Could cough, cold and flu sea­son be a good thing for this stock?

The Beacon Herald - - BUSINESS - GEOFF ZOCHODNE FI­NAN­CIAL POST

In an up-and-down year for Cana­dian IPOs, shares of Toron­to­based vi­ta­min-maker Jamieson Wellness Inc. have been on a steady rise since their July de­but.

Jamieson’s stock price closed Fri­day at $21.05, up 4.05 per cent for the day and more than 21 per cent since the com­pany’s shares first hit the Toronto Stock Ex­change. Mean­while, the S&P/ TSX Com­pos­ite in­dex is up just five per cent for the year.

Now ex­pec­ta­tions of a harsh flu sea­son have some pre­dict­ing Jamieson’s mo­men­tum will con­tinue through win­ter, too.

The com­pany an­nounced thirdquar­ter earn­ings last week, re­port­ing net in­come of about $1.1 mil­lion on rev­enue of $80.1 mil­lion, the lat­ter be­ing an in­crease of 45 per cent from the same pe­riod of 2016.

While Jamieson’s net in­come was down from $8.3 mil­lion for the same quar­ter last year, the com­pany said its re­sults were cur­tailed some­what by costs tied to share sales.

Ad­justed net in­come, ex­clud­ing the non-op­er­at­ing costs, ac­tu­ally jumped 210 per cent to $7.8 mil­lion for the quar­ter, up from $2.5 mil­lion, due in part to higher sales vol­umes.

On Thurs­day, BMO Cap­i­tal Mar­kets upped its tar­get price on Jamieson to $22 per share from $21, and kept its out­per­form rat­ing on the stock.

“Over­all, we be­lieve the im­pact of the quar­ter to be pos­i­tive,” wrote BMO Cap­i­tal Mar­kets an­a­lyst Peter Sk­lar. “We con­tinue to be­lieve Jamieson will ben­e­fit from its dom­i­nant brand po­si­tion, strong man­age­ment team, and abil­ity to gen­er­ate sig­nif­i­cant free cash flow.”

Na­tional Bank Fi­nan­cial main­tained its $22.25 tar­get price and out­per­form rat­ing on Jamieson shares, say­ing its re­sults had been “in line” with ex­pec­ta­tions.

“Given Jamieson’s pos­i­tive at­tributes, the grow­ing Cana­dian (vi­ta­min, min­eral, and sup­ple­ment) con­sump­tion and in­ter­na­tional mar­ket op­por­tu­nity, we be­lieve the com­pany is in a favourable po­si­tion to hit its growth tar­gets and con­se­quently nar­row the val­u­a­tion gap with peers,” Na­tional an­a­lyst En­dri Leno wrote.

Jamieson, a 95-year-old maker of vi­ta­mins and nat­u­ral health prod­ucts, was bought by U.S. pri­vate-eq­uity firm CCMP Cap­i­tal Ad­vi­sors in 2014 for what was re­port­edly around $300 mil­lion, and an at­tempt at sell­ing the com­pany last year was ul­ti­mately called off, ac­cord­ing to Bloomberg. Af­ter the July IPO, CCMP sold all of its com­mon shares of Jamieson in an Oc­to­ber sec­ondary of­fer­ing, the com­pany’s fi­nan­cial state­ments said.

But post-IPO Jamieson could be on track to con­tinue its gains through­out the win­ter, de­spite nar­row­ing its rev­enue out­look range for this year.

Jamieson is tout­ing one of its newer of­fer­ings, a pur­port­edly pre­ven­ta­tive “Cold Fighter” sup­ple­ment, which it claims “fights early signs of cold and flu symp­toms.”

“Re­tail­ers and con­sumers have been ask­ing for in­no­va­tion in the cough and cold cat­e­gory for quite some time, and we be­lieve we’ve de­liv­ered that as only Jamieson can,” com­pany pres­i­dent and chief ex­ec­u­tive Mark Hor­nick said on the com­pany’s third-quar­ter con­fer­ence call. “So far we’re off to a good start.”

A prod­uct boast­ing sim­i­lar qual­i­ties, Valeant Phar­ma­ceu­ti­cals-owned Cold-FX, has de­spite its pop­u­lar­ity faced ques­tions about its ef­fec­tive­ness, al­though an at­tempt at a class ac­tion law­suit in Bri­tish Columbia was dis­missed in Novem­ber 2016.

In re­spond­ing to Jamieson’s Q3 re­sults, Sk­lar wrote that “the do­mes­tic, Jamieson-branded prod­ucts per­formed well, in­clud­ing the re­cently-launched Cold Fighter prod­uct, which be­gan ship­ping in Au­gust and will con­tinue to ramp-up into Q4/17.”

Leno said last week that ex­perts have taken note of an ugly flu sea­son in Aus­tralia — a po­ten­tially good thing for Jamieson.

POST­MEDIA NET­WORK FILES

Shares of Cana­dian vi­ta­min-maker Jamieson have been been on a steady rise since July.

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