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Eyeing further growth

Apr 07 2011 00:00 Andile Makholwa

Company Data

LITHA HEALTHCARE GROUP LIMITED [JSE:LHG]

Last traded 0
Change 0,02
% Change 0
Cumulative volume 211974
Market cap 1.48bn

Last Updated: 19-12-2014 at 11:33. Prices are delayed by 15 minutes. Source: McGregor BFA

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Litha Healthcare is evolving into a diversified healthcare business and wants to leverage its public and private clientele. Its share price performance suggests investors may be seeing value in this AltX graduate. Over the past 12 months Litha’s share price has grown from 83c to 235c – a 183% appreciation. Litha moved on to the JSE’s main board last year after it was acquired by Myriad Medical Holdings.

Litha’s main business is the distribution of vaccines under agency from several major international pharmaceutical companies. The group is a supplier of paediatric vaccines to the South African Government through The Biovac Institute (TBI) – a public/private partnership with the Health Department and the Department of Science & Technology. Its medical devices division comprises the wholesale distribution and importation of local and international medical equipment, while its smallest pharmaceuticals division markets and distributes generics and over-the-counter products to the pharmaceutical and consumer-related industry.

Posting annual results last week, group CEO Selwyn Kahanovitz said the group’s biotech division is well positioned to benefit from the rapidly growing vaccine market, which grew from US$5bn in 2000 to $17bn in 2009. It’s expected to leap to $100bn in 2025. In SA, immunisation spend was R90m in 2003; last year it hit R1bn.

Litha – which commissioned the construction of its own vaccine manufacturing facility a few years back – will start producing at least one product in 2013. Kahanovitz says the facility will lift the biotech division’s operation margin north of its current 9,7% and enable Litha to expand into the rest of the SADC countries.

Its pharmaceutical division is expected to double its R79m turnover over the short to medium term. The plan is to make it the second biggest division in the group. “We have a focused, acquisitive strategy for the pharma business, because that’s where we see growth coming from. We’re looking for brands from some multinationals; some non-performing or neglected brands or pharma products that we can put into our sales structure,” says Kahanovitz. “There are also a few Indian companies that have products about to be approved or having been approved, but they aren’t happy with the people marketing them.” To effect that, the division has boosted its national sales team.

Though its medical devices division also has growth prospects, Kahanovitz expects that to be slower than its other divisions. However, it has a good balance of public (45%) and private (55%) exposure.

Once rumoured an acquisition target by Adcock Ingram, Litha posted a 45% rise in annualised headlined earnings/share to year-end 2010. Kahanovitz says with R1,2bn turnover Litha has scale to compete in the healthcare market. However, he wouldn’t reject potential deals. He says: “One doesn’t want to close doors, but we’re really focused on building our business. We now have the scale. We have to take advantage of our shared services to grow the business.”

litha healthcare  |  healthcare
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