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Stock Talk - Jim Royal, Motley Fool

Feb 19, 2013|

Stock Talk - Jim Royal, Motley Fool

Transcript - will not be 100% accurate

All right we are joined by Jim -- from the Motley Fool the stock we're gonna talk about his company called Harvard biosciences. By the way this stock this morning before we even start talking about it. Is up more than 4% Jim are you doing today. A great Ted Barrett thanks very much for having me. This this -- a stock that's not for the faint of heart to Biotech stock and it looks like they're doing. Some kind of and IPO for another division within the companies that what I'm reading into it. Yes that's correct still I focused on special situations things like spin off in what harbored by excited to do is going to do in the next couple months. Is spin off one of its division. Called Harvard apparatus regenerative technology your heart. And that is a division that's focused on producing replacement organs using stem cells right now they've got to. Just a trachea product in the clinical stage. But a person he's growing hearts livers kidneys for transplant in the future. So why are they spinning it off as opposed to keeping it involved in the same company -- Harvard biosciences. Right so what's. There's a couple different interest for Harvard biosciences here and sped off. What is heart right now. Has no revenue it's losing about six million dollars the year so what that does for the parent company based spin it off that it makes it more profitable. But also. By spinning at all heart becomes. I've become this entirely separate entity that can -- its -- funding. And it exposes investors to get more risky segment and in contrast to the parent company. Which is much more stable. And growing earnings -- as well you know profitable. So if I buy it this -- symbol for HBI ill. Is our the symbol for Harvard biosciences is HBI though and they're making about seven pennies a share in the trading at five dollars a share if I buy a a thousand shares of HB IL in my gonna end up with more shares of the spinoff as well. Right that's correct so what Harvard Bioscience is going to do in the next few months is they're gonna IPO about 20%. Of the spin off. So they're gonna raise about twenty million dollars of cash from that OK so. Investors serve pardon me Harvard Bioscience is going to be left with the -- the remaining 80%. We stand they're going to and about four months after the IPOs spin off to an investors. OK so very simple math here if you think. The pricing on the IPO for the spin off it a hundred million dollars. Right now Harvard Bioscience is entirely. Is. Trading for about a 156 million dollars to attract those two you've got accompanying. The parent company. With solid earnings. Trading for about five times adjusted earnings that very very cheap and they expect earnings to grow fifteen to 20% a year that's their target. Do you have any insight to their pipeline because this is a business is a pipeline businesses and. Well this is a little bit different. Do that -- business here at the one -- profitable and earning. Is. Really it makes markets and two ballots. Research tool actually equipment for the life sciences -- researchers at universities. At big pharma companies. And and similar similar research institutions that -- based Dell products things like. Well like what that what can I think of offhand. The -- diesel. All -- so they're not a drug -- that that's absolutely not the court this this year makes tools tells tools for researchers in the app. Ability that the sort of more risky part here's the spin off but I think. It's up the pricing here gives you a lot of a lot of margin of safety for a buyer today. Would how to -- how does the sequestration. Impact this company is a well the sequestration goes through is going to be a lot less money to buy these tools is there. Well to some extent but that harbored by at night as the court. Really focuses on products that are much less capital intensive you don't -- huge budget either either product -- you need. On going to conduct research they're they're not so exposed to huge capital. Capital budgets where that goes to the things that are likely to -- constraint in an environment. Like a sequestration. Just up one or the other thing that just like to mention is that management owns 14% of the stock and has another 14% -- options so that helps the line. Management. With outside shareholders and that's something that is it. They're not selling they're not selling any of it on this news or anything like that. Note and they've they've continued to hold and in fact it was very much their idea to spin off the company so. -- that that is a bullish indicators and you know radical your company like that and yet he once there you want them to have some skin in the game so making growth if they can grow this -- company. They can make big money. Interesting place five dollars a share thank you very much for joining us. Guys that was Jim royal and he's from the Motley Fool. This is not a blue chip dividend paying stock this is a a riskier played a symbol Ford is HB I feel. It's up today about 5% in Tracy you can buy this stock you buy a hundred shares first lessons 600 dollars right. And the whole idea here is that this other company that they're gonna spin off is gonna make billions if not billions but make lots of money. And so if you buy a hundred shares of HBI know you're gonna end up with shares of this other company as well. It's a risky play. But one that is warranting some of your Samir researcher -- Jim royal Motley -- symbol for that is HB IO.