Valuation of ALK-Abelló A/S

Nikolai Galle

Student thesis: Master thesis

Abstract

The objective of this master thesis is to determine the fair value for the share of the public listed Danish company ALK-Abelló and determine how their research- and development projects and development in the business units affects the valuation. By comparing it with the current market price of the share the 4th May 2016 it’s possible to determine, whether the share is over- or under valuated. AKL is a research driven company with develops and markets allergy immunotherapy. The company is the market leader and has a broad portfolio of allergy immunotherapy products, within SCIT, SLIT drops and SLIT tablets. The company is currently developing the new generation of allergy immunotherapy. The sublingual allergy immunotherapy tablets (SLIT tablets) are fast dissolving tablets, which combine the ease of use from the SLIT drops and effect of the SCIT. The expectations to the SLIT tablets are huge and the company will in the coming year market new tablets and expand geographically.
The fair value of the share will be estimated by the DCF-model, which is based on a fundamental analysis of the company’s strategic and financial value drivers. The strategic analysis revealed several of internal and external factors affecting the future development of ALK. ALK is market leader in the allergy immunotherapy industry, however the development of SLIT tablets is a head of the main competitor Stallergenes Greer, which gives the company a first mover advantage. The market for allergy immunotherapy is expected to grow, as the percentage of people affected by allergy is rising. In addition the economic development in the growth economies are predicted to affect the appearance of allergy and the availability of allergy immunotherapy treatment. Furthermore, ALK is also affected by price regulations from the health authorities.
The financial analysis revealed, that ALK over the analysis period had experienced volatility in their ratios, however a positive trend was identified. The company’s return of equity was in the period between 1,83% and 13,38%, which mainly was driven by a rise in the profit margin, due to rationalization of operating costs and sales growth.
Based on the strategic and financial analysis the free cash flow to the firm through the forecast period of 10 years and terminal year was estimated. The WACC for ALK was estimated to 4.14%, which estimated the fair value of the ALK share the 4th May 2016 to 1.292 DKK. The share was traded at 1.129 DKK, which implies the share price is undervalued with 14%. A sensitivity analysis of the value revealed that the value especially was sensitive to changes in the sales growth in the terminal year.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2016
Number of pages94