SPL looks very interesting at these levels, volume through on Friday appears to be the end of a larger selling line.
The Vivagel/SSL collaboration appears to be going very well and these revenues to SPL have a very low probability discount weighting against them.
Durex is a key revenue stream for SSL (45%).
SSL generated EBIT of approx GBP68.1m in 2008 has 100m of net debt, 190.1m shares on issue and a current share price of 4.45.
Therefore it trades on an EV/EBIT of 13.9x 2008
SSL earnings are growing at approx 12% CAGR so EBIT in 2011 should be approx GBP 95.7m and hence its 2011 EV/EBIT is 9.9x
Assuming that SSL has to pay SPL royalties of say A$10m-A$15m in 2011
What is the value of this royalty stream to SSL?
Answer = A$100 to A$150m.
Halve these amounts to ensure that it is an EPS accretion gobsmacker to SSL and = $0.28c to $0.56c
Throw the rest in for free
cheers
a hidden gem that is about to run
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