Fri, Oct 24, 2014, 9:49 PM EDT - U.S. Markets closed


% | $
Quotes you view appear here for quick access.

Synageva BioPharma Corp. (GEVA) Message Board

germantrader71 1 post  |  Last Activity: Jun 24, 2014 8:57 AM Member since: Jan 18, 2006
SortNewest  |  Oldest  |  Highest Rated Expand all messages
  • Tobacco
    M&A Bull Case Priced In;
    Take Profits on LO and RAI
    In all but the most optimistic M&A scenarios, we see
    RAI and LO trading lower. We value LO at $68 in an
    M&A/bull-case context, and see meager returns for
    BAT if it were to buy more RAI stock at current
    levels. Risk reward for RAI & LO is unattractive and
    we downgrade both stocks to Underweight.
    Core industry fundamental outlook is still challenging.
    US cigarette volumes are declining ~4%, operating profit
    growth is very pedestrian, e-cigarettes are not a growth
    panacea, Engle progeny cases remain a concern, FDA has
    moved slowly but the menthol threat remains, and excise
    tax and other concerns will inevitably resurface. This is our
    view irrespective of M&A, likely will persist even with M&A,
    and is of greater concern at current valuations.
    Consolidation possible, but issues are considerable.
    While we have no knowledge of any particular transaction,
    press reports indicate that RAI is in ongoing discussions to
    acquire LO, although neither party has commented. Market
    enthusiasm notwithstanding, LO is already trading with an
    M&A premium (all time high 12.5x 2014e EBITDA), the
    antitrust issues are significant, and divestitures trigger
    capital gains tax and reduce synergies. And even if a deal
    occurs, it now appears largely priced in.
    LO is an outstanding business, but Newport is a
    one-market product with a narrow franchise, faces real and
    idiosyncratic menthol risk, and LO trades close to our M&A
    value of $68. Share buybacks are less accretive to EPS at
    higher values and we see ~17% downside absent M&A.
    RAI has virtually no underlying operating profit growth
    in its core cigarette business (RJRT), and even in a bull
    case we see little upside. RAI appears fully valued at
    peak 12.5x 2014e EBITDA assuming that a LO purchase
    would require material divestitures and at current valuation
    would produce limited accretion (and fail to meet RAI’s cost
    of capital). A potential BAT bid for the public’s stake in RAI
    would gener

76.97+0.88(+1.16%)Oct 24 4:00 PMEDT

Trending Tickers

Trending Tickers features significant U.S. stocks showing the most dramatic increase in user interest in Yahoo Finance in the previous hour over historic norms. The list is limited to those equities which trade at least 100,000 shares on an average day and have a market cap of more than $300 million.