Alliance Pharma Share Price (APH)

Took the opportunity to add.

Now holding >22%.

Bid?

Tend to agree with you both. The market hates uncertainty and is trying to price in a lot at the moment. As ever, it will over estimate to the downside in lieu of facts about what’s going on. Hopefully the new CEO knows what he’s about and has also run the rule of the company before taking it on so he knows what he’s up against. As soon as the closed period ends he could buy some shares himself which would help restore confidence in the short term, and then just publish the results! Better to get all the bad news public quickly so as to tie it to your predecessor…

Wow that was clearly on a very different level from what I can mange

FYI, KPMGs resignation letter as auditor in 2022, and the company's response to it is below. Relates to the accounting treatment of the CMA fine, ie the £8m provision made in 2021 accounts, and KPMGs view of the process by which the Board signed off on this treatment. Despite these concerns they still signed off on the 2021 accounts, as Deloitte did on the 2022 accounts. FWIW I don't really care about accounting treatment of the CMA fine, my base case is they eventually have to pay the £8m in full plus some CMA costs of £1-2m. Anything less is upside. Again me saying this doesn't preclude some other issues, technical or otherwise, with the delayed 2023 accounts...

https://www.alliancepharmaceuticals.com/media/gdgnqciv/circular-080822.pdf

For me the main risk is weak trading and more downgrades, but I hope them pointing to Jan trading update as recently as yesterday means this is not the case currently. I don't think the board / Numis Deutsche / Investec (blue chips in small cap world) would let them mislead on this point.

I should say - those EBIT multiples I gave are EV/adj EBIT multiples.

Even if no profit growth for next three years (v unlikely in my view), and if it only rerates to 8x EV/EBIT (v conservative in my view vs peers), I see c.80% upside at least from here simply as the business should reduce net debt to about £30m by 2026 even after paying the fine as interest costs will come down as debt reduces.

£41.5m EBIT x8 = £330m EV, less £30m net debt in 2026 = £300m mcap vs £165m today, ie 80% upside over 2-3 years. Excellent risk vs reward imho.

In reality (assuming nothing more nefarious in the accounts - which is a known risk) I think they will return to growth in 2025, reinstate divi and rerate to something more in line with historic rating of c.10x, so think my target above is pretty conservative in terms of both timing and share price. Also opportunity for further M&A which I think on the balance will lead to upgrades and be positive for the story.