Research, Charts & Company Announcements
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DIAGNOSTIC MEDICAL SYSTEMS
DIAGNOSTIC MEDICAL SYSTEMS
H1 16 : well in line with our numbers
03 Oct 16
DMS released its H1 16 results. Revenues reached €17.2m (+15.7%), EBITDA €41k (vs €-707k), operating result €-402k (vs €-1.16m) and net result (group share) €-459k (vs €-786k). The group had €6.2m in available cash at the end of June (€6.1m of gross debt, and €0.1m in net cash) vs €7.3m a year ago. It confirmed its target of outperforming the market on its historical business (imaging) while progressing with the synergies with AXS Médical.
Radiology, bone densitometry….and more!
07 Jul 16
Recommendation and upside We initiate coverage of DMS, a specialist in radiology and bone densitometry which has also started to invest in side-businesses (electronic noses through Alpha Mos, fundamental and applied research on adipose tissue through Stemcis…). The current market capitalisation stands at c. €26m based on a share price of €0.17, but we see significant potential upside (over 70%), with a target price of €0.29, reflecting the company’s sound growth prospects. Business and Trends The group is engaged in the segments of radiology and bone densitometry, its two core and historic businesses, where it provides hospitals, clinics and practitioners with diagnostic tools based on X-ray and digital technologies. The business is supported by the population ageing and new technologies. The radiology segment is dominated by large groups (such as General Electric, Siemens, Toshiba….) but niche players offer flexibility and also an OEM activity, as is the case with Toshiba and Carestream for DMS, which does not rule out other agreements with majors. On the bone densitometry side, two main players dominate the market: General Electric (through Lunar, which was acquired in 2001) and Hologic, both achieving the bulk of their sales in the US, with DMS ranking number three worldwide and also considering future OEM agreements in that segment. The group has gone through a restructuring phase after the new CEO took the helm in 2009 and now looks set to deliver, while it is also investing in side and promising businesses, as evidenced by the take-overs of Alpha Mos and Stemcis. The group outperformed the market during the past few years, which will further be supported by new OEM agreements, the ramp-up of former ones as well as the launch of new products. Need to know In 2014, DMS acquired Alpha Mos for €6m (72.88%, currently 62% held after the exercise of options), which is an analytical instrumentation company set up in 1993 to develop and market electronic noses and tongues. In 2015, DMS acquired AXS Medical, specialising in imaging and 3D modelling in the field of orthopaedics. Lastly, DMS took control of Stemcis by means of a contribution in kind worth €2.3m (fundamental and applied research on adipose tissue, protocols and innovative medical devices for use in human and veterinary medicine), aimed at the osteoarthritis market, as well as reconstructive and cosmetic surgery, ophthalmology and maxillofacial surgery. Today, the group is thus structured as follows: In short, one can proclaim that the DMS group is primarily a Medtech company with two correlated businesses (radiology and bone densitometry) which is also ready to invest in side businesses (AXS) or businesses that may have strong potential and growth rates (Stemcis, Alpha Mos) without necessarily offering obvious synergies with the core businesses, but potentially benefiting from huge growth prospects. Lastly, on 17 June 2016, the group announced it will proceed with a reverse share split (10 old shares for 1 new one) with a first listing of the new shares on 21 July (the price of which will therefore be 10 times more than on 20 July).
08 Dec 16
Elderstreet stake acquired 02 GENERAL NEWS Globalworth premium In this issue Venture capital firm Draper Esprit has taken a 30.8% stake in venture capital trust manager Elderstreet. Both investment managers focus on the technology sector and they will be able to co-invest. Elderstreet has investments in a number of AIM-quoted companies through its VCTs. The purchase was funded by an issue of Draper Esprit shares worth just over £250,000. Simon Cook, the chief executive of Draper Esprit, is a former partner at Elderstreet so he knows the business and the people who run it, although he did leave more than 14 years ago. Cook has previously acquired portfolios from 3i and Cazenove, two other firms where he has worked. Draper Esprit has an option to acquire the remaining shares in Elderstreet, which has more than £25m under management. Adding Elderstreet to the group enables Draper Esprit to offer investors a range of EIS funds, VCTs and an ISA qualifying listed evergreen patient capital fund. The enlarged group has venture capital assets under management of more than £350m. At the end of September 2016, Draper Esprit had a net asset value of 352p a share, which is similar to the current share price. The June 2016 flotation price was 300p a share. Draper Esprit is quoted on Ireland’s Enterprise Securities Market as well as AIM.
N+1 Singer - Morning Song 05-12-2016
05 Dec 16
RTHM is acquiring a profitable Canadian listed mobile specialist for equivalent of US$42.5m consideration in shares (88.235m). This helps adds to two growth vectors RTHM is targeting; (i) adds unique exclusive audience (10m unique) and (ii) Exclusive demand Yahoo and Facebook. The business has 15 premium and owned and operated apps which provide users with rewards for activity. The business is expected to deliver c$9m of EBITDA in FY18 including $2m of cost synergies. This equates to just 4.7x EV/EBITDA. This marks what we see the first step in RTHM activity to scale the business and deliver on margin potential (see our initiation notes). Our initial estimates for EPS revisions are very significant - for FY18 are 2.3 cents (currently 0.6) and for FY19 4.3 (currently 2.5). There is a call at 830 for investors and we will revise post this.
Panmure Morning Note 02-12-16
02 Dec 16
We expect CareTech to report FY results to September on 8th December. A positive trading update in October indicated that performance for the year was in line with market expectations therefore we are focusing on the outlook. We expect a confident statement since the end of 2016 showed positive trends across fee rates, expansion in places and occupancy. We believe CareTech is well positioned for further expansion, and remains at an attractive valuation. We retain our BUY and 380p price target.
Small Cap Breakfast
07 Dec 16
Creo Medical group—Schedule 1 update.. £20m raise. Expected market cap £61.2m, admission expected 9 December. ECSC—Schedule 1 from provider of cyber security services. Raising £5m. Vendor sale £0.8m. Target date 14 Dec. Expected market cap £15m. RM Secured Direct Lending - The secured direct lending fund intends to float on the Main Market on 15 December raising up to £100m
N+1 Singer - Morning Song 06-12-2016
06 Dec 16
With FY16 volume and revenue already disclosed in the pre-close, the focus in today’s prelims is on PBT (£100.3m versus our £101m) and EPS (96.8p versus our 95.4p). No special dividend triggered this year (none forecast) and DPS is held at 46.8p (N1SE: 48.0p). On end markets, recent commentary is reiterated – the core business is growing, whilst consumer electronics will be subdued in the current year (competitive capacity from Solvay). On currency, there will be a material benefit in the current year (a little more than the £14m to £15m previously indicated), and a further tailwind next year if current rates are maintained (quantum TBC). There is also an investment of £10m today in a minority interest in Magma Global, Victrex’ oil and gas mega programme partner. Although the share price is now close to our TP of 1730p, we feel that there is enough in today’s announcement to retain a positive stance on medium term opportunities with strong cashflow and a special dividend potentially to look forward to in the current year.
Panmure Morning Note 08-12-2016
08 Dec 16
CareTech results were in line with expectations to PBT, but exceeded at the EPS level due to a lower tax rate. The strong performance puts the company in a good position for further expansion with a focus on organic growth. It has acquired 8 new facilities to be refurbished for Children’s Services which we expect to result in faster revenue growth in 2017 and improved profitability from 2018 onwards. We see CareTech as a significantly undervalued asset with an attractive dividend yield in an expanding sector. We maintain our BUY recommendation.