ASX:EBO
EBOS Group Ltd
Investment Summary
The fund managers believe that EBOS Group Ltd is facing challenges following the loss of the Chemist Warehouse pharmaceutical supply contract, which constitutes approximately $1.9bn in annual revenue. In their opinion, the share price decline reflects the anticipated earnings impact from this development. They acknowledge that while EBOS executed its contractual obligations effectively, the competing offer from Sigma, which included share issuance, placed them at a disadvantage. The fund managers note that the board recognized the risks associated with contract renewal and have proactively implemented strategies to mitigate earnings loss. Attention is now directed towards replacing lost volumes and identifying cost-saving opportunities. Additionally, they emphasize EBOS's ongoing efforts to diversify earnings and expressed confidence in growth initiatives, particularly in areas such as Terry White Chemmart pharmacies, animal care, medical devices, and contract logistics.
Commentary From The Managers
Cooper Investors
30 June 2023
$33.77
- EBOS (EBO) underperformed due to the loss of their Chemist Warehouse pharmaceutical supply contract.
- This contract generated approximately $1.9bn in annual revenue and is set to expire in June 2024.
- The market reaction reflected concerns over earnings loss from the contract renegotiations.
- EBOS acknowledges the risk of non-renewal but has developed strategies to mitigate the impact.
- Focus for EBOS has shifted towards replacing lost volumes and identifying cost-saving opportunities.
- There have been efforts to diversify group earnings in recent years.
- EBOS asserts its confidence in its growth strategies across various sectors.
- Key areas for growth include Terry White Chemmart pharmacies, animal care, medical devices, and contract logistics.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.