Abcam PLC (LON: ABC)

Abcam PLC (LON: ABC) is an FTSE AIM UK 50 Index listed multinational Life Sciences Company, which produces and markets protein research agents and tools to assist life science researchers and clinical communities. The Company was founded in 1998 and headquartered in Cambridge, UK. Moreover, ABC’s products include a diverse range of antibodies and protein research tools used by researchers critical for drug discovery and diagnostics.

The Company will release results for the 18 months ended 31 December 2021 on 14 March 2022.

Growth Prospects (also covers trading update released on 27 January 2022)

• Key Clients: The key clients of ABC are researchers and scientist in academic institutions, pharmaceutical & biotechnology companies, research institutes and diagnostic companies. Abcam sells its products in around 130 countries. Presently, the Company is serving more than 750,000 customers all around the globe.
• Successful Integration of BioVision: The acquisition of BioVision completed on 27 October 2021 contributed approximately £2.5 million of incremental revenue for FY21
• Impressive Collaborations: ABC has entered a strategic partnership with Twist Bioscience to enhance Antibody Discovery for Diagnostic and Research Applications. Furthermore, the Company will develop and commercialize antibodies for diagnostic and research use, with Twist retaining rights for therapeutic applications.

Key Risks

• Strategic Agility: The top-line business would be adversely affected in case the strategy fails to deliver a sustainable business model with differentiated service offerings.
• Acquisition Risk: The financial position could be hampered due to the overvaluation of the target company, ineffective due diligence, and failure to identify proper synergies.
• Lack of Innovation: ABC might get failed to deliver on the innovation aspect for the transformational projects as per customers’ expectations with regards to their digital experience.
• Central Bank Meeting: The Bank of England and ECB meetings lined up on 03 February 2022 may result in an interest rate hike announcement. Thus, it may put pressure on UK equities.
  

Key Fundamental Statistics & Key Shareholders Statistics of Abcam PLC.

T. Rowe Price Associates, Inc is the most significant shareholder as it holds nearly 20.58 million shares as of 31 December 2021.

H1 FY21 Interim Results (for the six months ended 30 June 2021 as of 13 September 2021)

 (Source: Company Filings)

• Robust Revenue growth: The top-line revenue had increased to £150.2 million during H1 FY21.
• Decent Gross Profit: On the profitability front, the gross margin had slightly improved from 68.9% during H1 FY20 to 71.4% for H1 FY21.
• Cash from Operating Activities: The net cash inflow from operating activities remained £71.9 million for the 12 months period ended 30 June 2021.
  

Financial Ratios (H1 FY21)

Share Price Performance Analysis

 (Source: Refinitiv, Research done by Kalkine Group)

On 03 February 2022, at 10:04 AM GMT, ABC’s shares were trading at GBX 1,321.00, down by around 1.39% from the previous day closing price. Stock 52-week High and Low were GBX 1,760.00 and GBX 1,200.00, respectively.

On a daily chart, the stock is trading between the lower Bollinger band and the middle Bollinger band, indicating a bullish price momentum. Moreover, the 14-days RSI of ~39.19 approaches an oversold territory. 

Valuation Methodology: Price/Earnings Approach (FY22E) (Illustrative)

Business Outlook

ABC has demonstrated rising demand in the life sciences market, well supported by increasing public funding and focus on clinically relevant biologics. The Company highlighted that it would continue to generate lucrative returns from the investments with a high return on capital employed and achieve operational excellence. Moreover, ABC develops most products aiming at high gross margins. Furthermore, ABC had revised its revenue outcome to be ranging from £425 million to £500 million for calendar 2024 at current exchange rates. Overall, the Company remained confident towards achieving business goals for 2024 and generate long term returns for the shareholders.

Considering the strong net cash position, decent top-line business, reduction in the net debt, modest financial performance, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Abcam at the current market price of GBX 1,321.00 (as on 03 February 2022 at 10:04 AM GMT), with lower-double digit upside potential based on 64.95x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios. 

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

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