Worth the wait…


LITHA HEALTH­CARE – the for­mer AltXlisted counter that merged with Myr­iad Med­i­cal last year and sub­se­quently moved to the JSE’s main board – spends a sig­nif­i­cant chunk of its 138-page an­nual re­port ex­plain­ing it­self and strate­gic plans for its three di­vi­sions for the next cou­ple of years. Un­der­stand­ably, as an AltX player, few in­vestors paid at­ten­tion to it. Now that it plays in the big league it has to be un­der­stood bet­ter.

On the face of it, Litha doesn’t of­fer much to in­vestors. It’s largely de­pen­dent on its biotech busi­ness, which sup­plies pae­di­atric vac­cines to South Africa’s Depart­ment of Health through a pri­vate pub­lic part­ner­ship (PPP) in The Bio­vac In­sti­tute and, to a lim­ited ex­tent, the pri­vate sec­tor. It’s said it’s not about to de­clare a div­i­dend (maybe in three years’ time), which makes it less at­trac­tive to short-term in­vestors.

Nev­er­the­less, we think in­vestors should con­sider the counter. It’s not yet in the league of Aspen Phar­ma­care or Ad­cock Ingram and it cer­tainly can’t be com­pared to Ci­pla Med­pro. Aside from the ob­vi­ous fact that phar­ma­ceu­ti­cal and pri­vate hos­pi­tal groups are de­fen­sive stocks, Litha has the mak­ing of a po­ten­tially suc­cess­ful small cap.

While its PPP with Gov­ern­ment gives it a guar­an­teed in­come, it’s de­vel­op­ing ca­pac­ity to start man­u­fac­tur­ing its own vac­cines in 2013 to ex­port it to the rest of south­ern Africa, ven­tur­ing into a largely un­tapped mar­ket. Hav­ing your own man­u­fac­tur­ing divi­sion takes it out of just be­ing a dis­trib­u­tor and will boost its mar­gins. Equally, there’s po­ten­tial in its pharma busi­ness, es­pe­cially the fo­cus on generic medicines, while its higher mar­gin med­i­cal de­vices divi­sion is poised to in­crease its sales to the pub­lic sec­tor.

As a com­pany emerg­ing from a merger its 2010 fi­nan­cial fig­ures aren’t com­pa­ra­ble. How­ever, you can bet on its long-term po­ten­tial.

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