II Editor
07 Feb 2018
NEW ARTICLE: Trends and Targets for 8/02/2018 " GSK (LSE:GSK) This week, we've been taking the easy option for 'headline' subjects by choosing shares from our email. Today, it's GSK's turn under the spotlight, a well established share currently showing some rather unexpected potentials for ..."[link]
Uncle Doug
07 Feb 2018
Re: Results Excellent post Bill. Thank you for your insights. I too thought the results were good and I hoped for a bit more of a bounce today. Good news on sales, margins, EPS, pipeline, pensions and lower debt. I've held GSK since 2001 with a few top ups and profit taking in between but always held a decent chunk. 17 years of lovely dividends. I reckon the downside risk is minimal at these levels and 12/13 quid represents very good value. The SP performance has been disappointing this last year but historically (I know ... should never look at past performance) they usually recover from these levels. We are overdue a pharmas comeback. While I wait I'll keep picking up that juicy divvy. Strong Buy.
old_punter
07 Feb 2018
Re: Results Bill,A good comment on the results, thank you and 9 blueys so others agree, I also thought the results overall make the shares look good value even after the bounce today to 1294p.Must have a look at the results presentation but subject to that my view FWIW is that GSK may continue to be a profitable trade buying around this level and selling £16 plus. For the time being there is also a nice 6% yield while one waits for the £16 plus to exit. I don't entirely dismiss what many see as a credible story as to why GSK could be a good long term investment, but if that's right I see it as a bonus.
marktime1231
07 Feb 2018
Cheer what good analysis and comment everyone thank you. And how refreshingly honest from GSK about what may happen next year and how it could affect numbers. Even I understood most of it, if only CLLN had been slightly less cryptic. No doubt someone will find something in the detail to challenge.Walmsley we can trust maybe?If I had any spare cash in the pot I might add a little on today's update and the extra assurance over a 6%+ dividend. Maybe there will still be a chance, consensus anywhere between 1340 and 1650 suggests today's splendid pick up has some way to go.Thank goodness for some goodish news.
gamesinvestor
07 Feb 2018
Re: It looks low ""RDSB as low as £13 - recently £26HSBA as low as £4 - recently £7BLT as low as £6 - recently £15AZN as low as £38 - recently £52""Herald, all good points, however for every analysts one up you get as many down - like Capita, Provident, North West Biotherapeutics etc etc.Analysts by and large have little clue over the stock price direction, let alone the value of the companies they are supposed to be analysing.I guess you must draw your own conclusions based on some basic numbers, a feel for what the company is developing, how well it develops it and spends shareholders money, and who are the competitors ready to eat their lunch.Games
IOMINVESTCOM
07 Feb 2018
Re: Results Thank you Bill as well for a good post on your thinking on the results.atb
IOMINVESTCOM
07 Feb 2018
Results LONDON (Alliance News) - GlaxoSmithKline PLC on Wednesday reported rise in earnings for the recently ended financial year and said that earnings outcome for the new financial year is dependent upon timing and impact of potential US generic competition to asthma treatment drug Advair.For the year ended December 31, Glaxo's pretax profit rose to GBP3.53 billion from GBP1.94 billion the year prior. Revenue grew to GBP30.19 billion from GBP27.89 billion the year before.Profit performance was partly helped by a sharp fall in operating expenses to GBP1.61 billion from GBP3.01 billion the year prior. The drop was primarily due to the lower accounting charges related to its Shionogi-ViiV Healthcare joint venture, the acquisition of Novartis AG's former vaccines business and Pfizer put options over its ViiV business.Revenue was boosted by year-on-year growth across all of the company's main units. Pharmaceuticals revenue advanced 7% to GBP17.3 billion, Vaccines revenue grew 12% to GBP5.2 billion and Consumer Healthcare unit revenue was up 8% at GBP7.8 billion. On a constant-currency basis, revenue grew 3%, 6% and 2%, respectively.Annual adjusted earnings per share advanced to 111.8 pence - in line with the company's guidance - which is 11% higher that 2016 on a reported basis and 4% higher at constant exchange rates.GSK declared a unchanged fourth quarter dividend of 23 pence per share, giving a total payout of 80p for 2017, also unchanged from 2016. For 2018, GSK expects to declare a dividend of 80p."In 2017 GSK delivered encouraging results from across the company with sales growth in each of our three global businesses, an improved group operating margin, adjusted earnings per share growth of 4% at constant exchange rates and stronger free cash flow," Chief Executive Emma Walmsley said."We are focused on competing effectively across our current portfolio and delivering three new launches which bring significant benefits to patients: Trelegy Ellipta which provides three medicines in a single inhaler to treat COPD; Juluca, the first 2-drug regimen, once-daily, single pill for HIV, helping to reduce the amount of medicines needed, and Shingrix, our new vaccine which represents a new standard for the prevention of shingles," Walmsley added."Improving our Pharmaceuticals business remains our main priority and we are strengthening our pipeline with a focus on priority assets in two current therapy areas, Respiratory and HIV, and two potential areas, Oncology and Immuno-inflammation," Walmsley continued. "We will provide a further update to investors at second quarter on our plans for R&D.""We continue to make changes across GSK to drive improvements in performance and we have made several new appointments to key leadership positions," Walmsley said."Looking ahead," Walmsley continued, "in 2018 we could see a potential generic version of Advair in the US and our 2018 guidance reflects this. With the sales momentum we anticipate from new and recent launches and focused improvements in operating performance we are increasingly confident in our ability to deliver mid to high single digit growth in Adjusted EPS compound annual growth rate."Walmsley emphasised cash generation continued to be a "key focus" and that in 2017 GSK generated GBP3.44 billion in free cash flow. GSK remained committed to paying an 80 pence per share dividend in 2018, the same as in 2017.Looking towards 2018, GSK said adjusted EPS growth was "uncertain" depending on the timing of generic competition to its blockbuster Advair product in the US.Should no generic arrive in 2018, adjusted EPS is expected to grow between 4% and 7% on a reported basis. Should it arrive mid-year, adjusted EPS growth should emerge between flat and 3% for 2018.In a mid-year launch scenario, GSK expects a GBP750 million revenue his to US advair sales. In 2017, Advair made GBP1.61 billion in sales in the US which is equivalent to 5.3% of tot
Herald
07 Feb 2018
It looks low You might think that analysts would be expert on the mega cap stocks such as GSK. How can such over analysed stocks move so much, the fluctuations can be massive. Something as superficial as buying when it "looks low" has been rewarding in the cases below, albeit you don't know when really is the low point. Games makes valid points about why not but on the non-analytical it looks low I'll have some more GSK at sub £13.RDSB as low as £13 - recently £26HSBA as low as £4 - recently £7BLT as low as £6 - recently £15AZN as low as £38 - recently £52
Bill1703
07 Feb 2018
Re: Results "... very difficult to find the real numbers in the report, after scrolling down from all the adjusted stuff..."Never the simplest set of figures, it is true Games - but not that hard. Think I've pretty much got to the bottom of it all now.A few highlights to pick out:Free cash flow - slightly lower on my definition than what they report (I don't include asset sales), so £3.16bn up from £2.92bn (vs their £3.4bn up from £3.0bn). Still not covering the divi of course (even on their definition), but getting closer (FCF cover 0.8x vs 0.7x, on my figures). Dividends - "... continue to expect to pay 80p for 2018." And otherwise, current policy reiterated (ie. rebuild FCF cover to 1.25-1.5x over time)... but NOTHING now on 2019 explicitly, either way. Perhaps significant... perhaps not...? Balance sheet - net debt down, and down by well over £1bn including pension deficit. ND/EBITDA end 2017 at 1.4x (vs 1.8x), the lowest it's been for a while and now lower than AZN (first time in a long while). Net pension deficit £1.5bn vs £2.1bn.Guidance - underlying EPS growth of 4-7% at constant FX, but at current rates, a prospective negative EPS effect of 6% (vs 7% net benefit in 2017).Overall, solid enough, no more no less... and plenty of ammunition for bulls and bears alike, no doubt, whichever way you choose to incline.People will worry about FCF<divi, but it's now on a FCF yield of nearly 5%, even on my (lower) figures - can't remember seeing that before. And while the increasingly strong balance sheet is good news, it may prove much less so if it emboldens them to do the "big deal" (at least in a nervous market's eyes).We are seeing steadily (and sometimes dramatically) lower pension deficits across the market now - in the "new" bond yield environment, I can see pension concerns (arguably over-stated anyway?) quickly becoming a bit of a non-issue for most (though the sheer scale of some deficits - eg. BT - will remain a focus for many).And we are now seeing companies signal a negative prospective EPS effect from FX, following the GBP rally (or at least, USD slump)... shouldn't be a big issue for us fundamentalists, of course, but it was undoubtedly a major help for overseas earners' SPs on the way down (for sterling), and so... you can't have it both ways!GSK too cheap, for me... I'm just less sure by how much. Will be interesting to hear how the CEO performs in front of analysts, etc, today - would not be good to fluff her lines, yet again....
IOMINVESTCOM
07 Feb 2018
Re: Results Hi Games,Thank you for a full and interesting view point you have based on longer term holder than myself. I have to say you make a strong points and I struggle to give you a meaningful response to debate the other side. Maybe looking at Pfizer's consumer unit will be a step in the right direction.There are numerous dangers on patent expiry, drug pricing and R&D that can make you a weak holder but I intend to get paid for the moment (6.4%) to see what Emma can pull out of the hat. I also have in mind to trade a proportion of my holding and maybe get lucky getting close to Broker average targets around £16+ on various steps higher
7 Feb 18 Liberum Capital Buy 1,254.60 1630.00 1630.00 Reiterates05 Feb 18 Kepler Cheuvreux Reduce 1,254.60 1340.00 1340.00 Reiterates30 Jan 18 Barclays Capital Overweight 1,254.60 1650.00 1650.00 Reiterates18 Jan 18 Liberum Capital Buy 1,254.60 1760.00 1630.00 Reiterates17 Jan 18 Barclays Capital Overweight 1,254.60 1450.00 1650.00 Upgrades16 Jan 18 Jefferies International Buy 1,254.60 - 1500.00 Reiterates16 Jan 18 Exane BNP Paribas Neutral 1,254.60 - 1580.00 Reiterates15 Jan 18 Liberum Capital Buy 1,254.60 1760.00 1760.00 Reiterates11 Jan 18 Deutsche Bank Hold 1,254.60 1380.00 1440.00 ReiteratesThanks again for your quick response.atb
gamesinvestor
07 Feb 2018
Re: Results "Is that not down to the deferred tax non cash adjustments due to USA corporation tax implementation?"STEP -- I could well be -- the Q4 tax in Q4-2016 was 106 compared to 805 in Q4-2017Games
gamesinvestor
07 Feb 2018
Re: Results IOM -- It's a good question. I used to be a strong believer in both this and AZN, but exited both after more careful reading and looking at Terry Smith's analysis. It still seems like a pack of cards in terms of the constant adjustments and exceptionals which keep getting declared when in actual fact they are real and regular business costs.I find it hard to draw any conclusions so it makes me somewhat nervous in investing a lot of money in these companies -- they used to be in my top 10, but I got out with healthy gains in the share prices as the businesses continued to decline.They have a massive disadvantage in my view, in that the cost of R&D has ballooned from £100K levels to many £hundreds of K's to get a drug out and most seem to fail - I mean realistically it is most, so the costs can become immeasurable.This is also coupled with the fact that there are few blockbuster opportunities, and many drugs are serving a smaller audience, hence the costs become prohibitive. It's no longer that possible to sell a drug for a tenner to many millions of people and make it pay for your R&D - you probably have an audience of a few 10's of thousands and a very expensive drug.Neil Woodford is getting hammered all round on this with the likes of companies like Prothena and North West Biotherapeutics which he is losing so much investor capital on. I suppose at least GSK can sell you a tube of toothpaste, so I'm in sympathy with Emma to a degree but is it going to steady the ship?On top of that you lose the right to your product - I don't know of any other industry that has such a severe off patent impact than Pharma -- I would worry that Advair is going to see a loss in scale that is such a big chunk of the business.Yes they are developing new stuff which is £6Bn plus - but it's still only 20% of the business.I'd need some serious convincing that I've missed the point here before opening the old wallet.I have, however, invested in Alliance Pharma, which is at the complete other end of the spectrum, but is not hamstrung by massive R&D expenditure.Games - It's possible I have missed the point but it's a mystery to my limited brain at the moment !!
IOMINVESTCOM
07 Feb 2018
Re: Results Hi Games,At what price would attract you back in?atb
STEP-HEN
07 Feb 2018
Re: Results Is that not down to the deferred tax non cash adjustments due to USA corporation tax implementation?
gamesinvestor
07 Feb 2018
Re: Results very difficult to find the real numbers in the report, after scrolling down from all the adjusted stuff.If you scroll down to page 42 it appears that operating profit fell in Q4 compared to last year from £595M to £512M.[link] after tax, they made a loss of £363M for Q42017 compared to a profit of £317M in Q4 2016 - so that's an after tax negative swing from profit to loss of £680M in one quarter.The share price is up, but if the next quarters results reflect this trend then 2018 is going to be a stinker.This is also before Advair comes under serious attack from generics, which it will do inevitably.Games - Glad I got out at 17XX
