Abcam released a statement ahead of its AGM confirming FY targets and giving a little more clarity on planned investments. We maintain our Neutral recommendation and our investment thesis remains unchanged.
- FY targets confirmed. Abcam confirmed the financial and strategic targets for FY16 set at the September results. Given the company has progressed through four months of the fiscal year, this is an encouraging update that the business remains on track.
- Strategic investments. The company has given more detail on the investments it will be making. H1 FY16 will see an increase in investments, given the higher run rate coming into the year, and investment in Firefly (which will be H1 weighted). In addition to these, the company is investing in an IT platform over the next 2-3 years, and is currently in the design and system selection phase. We expect management will most likely give more guidance on these costs at the H1 results in March-16.
- Updated forecasts. We adjust for latest currency moves, which we forecast results in slightly lower gross margins, although offset by higher hedging gains, and minimal changes to the bottom line. We also use this opportunity to revise our share price target from GBp 506 to GBp 558 per share supported by sector multiple expansion since our last model update.