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Biotech / Medical : Hoechst (HOE) -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (17)	5/19/1998 6:44:00 AM
From: Teddy	Respond to of 42

More "no comment" stuff: Dow Jones Newswires -- May 19, 1998 Hoechst: No Comment On Report Of DEM3.70 EPS In '98>G.HFA FRANKFURT (Dow Jones)--German pharmaceutical and chemical holding firm Hoechst AG (G.HFA) said Tuesday it won't comment on a report which said its chairman expects Hoechst to post per-share earnings of DEM3.70 in 1998. A DEM3.70 per-share earning would amount to a 19% rise over the DEM3.15 per-share earning posted in 1997, according to an advance copy of Wednesday's edition of German weekly economic magazine Capital. The Hoechst spokesman said it's company policy not to comment on forecasts of such sort. The Capital article refers to a secret supervisory board plan as the source of its information. According to the financial plan, Hoechst could post an additional profit of more than DEM100 million in 1998 if the dollar averages around DEM1.80 this year. Hoechst's financial plan for 1998 is based on an average dollar rate of DEM1.70, the magazine reported. Capital also reported that the plan said Hoechst intends to increase its cash flow to DEM5.6 billion in 1998 after it fell to DEM3.5 billion in 1997. A DEM5.6 billion cash flow would be at the same level as in 1996. The spokesman confirmed that Chairman Juergen Dormann's current five-year term expires April 1999 and that his contract's extension be discussed at Hoechst's supervisory board meeting June 9. According to the magazine, the supervisory board is considering a two-year extension of Dormann's contract. -By Uta Harnischfeger;49-69-25616500;uharnischfeg@ap.org Hoechst AG (G.HFA) is a major international group of companies that supply healthcare, agricultural and industrial chemical sectors. Headquarters: 65926 Frankfurt am Main, Germany Significant Developments: In May 1997, Hoechst stockholders approved the transformation of Hoechst AG into a strategic management holding company. Under this plan, all business operations and service units will become independently run subsidiaries. In February 1998, Hoechst said operating profit in 1997 fell to DEM3.7 billion from 4.0 billion in 1996. However, excluding special items, operating profit in 1997 rose to DEM4.2 billion from DEM3.5 billion in 1996, it said. The group also said the increase in 1997 sales was mainly due to favorable exchange rate movements. In March 1998, Hoechst Chairman Dormann said 1998 operating profit will remain flat at the 1997 level of DEM3.65 billion. Due to continued restructuring, 1998 sales will drop to range between DEM40 billion and DEM45 billion, he added. In May, Hoechst said its 1998 first quarter net profit was largely flat on the year, rising to DEM360 million from DEM359 million a year earlier. Hoechst cited the Asian economic downturn as having particular impact on its industrial businesses, although it said prospects for its agricultural unit are improving due to "strong demand." It also reiterated its plan to expand its life science activities and further shed its industrial chemicals business, but nonetheless forecast a "difficult year" for 1998 due to more restructuring, price cuts in Japan, and competitive pressures. All figures are in Deutsche marks and are rounded: Year To Year To Year To 12/31/97 12/31/96 12/31/95 Grp Pretax Profit 3.16 bln a 5.15 bln 4.09 bln Grp Net Profit 1.34 bln 2.11 bln 2.25 bln Grp Sales 52.10 bln 50.93 bln 52.2 bln Annual Dividend 1.50 1.40 1.30 EPS (DVFA/SG) 3.10 2.75 2.40 a. Adjusted for restructuring. Currency History (Deutsche mark vs dollar) 12/31/97 12/31/96 12/29/95 Frankfurt Fix 1.7921 1.5548 1.4335

To: Paul Senior who wrote (17)	5/20/1998 10:01:00 PM
From: Teddy	Respond to of 42

The rumors never stop. Latest is that they are raising the dividend and cash flow is improving: biz.yahoo.com It must be true: i read it on the internet<G>

To: Paul Senior who wrote (17)	5/29/1998 5:41:00 AM
From: Teddy	Read Replies (1) \| Respond to of 42

Long report from JP Morgan, via Yahoo: JP Morgan raises Hoechst to Buy - "Value Case Restored" Research issued by J.P. Morgan Summary We are upgrading our recommendation on Hoechst to BUY and raising our price target to DM 110. We believe Hoechst is a remarkably cheap chem/pharma hybrid that is seeking to become a pureplay life sciences company. Last year was difficult for Hoechst stock: the shares underperformed the MSCI by 31% primarily because management's promises were not turned into actions, the pace of chemicals divestments slowed and the financial performance of HMR deteriorated. HMR's profits have stabilised and we believe management has worked hard to reset the bar on expectations. Looking forward, we believe newsflow on chemicals divestments should accelerate and pipeline newsflow should become more intense. We are increasingly of the view that the worst is behind the stock. Using a sum-of-the-parts analysis, we see values for Hoechst stock of between DM 100 (nothing changes) and DM 160 (HMR reaches industry-average financial performance). Looking at this analysis on the basis of the current Hoechst share price, HMR is implicitly valued today at 1.6 times 2000 sales and 6 times 2000 EBITDA on our estimates. In our view, every chemicals business that is sold exposes this too low valuation and every piece of positive pipeline news shows that HMR has a positive future and should be valued as such. Three Reasons to Upgrade the Stock Price Target DM 110 Upside of 39% We believe almost any investment case on Hoechst stock has to address three fundamental points: when, how and for what value can Hoechst exit the remaining industrial businesses; what will Hoechst be worth after a transformation to a pure life-sciences company; and what will happen to the financial performance of HMR? We have studied each of these issues in detail and believe that a BUY rating is the only appropriate call on Hoechst stock. We look at each of the three issues in detail below: Hoechst is now making good progress through its asset sale process, having tackled many of the difficult disposals first. At the end of 1997, Hoechst had chemicals sales of DM 32.4 billion, of which DM 4.3 billion related to the last half-year of specialty chemicals sales prior to its divestment. Looking to the remaining businesses, we expect the divestment of the DM 6.2 billion sales Trevira business (polyester) to be finalised before the end of the year, with the European portion already closed and the North American assets subject to a letter of intent. Hoechst has announced its intention to combine Ticona (a DM 1.5 billion sales specialty polymers business) and Celanese (a DM 8.6 billion sales basic chemicals business) and prepare the business for IPO (most likely in stages) in early 1999. The DM 2.1 billion sales plastics division has been divided into several parts, with each going into its own joint venture by the end of this year. The only businesses that remain - Herberts (a DM 2.7 billion sales European car paints business) and Messer (a DM 2.8 billion sales industrial gases business) - are attractive assets that could easily be divested through trade sales. In summary, we expect that Hoechst can reduce its end-1997 chemicals sales of DM 32.4 billion to around DM 6.2 billion by 2000. We believe progress on asset disposals should accelerate from here, as Hoechst has focused on the difficult disposals first and has already established the strategic management holding company structure. We have valued each of the businesses that Hoechst wishes to sell using trading, rather than transaction, multiples and have taken full account of any capital gains taxes that the disposals might generate. Including those associate companies which are chemical in nature, we estimate that Hoechst could raise after-tax divestment proceeds of around DM 20 billion during the next four years, leaving the company with substantial net cash balances. Hoechst is worth at least DM 100 (upside of 27%) and potentially as much as DM 160 (upside of 102%). We value Hoechst using a sum-of-the-parts approach to capture the value of its component parts. This approach also allows us to take full account of the tax liabilities that may be crystallised as chemicals businesses are sold (detailed above). Using conservative margin and multiple assumptions, based on our estimates for 2000 for HMR (15% EBIT margins, 10 times EBITDA and 2.7 times sales) and AgrEvo (15% EBIT margins, 12 times EBITDA and 2.7 times sales), we calculate a share price for Hoechst of DM 100. However, we believe considerable upside beyond this level exists - our valuation for AgrEvo is only half that of Monsanto (Market Performer, $55.2) - and achieving this level would add around DM 10 per Hoechst share. Further, if HMR were to attain an industry average valuation on EBIT margins of 20% (management's target), it would add a further DM 45 to the Hoechst share price. In fixing our end-1999 price target of DM 110, we have incorporated only a small portion of the upside that management is trying to capture. The financial performance of HMR: stable now, improving later. As the disposal programme reaches its conclusion, greater attention is naturally being focused on the performance of HMR, the core life sciences asset. We see two key issues as important in evaluating the company: the patent expiry on Cardizem CD and the growth in sales from new products (the pipeline). In relation to the Cardizem CD patent expiry, we are confident that the patent will hold at least until the middle of 1999, with patent protection until the end of 1999 a distinct possibility. In relation to the pipeline, we are also becoming more bullish: three products really matter. Allegra has been launched and is performing strongly. The launch of a once-a-day product and Allegra-D (with decongestant) should allow for the product's initial success to be maintained and enhanced. Arava, a disease-modifier for the treatment of rheumatoid arthritis, gained expedited review status from the FDA a few weeks ago, which we take as a very good sign. The final product that matters, Actonel, an osteoporosis drug licensed in from P&G (BUY, $82.1), is on track for launch in 1999. Assuming that the pipeline plays out as we currently expect, HMR should be able to at least offset the expected decline in sales of Cardizem CD with new products from the pipeline. In terms of timing, we expect a substantial jump in sales of new products from 2000, with a meaningful improvement in overall company sales growth from 2001. On the basis of the current Hoechst share price, HMR is implicitly valued today at 1.6 times 2000 sales and 6 times 2000 EBITDA on our estimates. In our view, every chemicals business that is sold exposes this too low valuation and every piece of positive pipeline news shows that HMR has a positive future and should be valued as such. J.P. Morgan has acted as co- or lead-manager of an offering of securities by Procter & Gamble in the last three years. A director of J.P. Morgan is a member of the Supervisory Board of Hoechst.