Qiagen Spending for Growth
Qiagen N.V. (QGEN), through its subsidiaries in Europe, Asia, Australia, Canada, and the U.S., operates in the life sciences industry with a portfolio of more than 500 products and automated solutions. Though the molecular diagnostic and research market offer enormous growth, the company faces stiff competition. As such, we maintain our Hold rating for Qiagen.
The company continues to remain aggressive on the acquisition front. The most significant deal closed by the company in July 2007, is the acquisition of Digene Corp., which should boost the topline going forward. Another recent significant acquisition was Corbett Life Sciences which occurred in July 2008.
We believe the company will continue entering into strategic partnerships and alliances going forward. We are optimistic on a number of new research products and potential breakthrough procedures for fractionation of proteins using Qiagen's new product offerings.
We would, however, like to see more home-brew protocols begin to use Qiagen's products and trends in research spending stabilize before we become bullish on the company. Our $22 price target corresponds to 35 x our projected fiscal 2009 EPS of $0.75, discounted back at 20 percent for one year. We believe that Qiagen shares offer only limited upside at the current price.
Virgin Media in Early Turnaround
Virgin Media, Inc. (VMED) is in the early stages of a turnaround, poised to generate strong free cash flow growth and improved EPS in 2009. A new management team is re-branding the services and rolling out digital services to stabilize average revenue per user (ARPU), reduce churn and slow its market share drain from the onslaught of new entrants into VMED's markets.
The company remained focused on leading in next generation broadband and redefining the TV experience through video on demand (VOD). On the cost side, we expect lower interest expense, capital expenditures and income taxes to increase free cash flow beginning this year. The stock is currently trading at a steep discount to chief competitor BSkyB and its other cable peers, a discount that we think will narrow as profitability improves, or as management gets closer to selling the company.
First quarter 2008 results reflected the nascent turnaround, with growth in net subscribers and revenue-generating users. The company added 4,900 net subscribers in 1Q08 compared to 46,900 net disconnections in 1Q07.
In order to compete with rival BSkyB on broadband is launching superfast broadband speeds to woo customers. In broadband, the company is better placed to compete as it already offers speeds of up to 20 megabits per second to some customers, and has successfully trialed 50 megabits with a view to offer content such as high definition programming on demand.
