Thoughts on Sigma Healthcare (SIG)
Hi Guys, With the recent merger what are your thoughts on future growth particularly USA potential? Paul
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Answer
Hi Paul,
SIG soared higher on Thursday after the ACCC revealed it would not oppose the merger between Chemist Warehouse and Sigma Healthcare. With the merger almost guaranteed to go ahead the key is what’s the growth from here with the stock already up over 100% since the start of the year, the markets fully embracing the merger.
Australia’s new largest pharmacy group will supply 1000 pharmacies across CWG’s Chemist Warehouse, MyChemist, Sigma’s Amcal and Discount Drug Stores chains, enjoying a giant distribution business with 16 distribution centres. To put the numbers into perspective the two merger businesses generate a combined $495 million in earnings before interest and tax a year, and there is potential for a further $60 million in synergies
We believe SIG is a great business by mergers often deliver complexities along their journey and we believe at least for now the benefits of the deal are reflected in the share price. In terms of US expansion, a may take time before they feel ready and competition will be stiff in Trump land.
- We are neutral SIG around $2.50.
