouri. PRRSv is the most economically important disease, affecting the swine industry in the order of $0.7bn p.a. in the US and €1.5bn p.a. in Europe. The technology is in early stages but it has been demonstrated that gene editing can be used to prevent pigs producing a protein necessary for the spread of the virus and thus render pigs resistant to PRRSv. Commercialisation is unlikely within the next five years and will require significant further development but this adds another leg to Genus's LT growth outlook and confirms the company's position at the forefront of genetic R&D in the livestock industry.
08 Dec 15
AGM statement: Trading in line with expectations
Genus confirms trading is in line with expectations so far in its financial year to June 2016. In constant currencies adjusted PBT grew with volumes rising in porcine but falling in bovine. In reported terms sterling strength is a material headwind this year but we expect growth to accelerate in FY17E as Genus continues to gain share and improve margins in its porcine and bovine genetics business. We recently reduced our rating to Hold on valuation grounds keeping our 1500p TP unchanged. We do not expect to change estimates due to this AGM statement.
19 Nov 15
Trading update: mixed conditions but outlook in line
Genus’ update this morning indicates a trading outlook for the full year in line with expectations. Genus ABS has been negatively impacted by low dairy prices during the period since 1st July whilst Genus PIC royalties have been supported by increased pig production in key markets incl. the USA. Trading in Genus Asia has improved as a result of improved porcine prices in China. These trends are factored into our current forecasts. Adj PBT increased during the period in constant currency, in line with our expectation of 4.9% growth for the financial year to June 2016. We retain a target price of 1,442p and a Hold recommendation on valuation grounds.
19 Nov 15
Shares at target price
We are reducing our rating to Hold. The shares have risen 17% YTD and are now at our target price. We remain bullish on the long term and are not changing estimates. We expect the AGM statement next week to indicate trading is in line with expectations. Currency headwinds drive below average EPS growth in FY16E but we expect growth to accelerate in FY17E as Genus continues to gain share and improve margins in its porcine and bovine genetics business. Our £15.00 TP is unchanged.
12 Nov 15
Upgrading to Hold on improved PIC outlook
FY2015 revenue and adj PBT were 1.2% & 3.3% ahead of our forecasts respectively, driven by Genus PIC. We have made minor changes to near term forecasts and upgraded our long-term projections to reflect the strong genomic & strategic progress in Genus PIC. However, we continue to believe that lower producer profitability, currency headwinds and Asia concerns could weigh on FY2016-17 performance. We upgrade from Sell to Hold, with a target price of 1,442p (from 1,188p).
24 Sep 15
Strong FY15 results in a mixed trading backdrop
Adjusted FY2015 EPS increased 22% (26% in l.c.) to 56.8p, 4% higher than our forecast and driven by strong performance in the porcine division. DPS growth was kept at 10% and net debt fell slightly due to good working capital control. Strong sterling remains a fierce headwind but we believe the outlook remains for low double-digit EPS growth given Genus's market leading position in a structural growth industry with an impressive track record and strong balance sheet.
08 Sep 15
FY2015 slightly ahead, outlook cautious
FY2015 results are slightly ahead of forecasts, with adj PBT £46.6m vs. our expected £45.1m. On a divisional basis, Genus PIC performed slightly ahead of expectations (adj op profit £61.9m vs. our £59.0m), Genus Asia below (adj op profit £5.5m vs. our £7.1m), and Genus ABS in line with our estimates (adj op profit £24.0m vs. our £24.3m). Adj operating profit incl. JVs was up 14% during the period (+18% in constant currency). The outlook strikes a cautious note, highlighting lower YoY Porcine prices, overall challenging market conditions for Genus’ Dairy customers and a continuing currency headwind. However, these developments are already factored into our forecasts, which currently include a 2014-19 CAGR in adj operating profit (incl. JVs) of 10.5%.
08 Sep 15
Chinese upturn; Currency headwinds
The Chinese hog cycle is back into positive territory and the environment in Russia is showing signs of improvement. Asia contributed just 7% EBIT in FY2015E but is in a good position to grow with a more helpful environment and remains an important LT driver for Genus. Strong sterling remains a fierce translational headwind, however, and more than offsets underlying Asian upgrades. Despite this, the outlook remains for double digit EPS CAGR and we believe Genus remains a compelling long-term investment.
13 Aug 15