Bioton: Subscribes for HTL-Strefa

Bioton subscribed for 638,000 shares of HTL-Strefa in the IPO worth PLN 23m. It is almost 25% of the 2.71m shares sold by HTL-Strefa in the IPO at PLN 36 per share. The IPO includes 1.75m of new shares and 0.95m of existing shares. Should all the subscribed shares are allocated to Bioton it would control 5% of HTL-Strefa.

HTL Strefa is one the world’s largest producers of blood lancets, used by diabetes. The company supplies both hospitals and individuals. The primary market of operations is USA where it sells 95% of its production. In 2005 the company recorded some PLN 50m of sales and PLN 19m of net profit. According to the management forecast, in 2006, sales should grow to PLN 66m and net profit should come in at PLN 17.5m. On this forecast HTL-Strefa sells its shares at 2006F P/E of 26.2x. Our view: Although last week Bioton’s CEO stated that Bioton is not going to subscribe in HTL-Strefa IPO, the subscription comes as no surprise, in our opinion, given the obvious complementary nature of products of two companies. We believe that in the future Bioton could further increase its stake in HTL-Strefa.