Pac Partners 80 cent price target

	Column 1	Column 2	Column 3	Column 4
0	COMPANY Compumedics	CMP	$ 0.40/share MCap $66m[/P]	Date: 22 February 2016
1	RECOMMENDATION Buy	High Risk	$ 0.80/share target (+20%)[/P]
2	EVENT - Adding brain imaging division…major new earnings stream
3	KEY POINTS
4	CMP secured a Brain Image licence and technology deal with Korea’s KRISS institute that enables FY19 and FY20 EBITDA to be raised 25% from FY’19. Our Price Target is lifted 20% to $0.80/share.
5	We initiating coverage on CMP in Oct 2015 with a Buy because CMP was delivering on its four growth drivers: lowering costs of base sleep and neuro diagnostic platforms; accelerating growth in China and USA with new distribution; opening up new channels with e-commerce ; and, blue sky opportunities.
6	This MEG Division converts some of the Blue Sky to tangible cash flow and reinforces our Buy. DCF and Price Target up 20% to $0.80/share.
7	FY 16F METRICS PER 21.3x	EV/EBITDA 11.2x	Yield 0 %[/P]
8	LINK TO FINANCIAL SUMMARY and today’s summary update RN_CMP_220216
9	DETAIL – see our initiation report – RR_CMP_211015
10	CMP secured a licence and technology deal with Korea’s KRISS institute that enables CMP to sell $20m/annum of complete “new generation” MEG* Brain Imaging Systems by FY19. *Magnetoencephalography
11	This will add a complimentary high barrier to entry division to CMP with high EBITDA margins. Our estimates of FY19 and FY20 EBITDA are raised 25% to $19m and $25m. Our DCF lifts 20% to $0.80/share.
12	CMP has been supplying the key software for Brain Imaging Systems to Elekta, the current MEG market leader with 80% market share, for over 10 years. CMP’s $20m/annum represents ~40% market share.
13	CMP and KRISS have timed its entry into the MEG market well. o Demand for brain imaging is growing at “a multiple of the 4%pa” developed world health spend increase due to its use in early detection and treatment of neurological disorders
14	o MEG is better suited to significant neurological disorders such as: Alzheimer’s, Parkinson’s, epilepsy and autism. MEG has a higher degree of sensitivity and faster measurement of brain signals than standard MRI (Magnetic resonance imaging)
15	CMP now has three globally significant platforms with: premium sleep diagnosis systems (6% global market share; neuro/blood blow diagnosis systems (~5% global market shares); and now brain imaging (potential for 40% of new sales).
16	We initiating coverage on CMP last year with a Buy because it was delivering on its three growth drivers: lowering costs of base platforms; accelerating growth in China and USA with new distribution; opening up new channels with e-commerce ; and, blue sky.
17	This MEG Division converts some of the Blue Sky to tangible cash flow and reinforces our Buy. Our 12 Month price target is up 20% to $0.80/share.
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20	NEXT UPDATE – HY Road Show
21	Please contact Roger Chen [email protected] or myself.
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23	Should you have any queries, please do not hesitate to contact me on +613-8633-9864.
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25	Paul Jensz Director Industrials AnalystPAC Partners Pty Ltd.Level 12, 15 William StreetMelbourne VIC 3000Phone: +61 3 8633 9864 Mobile: +61 410 650909[email protected]www.pacpartners.com.au
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