GlaxoSmithKline (Egypt) : Neutral outlook but great fundamentals

GlaxoSmithKline (Egypt) relative valuation is now NEUTRAL. It was previously rated UNDERVALUED, and has a fundamental analysis score of 66.

Our analysis is based on comparing GlaxoSmithKline (Egypt) with the following peers – Egyptian International Pharmaceutical Industries Co., Arab Drug Company for Pharmaceuticals and Chemi cal Industries, May & Baker Nigeria Plc and Memphis Pharmaceutical & Chemical Industries (PHAR-EG, ADCI-EG, MAYBAKER-NG and MPCI-EG).

Relative Valuation

GlaxoSmithKline (Egypt) is currently neutrally valued, as its previous close of EGP 11.16 lies within the CapitalCube estimate range of EGP 11.13 to EGP 12.60. Over the last 52 week period, GlaxoSmithKline (Egypt) has fluctuated between EGP 7.75 and EGP 11.51.

Relative Valuation

Company Overview

  • Considering peers, relative outperformance over the last year and the last month suggest a leading position.
  • GlaxoSmithKline S.A.E.’s current Price/Book of 0.93 is about median in its peer group.
  • BIOC-EG‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • BIOC-EG‘s relatively high profit margins are burdened by relative asset inefficiency.
  • Changes in annual earnings are in line with its chosen peers but lags in terms of revenue, implying the company is cost conscious and selective about spending for growth.
  • Over the last five years, BIOC-EG‘s return on assets has improved from median to better than the median among its peers, suggesting the company has found relative operating advantages.
  • The company’s relatively high pre-tax margin suggests tight control on operating costs versus peers.
  • While BIOC-EG‘s revenues growth has been below the peer median in the last few years, the market still gives the stock a P/E ratio that is around peer median and seems to see the company as a long-term strategic bet.
  • The company’s level of capital investment seems appropriate to support the company’s growth.
  • BIOC-EG currently does not have any debt.

Investment Outlook

GlaxoSmithKline (Egypt) has a fundamental score of 66 and has a relative valuation of NEUTRAL.

GlaxoSmithKline (Egypt) is on the top left quadrant of the CapitalCube Value – Price Matrix. We classify this space a ‘Value Play’. Here, GlaxoSmithKline (Egypt) is potentially undervalued, since it trades below its CapitalCube Implied Price of 11.86. At the same time, GlaxoSmithKline (Egypt) is also fundamentally strong with a score of 66. This is a classic value stock definition.

Fundamentals Vs Relative Valuation

Quadrant label definitions. Hover to know more

Safety, Value Play, Value Trap, Speculative

Drivers of Valuation

The market seems to expect BIOC-EG to maintain its relatively high returns.

BIOC-EG‘s operating performance is higher than the median of its chosen peers (ROE of 6.97% compared to the peer median ROE of 4.36%) but the market does not seem to expect higher growth relative to peers (P/E of 13.49 compared to peer median of 13.49) but simply to maintain its relatively high rates of return.

The company’s current Price/Book of 0.93 is about median in its peer group.

Valuation Drivers

Quadrant label definitions. Hover to know more

Outperforming, Harvesting, Challenged, Turnaround

BIOC-EG has moved to a relatively high ROE from an Harvesting profile at the prior year-end.

ROE % (On Common Equity)
Price To Earnings

Peer Analysis

A complete list of valuation metrics is available on the company page.

Company Profile

GlaxoSmithKline (Egypt) engages in the pharmaceutical and healthcare industries. Its business operations are carried out through the production, packaging, marketing, sale, and distribution of medicines and other pharmaceutical products. The firm also involves in the production, and in some cases, the sale and distribution of products for other pharmaceutical companies. The company was founded in 1981 and is headquartered in Cairo, Egypt.

Disclaimer

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