Investec upgrades Clinigen to 'buy' after recent sell-off

7th Jul 2014 12:29

Investec has upgraded pharmaceutical group Clinigen from 'hold' to 'buy', saying that even on a lower target price "we think the shares offer an attractive opportunity"."Clinigen's stock has fallen circa 40% since its interim results in March, when numbers were in line but growth was no longer as 'explosive' as it had been in prior years. "We now think the shares are too cheap to ignore and, on balance, offer good value for investors."Investec has cut its target price from 560p to 497p a result of revising its forecasts for the next two years to below consensus to reflect its "more prudent stance" on growth in the Clinical Trial Supply (CTS) division. CTS revenues are volatile and gross margins different from contract to contract, while currency rate have also moved unfavourably against the company. "Essentially, we think this removes an element of risk that we believe has concerned investors," it said.Nevertheless, Investec estimates that Clinigen should still grow earnings per share by around 15% per annum over the years ending June 2015 and 2016, "once overhead investment is complete, and as acquired pharmaceutical assets begin to deliver meaningful growth".What's more, further upside is possible through future acquisitions with the company's cash generation strong.For the financial year just gone (ended June 30th 2014), the broker still stands above consensus with its estimates.The shares were 1.2% higher at 389.13p by 12:05 on Monday.BC