Tuesday, June 16, 2015

Recent Buy






Today I bought 40 shares of of GlaxoSmithKline plc (ADR) (NYSE: GSK)

GlaxoSmithKline plc. (GSK) is a healthcare company. GSK develops pharmaceutical, vaccine and consumer healthcare products. The pharmaceuticals business develops and makes medicines to treat a range of acute and chronic diseases. The vaccines business produces paediatric and adult vaccines against a range of infectious diseases. GSK’s Consumer Healthcare business is structured around four categories: Total Wellness, Oral Care, Nutrition and Skin Health. For Pharmaceuticals and Vaccines, GSK operates in geographical segments that combine these two businesses, namely United States Pharmaceuticals and Vaccines, Europe Pharmaceuticals and Vaccines, Emerging Markets and Asia Pacific (EMAP) Pharmaceuticals and Vaccines, and Japan Pharmaceuticals and Vaccines. Its Consumer Healthcare business functions as a global unit, as does ViiV Healthcare, a human immunodeficiency virus (HIV) company founded by GSK along with Pfizer and Shionogi. In addition, it owns the biological conjugation platform.

The stock has dropped around 20% YTD making it look like cheap stock to buy. GSK currently trades with a P/E 6.59 but the forward P/E is 17.97.

Reasons why GSK is not doing well at the moment!?

  • Facing competition against cheaper drugs, especially its key drug Advair. Advair is used to tread asthma. 
  • Core EPS moving to negative direction. Q1 2015 Core EPS was 17.3p (-16%) CER. This is expected to continue at least year 2015. Sir Andrew Witty, Chief Executive Officer, GSK said For 2015, our financial performance will be impacted by the dilutive effect of the transaction and flow through of headwinds encountered in 2014.
  • In 2015, core EPS is expected to decline at a percentage rate in the high teens on a CER basis, primarily due to continued pricing pressure on Advair in US/Europe, the dilutive effect of the transaction and the inherited cost base of the Novartis businesses. 
  • GSK has decided to reduce the planned return to shareholders from the net proceeds generated from the Novartis transaction. 

Why did I buy GSK!?

  • Stock price is reasonable.
  • Good dividend, on Q1 report GSK announced that it expect to pay an annual ordinary dividend of 80p for each for the next three years (2015-2018) the current dividend yield is close to 6% on today's stock price. And GSK is planning to return approximately £1 billion (20p per share) to shareholders via a special dividend paid alongside GSK's Q4 2015 ordinary dividend payment.
  • Group revenue expected to grow at a CAGR of low-to-mid single digits over the five year period 2016-2020.
  • ViiV Healthcare strong positive outlook.
  • Transaction cost savings programme to be accelerated with over 50% of total synergies of £1 billion now expected in 2016 (vs 2017), with programme broadly complete by end of 2017 (vs 2019)
  • Total annual benefits of £3 billion from combination of existing restructuring and synergy programmes expected to be largely delivered by the end of 2017.
  • Reported Q1 sales £5.6 billion +1% CER with growth in Vaccines (+10%), Consumer Healthcare (+24%) offset by Pharmaceuticals (-7%).
  • Lot's of drugs in phase II and III

I believe that over all GSK is a good pharma stock to own, but it does contain some level of risk.

This purchase will increase my annual dividend income around $92.80.

Thank you for reading.

photo: http://freedigitalphotos.com/ By cuteimage 

2 comments:

  1. I like this buy. I have been looking at adding a big Pharma company to my portfolio alongside JNJ. Right now I am considering AZN, PFE, or GSK.

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    Replies
    1. Hi there Dividend Dreams!

      I hope that I can someday buy JNJ for cheap price :).
      Here is few other to consider add to your list. Roche Holding AG (RHHBY), Sanofi SA (SNY) and Novartis AG (NVS).

      Happy dividend hunting!

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