Piper Jaffray Downgrades American Oriental Bioengineering (AOB) to Neutral
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Piper Jaffray downgrades American Oriental Bioengineering (NYSE: AOB) from Buy to Neutral and lowers their price target from $17 to $11. The firm also lowers their FY08E EPS from $0.79 to $0.72 and reduces their FY09E EPS from $0.99 to $0.88.
The downgrade is based on uncertainty in business execution and the likely near-term dilutive impact on EPS from the distributor acquisition.
The firm highlighted that AOB indicated on its Q2 conference call that it signed a letter of intent to a acquire a "large" distributor with an estimated annual revenue of $580m for approximately $110m. First, Piper Jaffray highlighted that the target distributor is respectable but is not in the top 7 on a revenue basis. Second, the acquisition is potentially dilutive on EPS is there is not synergy. Next, the firm believes that the valuation is not cheap compared to the most recent comps. Finally, the firm highlights integration risks.
American Oriental Bioengineering, Inc., together with its subsidiaries, engages in the development, manufacture, and commercialization of plant-based pharmaceutical (PBP) and plant-based nutraceutical (PBN) products.
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Comments View All Comments
Great Call!!??LOL..
Pj.. should re read earnings and listen CC again.. or see a Doc..
How can you not get it? Piper did call a good downgrade
The big world drug companies have already learned:Its not adding more drup reps that bring in major sales, its adding a better product to your line. AOB sells basically the same things other China companies sell. How could you not get it?
Deserved downgrade
Something is really starting to smell with AOB. This latest action by them seems like it is being done so they can cover up a loose money trail.
Don't get it
Piper handled the failed offering several months ago, and was replace by Merrill as manager of the second offering. Sore losers. This is a new analyst for Piper who does not seem to understand the implications of this acquisition, as most acquisitions have not been understood. This history of acquisitions by AOB is that they have made very good judgments, have gained a very considerable return from them, and they know the market far better than Piper does. This acquisition will have a significant growth impact on all of AOBs businesses, increase margins and return from those, give them leverage for future acquisitions bycontrolling distribution channels, and greatly increase revenue, although margins will come down as a result of this type of business. But, net return to shareholders on the 110m should be good.
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Adam
Not a very good CC on Aug 12, 2008 07:42 PMThere seemed to be allot of nervous people and nothing really getting explained. I agree that something made me not trust them. I see no real reason for them to buy this instead of a real drug company. Is this new company they waisted all that money on related to AOB CEO?