UBS Tips Genomma Stock, Sees M&A

UBS has initiated Mexico’s Genomma with a buy rating and a MXP21.95 target, up from MXP15.40 Monday. Genomma Lab’s priced in June a $200m IPO at MXP16, the low end of a MXP16-20 target, in a deal managed locally by IXE and Santander, and internationally by UBS/Merrill Lynch. “At our price target, Genomma would be trading at a PE of 14.7 times our 2009 estimate, versus the current 2009E PE of 10.3 times,” says UBS. “This would still put Genomma at a significant valuation discount to most other global fast growing OTC/PC companies,” it adds, referring to over-the-counter drugs (OTC) and personal care products (PC), a universe it says trades at 16.1 times PE for 2009E. “We believe this company will enjoy rapid growth, high profitability, and low organic capex going forward thanks to a proven ability to select, brand and sell OTC/PC products, backed by highly effective advertising, complemented by largely outsourced manufacturing and R&D,” says UBS. The shop expects Genomma to use proceeds from the recent equity offering to buy brands and slowly expand internationally.