Biohit (HEL:BIOBV) shares are still trading 3.20 level as they were in December 2019 and we believe that Chinese investors are still poised to buy out all the outstanding stocks as soon as owner Osmo Suovaniemi decides to sell out – or his estate will do so when he passes away.
Any delays are providing a short window of opportunity for investors to capitalise on this deal before it happens. The company is a strong Nordic R&D play for investors with patience. What we can’t see is what is going on behind the scenes at Biohit. Unfortunately the length of the wait is hard to measure – more news is expected after the annual shareholder meeting on April 22nd.
Biohit is a specialist in diagnostic tests and other health products which also controls subsidiaries in the UK and Italy. However, the real value of the company is the treasure trove of patents that it has built up under Suovaniemi’s leadership, which is what really interests potential buyers.
Biohit earnings look broadly positive
The latest earnings release, which we saw on February 19, seems broadly positive.
The year 2019 was upbeat for Biohit due to the completion of the re-registration of its GastroPanel product in China. Regardless of the delay in the registration, Biohit’s net sales grew slightly and profitability improved. Net sales grew 1 % compared to 2018.
GastroPanel sales in China decreased due to the delay in the re-registration of the product. At the same time Biohit reported that its Middle-East business, subsidiaries in Italy and the UK, and its Acetium lozenge net sales for smoking intervention grew.
Operative EBITDA improved to EUR +0.6 million (EUR -0.1 million) due to increased raw material deliveries to China and reduced fixed costs. The 2019 operative EBITDA was 6 % of net sales. Cash at the end of the period amounted to EUR 1.3 million (EUR 1.4 million). The cash position was negatively impacted by the delay in customer payments worth of EUR 0.8 million. Payments were received in January 2020.
Biohit continued its domestic sales and marketing efforts for its Acetium lozenge product and as a result its distribution network expanded significantly, for example inside SOK (the largest Finnish retail chain).
Biohit inked several international distribution agreements for Acetium during the review period, including in Indonesia, Italy and Thailand.
Biohit shares: outlook for 2020
Biohit said it expects its 2020 sales to grow compared with 2019 (previous year EUR 10.1 million). Obviously the future outlook for sales in China and indeed in other strategic markets, will be heavily determined by the ongoing course of the coronavirus.
Chinese interest in this company is understood to be strong, but any major deal is most likely going to be slowed down as China continues to grapple with the current epidemic. We have already seen interest in acquiring the whole business, and as we pointed out in our previous note, company management has a vested interest in the sale of Biohit due to a lucrative options plan.
Previous deals of this nature have seen Chinese investors acquire all the outstanding shares of the company and take it off the Helsinki stock exchange. A good example is Amer Sports, which was acquired by Chinese investors in 2019 at a major 40% mark up for its stock.