Last time I wrote about Beximco Pharma I told that I sold a bit of my position recently, and today I have the same disclosure to make. It’s a bit unfortunate because the company keeps reporting great numbers, and the latest results are not different. The stock jumped 17% higher today in London, and because of that the discount between the shares that trade in Dhaka and London keeps shrinking. When I entered my position in 2014 the discount was a bit above 60%. In November it was still at 40%, at the end of the year roughly 35% and now it’s just 25%. That is making the shares of course less attractive than before, but it’s still a nice discount.
Beximco Pharma reported 13.4% revenue growth while operating profit grew with 18.2% in 2016. By buying the shares in London you are currently just paying a 13.3x P/E-ratio for the shares compared to the 17.8x P/E-ratio domestic investors are willing to pay in Dhaka. I think both numbers are pretty cheap for this kind of growth. Now that my Beximco position is not oversized anymore I will hang on to my current shares at the current discount.
Author is long Beximco Pharma
I recently trimmed my position in Beximco Pharmaceuticals (LON:BXP) a bit since the discount between the share price in Dhaka and London has shrunk from the original 60% to 39% at the time of writing this. However, it remains my biggest position, so I continue to follow the stock closely. The company reported results for the third quarter of 2016 today. The press release doesn’t contain anything besides the raw financials, but those numbers look good.
Revenue grew with 11.2% compared to the same quarter last year while EPS grew with 22% from 1.04BDT/share to 1.27BDT/share. Note that my per share numbers are slightly lower than those reported by Beximco Pharma, because I’m already accounting for the stock dividend. The shares are currently trading ex-div for the 5% stock dividend, but probably because the dividend hasn’t formally been approved by shareholders (the AGM is the 19th this month) the new shares aren’t yet recognized in the financials. Even with the higher number of shares the stock remains relative cheap: trading at a 9.9x P/E-ratio while it has good growth prospects. Compare this to Dhaka where investors are valuing the same shares at a 16.4x multiple.
Author is long Beximco Pharma
Beximco Pharmaceuticals (LON:BXP) reported results for the first half of 2016 today. Because of a new rule of the Bangladesh Securities and Exchange Commission the company is in the process of changing the end of its fiscal year from December to June. Because of that the reported financials are a bit messy since this is the transition year that counts 18 months. The change is annoying, because including a 18 month period in the historical financial results hurts comparability while changing all the historical results to align with the new fiscal year end date is just too much work. For this year I have separated the results as if the change has not happened yet. But enough about this accounting issue, time to check the numbers:
As you can see the results in the first half of 2016 were pretty good. Revenue grew with 13.12% thanks to a 5.3% increase in export sales and 13.6% more domestic sales and the period doesn’t yet include the start of the sales of Beximco Pharma’s first drug in the USA. Pretax profit is up 20.8%, but due to abnormal low taxes in the first half of 2015 net income is down a bit.
Overall good results, and with the stock up 8.4% in London at the time of writing this, the company is getting more expensive compared to my entry in 2014. At that time you could effectively buy the company at a 4.3x P/E-ratio and a 0.31x P/B-ratio in London. Now it’s trading at a 9.0x P/E-ratio and a 0.78 P/B-ratio. Still not expensive, and the discount compared to the price in Bangladesh remains consistently high. Because the results were released after the market closed in Bangladesh I cannot give you an exact discount. Using stale data from Bangladesh, it’s still 43%, but I expect that it will be back to 50% again tomorrow. While the company is getting less cheap when we look at simple valuation metrics I think this discount is the most meaningful, I don’t have any plans yet for exiting my position as long as it persists.
Author is long Beximco Pharmaceuticals
Beximco Pharma released a press release this morning announcing that the company is the first firm in Bangladesh to start exporting generic pharmaceutical products to the United States. This news was some time in the making since Beximco Pharma, also as a Bangladeshi first, already received US FDA approval one year ago. Apparently the launch was a big event in Bangladesh, with multiple newspapers reporting on it, and with a ceremony that was attended by the Finance Minister of Bangladesh and the US Ambassador in Dhaka.
I don’t expect that this launch will have a major impact on the profitability of the company in the near term, but since the US is a huge market and Bangladesh a very cheap producer of generic pharmaceutical products it could become a sizable growth factor. I’m not really in this stock because of the growth potential, but it’s nice that it’s there. While the stock is up 12.8% at the time of writing this post the London GDRs are still trading at an almost 60% discount compared to the price of the ordinary shares in Dhaka. There is no catalyst in sight for this to change, but I think that the GDRs are simply too cheap not to own and in the meantime we get paid a reasonable dividend that doesn’t have any discount.
Author is long Beximco Pharma
Beximco Pharma announced their results for 2015 today. The company had a solid year and managed to grow revenues with 15.7% while export sales grew a whopping 68.3% (starting from a very small base though). Thanks to the solid performance of Beximco since I bought it I have made a nice profit on paper, but the discount between the shares that trade in Bangladesh and the London GDRs has barely budged in the meantime and is at the moment of writing 62%. Because of this huge gap Beximco is currently my highest conviction idea, and also one of my biggest positions. By buying the stock in London you buy the company at a 6.4x P/E ratio while investors in Bangladesh are willing to pay 21.2x.
It’s obvious that we don’t have to expect that this gap will close anytime soon, but meanwhile we get paid a nice dividend that has been growing the past years. I think it’s a deal that is too good to pass up on. The graph below shows the historical growth in earnings/share and equity/share (in Bangladeshi Taka). That looks pretty sweet to me for a 6.4x P/E company!
Author is long BXP.L