Cipher Update - $CPH.to
CPH reported Q4 2021 and I thought there was some important points on the conference call and filings release that I thought I would go over.
It wasn’t long ago when I posted about CPH, have a read here.
Since then the shares have done well (up 30% or so), although it’s only been 3 months so keep that in mind.
Q4 Highlights
Revenue was down a little in Q4 compared to the prior year, but up a bit for the full year.
Gross margins for the full year was above 80%.
EBITDA margin is above 60% for the full year if you remove some one time expenses related to a the legal provisions and loss on disposal of assets.
Absortica revenue was up a tick from Q3 and showed stabilization.
Epuris revenue was up sequentially (0.6 mil) and up yoy (0.8 mil).
Epuris market share remained above 40%.
Opex for the quarter was just above 1 mil and was 5.1 mil for 2021 vs 6.2 mil for 2020.
CPH spent 1.7 mil on share buybacks in 2021.
Valuation
CPH currently trades at less than 4x EBIT and around 2.5x EV/EBIT using ttm numbers. I don’t see why these numbers will be lower in 2022 vs 2021. The company is less and less dependent on Absortica and more of the future is about Epuris.
Looking Ahead
It’s easy to see that CPH is cheap, but does that warrant a position (or continuing to hold a position)? CPH has demonstrated some key items that give me comfort to hold my position:
Cutting opex down and generating solid cash flow.
Consistently executing on the NCIB.
Realigning the distribution and marketing of their products to better suite the business.
Maintaining as much market share as possible with Absortica by introducing AG and LD formulation with Sun Pharma.
There are some large potential catalysts with their current pipeline (DTR-001, CF101, and MOB-015) that could move the share price. Moberg recently submitted to start phase 3 trials for MOB-015. Though it will take time to validate the product, this could be another win for CPH.
I’ve seen many of these cash heavy companies sit and do nothing with the excess cash. Though we can talk about what’s optimal for shareholders on whether a dividend, buyback, acquisition, etc is best, I’m usually happy to see them do something rather just sit and do nothing while the cash pile grows. Being reasonable is far better than being too conservative. I’m glad that my capital is partnered with management team who understands they have some levers to pull with the cash.
Let me know what you think of CPH.to
Thanks for reading,
Dean