Pac Partners Research Report 80 cent Valuation

	Column 1	Column 2	Column 3	Column 4	Column 5
0	COMPANY Compumedics Limited	CMP	$0.42/share	MCap $70m[/P]	Date: 18 July 2016
1	RECOMMENDATION Buy	High Risk	$0.80/share target[/P]
2	EVENT - FY16 earnings guidance confirmed
3	KEY POINTS
4	· In our view base sleep and neuro diagnostic platform is growing EBITDA at 15% for 3 years - FY16 to FY18. · CMP suggest MEG and eHealth step-out growth may be brought forward to next year, versus our FY19. · CMP is transforming its premium niche global diagnostic platform into a required partner for clinics, home, health funds and governments. PT is $0.80/share ( EV/EBITDA of 14x). We reiterate our Buy.
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6	FY16F METRICS PER 23.3x	EV/EBITDA 12.2x	Yield 0.0%[/P]
7	LINK TO FINANCIAL SUMMARY see below or RN_CMP_180716 NEXT UPDATE – FY Result 25 August
8	DETAIL
9	Event: 1 Confirming FY16 earnings guidance post receiving unaudited June quarter information: · Sales + 11% to $37.0m vs PAC at $37.6m · NPAT + 50% to ~$3.0m vs PAC at $3.1m 2 First time guidance of FY17 Sales at 11% growth vs our 14% 3 Reiterate step-out growth possible from MEG and eHealth Impact: CMP platform of sleep and neuro diagnostic devices and consumable are growing EBITDA at double digit (ave 15% for three years): Consistently growing sales at double digit levels after GFC impact in FY11-13: FY11 -5%, FY12 -10%, FY13 -3%, FY14 +14%, FY15 +9%, FY16F + 11%, FY17F + 14%, FY18F 21%; Expanding EBITDA margins with lower cost base and benefits of improved distribution and scale: FY12 -0.6%, FY13 1.3%, FY14 9.6%, FY15 +12.2%, FY16F +15.2%, FY17F + 19.8%, FY18F + 23.4%; Going to keep improving because mid-priced point devices (such as Grael) have only just started to be shipped to customers (i.e. benefits to date are from better distribution and cost base of premium devices only. CMP can accelerate sales and margin expansion with MEG and eHealth step-out growth…we have growth coming in FY19 and EBITDA up 45%pa…CMP is aiming for this to occur in FY17…two years earlier MEG (fast brain imaging for Alzheimer’s, Parkinson’s, epilepsy and autism) received major boost with Korean equipment partner KRISS in Feb’16, and now CMP has at least six customers negotiating terms for purchase of these $4m+ machines; and, eHealth (taking clinic grade sleep tests to the home and small sleep laboratory) had first sales announced last year ($3.3m/a supply to China for three years), and is now negotiating with multiple distribution channel providers as well as rolling out low cost eCloud network (for all CMP devices)
10	INVESTMENT OVERVIEW
11	CMP is transforming its premium niche global diagnostic platform into a required partner for clinics, home, health funds and governments. PT is $0.80/share ( EV/EBITDA of 14x). We reiterate our Buy.
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13	Should you have any queries, please do not hesitate to contact me on +61 3 8633 9864.
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15	Paul JenszIndustrials AnalystPAC Partners Level 10, 330 Collins Street Melbourne VIC 3000Phone: +61 3 8633 9864Mobile: +61 410 650 909www.pacpartners.com.au
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17	Recommendation CriteriaInvestment ViewPAC Partners Investment View is based on an absolute 1-year total return equal to capital appreciation plus yield.A Speculative recommendation is when a company has limited experience from which to derive a fundamental investment view.Risk Rating PAC Partners has a four tier Risk Rating System consisting of: Very High, High, Medium and Low. The Risk Rating is a subjective rating based on: Management Track Record, Forecasting Risk, Industry Risk and Financial Risk including cash flow analysis. Disclosure of Economic Interests The views expressed in this research report accurately reflect the personal views of Paul Jensz about the subject issuer and its securities. No part of the analyst's compensation was, is or will be directly or indirectly related to any recommendation or view expressed in this report. 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