Siegfried Holdings (XSWX:SFZN, Financial) is a small-cap Swiss pharmaceutical company that is undervalued compared to its peers. The company flies under Wall Street's radar because it is thinly traded on the pink sheets in the U.S. Siegfried purchased BASF's pharmaceutical ingredient division last year, which should greatly increase financials. Also, Tweedy Browne (Trades, Portfolio) is a major holder.
There are 4.17 million shares and the company trades at a market cap of 850 million Swiss francs ($850 million). The Swiss franc trades at almost parity with the dollar. The dividend is $1.80 and the dividend yield is 0.88%.
Sales were $480.6 million in 2015 and are expected to be 40% higher in 2016. That's $672.84 million and a market cap of only $850 million. Do you know of many pharmaceutical companies that trade that cheaply on a price-sales basis? Ebitda is anticipated to be $100 million in 2016. If the company produces this — again, CHEAP STOCK!
The generics division develops drugs that are off patent. Some well-known names include: Hydrocodone, Methadone, Morphine and Dopamine. Here is a list of Siegfried's generics. It also sells generics under the name Hameln. The company has labs in the U.S., Switzerland, Europe, Malta and China. The lab in Malta can research drugs while they are still under patent in the U.S. The day after the patent rolls off, Siegfried can begin marketing. The company recently got approval to open a lab in Nantong, China. The company also produces generics for: Roche (RHHBY, RHHBF), Novartis (NVS, Financial) Teva (TEVA, Financial), and Celgene (CELG, Financial).
BASF sold its ingredients division to Siegfried because BASF wants to focus on a handful of industries. The ingredients division was like a rounding error BASF is so large. It increased Siegfried's number of employees by 850 to 2,238 total. The deal was funded by two hybrid bond issues last fall. Some of the hybrids convert at 217.93 which is not far away.
At the end of 2015, the balance sheet was strong. The asset side showed $47 million in cash, $257 million in inventories and $124 million in accounts receivable. The liability side showed $215 million in debt, $64.7 million in accounts payable and $10 million in other noncurrent debt.
So let's briefly compare how other generic manufacturers trade on a P/S ratio. Akorn (AKRX, Financial) trades at 3.77 times sales. Mallinckrodt (MNK, Financial) trades at 2.2. Teva (TEVA, Financial) trades at 2.54 times. Again, Siegfried trades at only 1.26 times!
If you look at Siegfried under Google News, you'll only see a handful of articles ever written on the company. Guess who wrote them? Me. We own shares for our clients and are at a small profit. The shares have been on a run as of late. We are trying to get Siegfried to hire an American PR firm so that they can get their story out there.
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