Astellas Pharma Recommended By Charles De Vaulx Of IVA Funds

| About: Astellas Pharma, (ALPMF)

Summary

Astellas has been increasing sales for years.

The stock is under followed in the U.S.

Astellas is a major holding of IVA Funds.

Astellas Pharma (OTCPK:ALPMF)(OTCPK:ALPMY) is a Japanese drug maker and a major holding of IVA Funds. The stock is reasonably priced and has been growing sales for several years. Charles de Vaulx recently recommended the stock on Wealthtrack.

The company has 2.01 billion shares, the stock trades for ¥1,465, and the market cap is ¥3 trillion ($25.8 billion). It takes 114 yen to buy one dollar. The dividend is ¥33 and the dividend yield is 2.3%. Earnings per ¥96.36 and the price to earnings ratio is 15.2.

Over the last three fiscal years ending in March, revenues were ¥1.14 trillion ($10 billion) in 2014, ¥1.25 trillion ($11 billion) in 2015, and ¥1.372 trillion ($12 billion) in 2016. Thus far Astellas looks like a text book stock-trades at a reasonable price and sales increase every year. Net income went from ¥91 billion ($800 million) to ¥194 billion ($1.7 billion) over that time frame.

The balance sheet shows ¥378 billion ($3.3 billion) in cash and ¥322 billion ($2.8 billion) in receivables. The liability side shows ¥154 billion ($1.35 billion) in payables and ¥70 billion ($614 million) in debt. Bullet proof. Free cash flow was ¥196 billion ($1.7 billion) in 2016. That would be a free cash flow yield of 6.2%. Return on equity was 15% last year.

For the first nine months of 2017, sales decreased 5.6% because of currencies. On a constant currency basis, they appreciated 3%. The company has been buying back stock and just authorized a ¥50 billion ($439 million) buyback. According to the Annual Report, 36.2% of sales are derived in Japan, 33.2% the Americas, 24% Europe/Middle East/Africa, and 6.6% Asia.

Astellas's biggest seller is XTANDI, used for prostate cancer treatment. It can be taken orally. Eligard and Gonax are also used in the treatment of prostate cancer. Betanis/Myrbrtiq/BETMIGA are all used for urinary incontinence. There are dozens of drugs focusing on oncology, immunology, and urology in development.

What got me interested in Astellas was an interview on Wealthtrack with Charles de Vaulx of IVA Funds (IVIQX, IVWIX). Astellas was his one recommendation. He noted that Astellas is one of IVA's largest holdings, that it has tripled in value in five years, and that he thinks the stock is as cheap as ever. de Vaulx noted that management does a good job buying back shares at the right price and that it holds net cash. The stock is on sale because it is under followed.

Like most pharmaceutical companies, Astellas has drugs that will fall off patent. XTANDI falls off patent in 2019. The company has been using its cash to buy other drugs and partner with biotechs and other pharmas.

So is the stock a buy? Let me tell you what I like about Astellas. The stock is reasonably priced, has lots of cash, and has been increasing sales. If it were based in the U.S., it would trade at a higher level. You can tell that management wants to make the stock look appealing. The Annual Report is 158 pages. Most Japanese Annual Reports are about 25 pages. They give as little information as possible. Not Astellas. It wants to compete with the Europeans and U.S. Unlike other Japanese companies, I don't see strange crossholdings with other companies nor a founding family that wants to operate in seclusion. My guess is that the stock is down in part over worries about our new President and what he's going to do with healthcare. As for the pipeline, pharma is not my strong suit so I'm not going to discuss clinical trials. I find the stock to be quite interesting.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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