Vaccine-maker Litha won’t pay dividends as it looks for buys

The maker of flu and hepatitis vaccines will look for acquisitions to help bolster its offering. 

 Stock fell 28% this year after climbing 25% in 2012. The FTSE/JSE Africa Small Cap Index gained 7.6% in 2013, beating the 1.3% rise in the bourse’s all-share index. Litha advanced 0.8% yesterday to R2.60 for a market value of R1.4 billion.

“There probably won’t be prospects of dividends in the short to medium term, because we see a lot of opportunity out there in terms of consolidation in our pharmaceutical division,” chief financial officer Martin Kahanovitz said by phone from Johannesburg yesterday. “We can possibly make further acquisitions whether it be on a product basis or a business basis.”

Litha offered investors R3.90 a share in February as part of a transaction to include black investors that would have seen the company taken private and delisted from the Johannesburg Stock Exchange. Talks ended after terms weren’t agreed on, Litha said May 9, spurring a 16% slide in the stock since then.

“With that deal falling away, obviously there was big disappointment which was reflected in the sharp fall in the share price,” Jean Pierre Verster, who helps oversee R8-billion at 36ONE Asset Management, said by phone yesterday from Johannesburg. Investors would have expected a premium to the share price being paid to delist Litha, he said.

Montreal-based Paladin Labs holds a 44.5% stake of the company following Litha’s acquisition of Paladin’s Pharmaplan for R590-million in cash and new shares last year. Initial buyout targets will probably include drugs registered with South Africa’s Medicines Control Council, Verster said.

“We can utilize that cash better by just building further scale in our pharmaceutical division,” Kahanovitz said.

Litha’s 14-day relative strength index fell as low as 13 on May 29 and was at 31 yesterday, trading above the 30 level deemed as oversold for the first time in five days.

– Bloomberg

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