Newsflash for the Snoozers Part 6

Monday, 9th November 2015 10:05 - by Moosh

Cyprotex (TIDM: CRX) CRX has had a good year so far – following on from a bullish interim results statement on 18 August 2015, the company released a further trading update on 23 October 2015 stating that the year-to-date trading is ahead of market expectations.

Not surprisingly the market took these cumulative updates positively and the price has headed up to 80p+ in recent weeks. With the US operations in Kalamazoo still requiring some care and attention, and assuming that CRX rises to the challenge, I would be expecting any beneficial effects of this to positively impact CRX during the new 2016 financial year. The current financial year looks like the UK business has found stability and growth so looking ahead, the growth should come from firming up of US operations alongside UK/European business as well as new markets of the Far East.

In October 2015, the animal testing ban for household products in the UK came into force – CRX is perfectly placed with the scientific know-how to capture this audience and its needs so I would suspect this side of the business to be boosted in the 2016 financial year too.

Regarding a takeover price for CRX, I have my own industry standard for bio/pharma companies, which is 3 times the annual revenue. Rather than trying to guess the current year (we’ll have to wait for the final results in ~March 2016), let’s work with the most recent annual revenue of £11.57m (year to 31 December 2014); tripling this and splitting over 22.47m shares yields ~154p takeover price. If CRX can maintain longer term growth then I feel this to be a suitable starting point if the company wishes to be bought out and I wouldn’t be satisfied with anything less. With the current price ~79.75p (mid-price market close 6 November 2015) then it’s no wonder that the market has been snapping up CRX over the last few months. What CRX does is essential to the pharmaceutical/chemical/cosmetic industries and the company has certainly proved over the last few years that it is consistently capable of attracting new custom as well as being used by bigger fish, like the US Environmental Protection Agency.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.