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.

On 14 March 2022, the Company will release FY21 results for the 12 months ended 31 December 2021.

Growth Prospects (also encapsulates details of a trading update released on 27 January 2022)

• Acquisition Benefits: The acquisition of BioVision completed on 27 October 2021, contributed approximately £2.5 million of incremental revenue for FY21. Moreover, the Company has collaborated with Twist Bioscience to enhance Antibody Discovery for Diagnostic and Research Applications.
• Solid Demand for Proprietary Products: The in-house catalogue sales grew by approximately 37% CER on an organic basis during FY21. Meanwhile, the global lab activity witnessed a continued recovery.

Key Risks 

• Ukraine Tension: The mounting concern over the Russian invasion in Ukraine can continue to weigh on the equity market.
• 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.

Key Fundamental and Shareholders Statistics of Abcam PLC.

Wellington Management Company, LLP is the most significant shareholder as it holds nearly 17.00 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 10 March 2022 at 08:08 AM GMT, ABC’s shares were trading at GBX 1,226.00, up by around 0.99% against the previous day closing price. Stock 52-week High and Low were GBX 1,760.00 and GBX 1,145.67, respectively.

On a daily chart, the stock price is sustained between the lower Bollinger band and the middle Bollinger band. Hence, there could be an uptick in the stock price in the near term. Also, the 14-days RSI stood at ~45.44.

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

Business Outlook

The Company gained momentum during FY21 and expected revenue jump of over 22% on a CER (“constant exchange rate”) driven by tremendous recovery in lab activities. ABC would continue to build capabilities, invest in innovation, and implement its multi-year growth strategy. 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 expected FY21 adjusted operating profits in line with the expectations.

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Considering the acquisition benefits, decent profitability, solid revenue guidance, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Abcam PLC at the current price of GBX 1,226.00 (as of 10 March 2022 at 08:08 AM GMT), with lower-double digit upside potential based on 58.41x 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 decisions should be made depending on the investors’ appetite for 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 is subject to the factors discussed above.

Note 3: Target Price refers to a price level that 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.

Note 4: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 5: Dividend Yield may vary as per the stock price movement.  

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 the 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 unfavourable movement in the stock prices.

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