Questor share tip: Dechra is a buy on US prospects

Animal pharmaceuticals group Dechra's interim results were pretty good – and the company confirmed that everything is on track to meet full-year expectations. The second half should also see the synergy benefits from its recent purchases coming through. Questor says buy.

Dechra Pharmaceuticals
504p -10
Questor says BUY

In the six months to December, revenues rose 4pc to £192.2m, but pre-tax profits slipped to £9m from £9.7m, as there was a negative swing on foreign exchange gains compared with last year.

The interim dividend was increased by 12.1pc to 3.7p and it will be paid on April 7.

There have some concerns about competition, so the fact the company has left its guidance unchanged is a positive.

The key to Dechra's performance is the US, a market the company has recently entered. There have been supply issues in the country with ophthalmic products but the sales performance was solid despite this. Revenue from US pharmaceuticals was ahead of the corresponding period last year by 21pc.

Its services business was hit by decreased footfall in vet's practices during the snowy weather.

The shares are trading on a June 2011 earnings multiple of 14.7 times, falling to 12.6 in 2012 and currently are yielding 2.5pc.

They were first recommended on October 25, 2009, at 427.9p and they are now up 18pc compared with a FTSE 100 that has risen 15pc.

Questor likes Dechra's recent purchases of Dermapet and Genitrix and believes the rating is still not too high for a company that could offer double-digit earnings growth for the next few years. It also has a great opportunity in the US to increase penetration of its products.

Buy.

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