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Hardman & Co

Sinclair Pharma Plc Poised for a long term uplift

Hardman & Co ReportSinclair Pharma Plc (LON:SPH) has evolved into a pure-play aesthetics company with a concentrated and highly competitive portfolio of differentiated injectable aesthetics products. These products target unmet clinical needs for effective, high quality, longer duration, natural looking and minimally-invasive treatments, which is a significant growth opportunity. Sinclair has an established sales and marketing presence in Europe, direct sales in Brazil, and operates through an international group of distributors in other markets, including SE Asia and the US. With the benefit of a strong balance sheet, Sinclair is investing in an accelerated growth phase and margin expansion.


►Strategy: Following an extensive strategic review, Sinclair disposed of its non-core pharmaceuticals business, transforming the group into a focused aesthetics business operating with a mixed direct sales and distributor model. Entry into the important US market is via a recent distribution agreement with ThermiGen

►Growth prospects: Sinclair is operating in high growth markets and expects to accelerate growth in its own performance through a number of product distribution and marketing initiatives, expansion into new geographic territories, and through the launch of product line extensions.

►Financials: With interims as expected, the Company reiterated its CY2016 guidance of 40% sales growth, pre-Brazil consolidation and US Silhouette InstaLift sales. Management also stated that Q3 2016 sales are expected to exceed £7.7m. Forecasts remain unchanged with EBITDA break-even in 2017.

►Valuation: We use primarily a DCF approach as there are few quoted competitors that could be considered as true comparator companies for valuation purposes. Our DCF valuation, using a 10% WACC and terminal growth rate of 2%, suggests a valuation of around 100p.

►Investment summary: Sinclair Pharma Plc is investing in an accelerated growth phase to deliver EBITDA profit next year and overall profitability in fiscal 2018. The shares offer the opportunity to invest in a high growth company with expanding margins and high operational leverage. The risk/reward profile is most favourable and the shares are attractively valued on a DCF basis.

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