AJIC......NAN June 2018, page-7

couple of snips

"T2 Launch Date Now Imminent Nanosonics recent announcement regarding the launch of the second generation Trophon in 1QFY19 has proved to be a significant catalyst for the stock, notwithstanding that 2H18 revenues are likely to be adversely impacted. The product launch is expected to create renewed enthusiasm of both the Nanosonics sales team as well as GE Healthcare which continues to sell the Trophon in the US. The T2 contains many new features with the highlight being integration with hospital electronic medical records and reporting features. The company is yet to provide guidance on revisions to selling prices, manufacturing cost and margins for the T2, however, we do not expect any material change to profitability with the development cost being recovered through long term volume increases, particularly of consumables. The second major catalyst is the capture of the manufacturing and distribution margin on the GE Healthcare sales of Trophon consumables. This begins from 1 July 2019 and is the major driver of the FY20 EPS growth. We expect the US install base will exceed 19,000 units by the transition, generating approximately $57m of revenues at >90% GP margin in perpetuity. The third catalyst is the launch of a least one new product in late FY20. The market for this product is expected to be at least as large as the Trophon."

"Upgrade to Buy Despite the recent share price appreciation, we upgrade our recommendation to Buy. With the Trophon now well established as the market leader in the US for high level disinfection for ultrasound probes, we believe the company is at the beginning of a long period of relatively low risk earnings growth. While FY18 revenues are being impacted by the timing of the switch to the T2, this pent up demand is likely to be reflected in significantly higher 1H19 revenue growth. Our price target is revised upward to $3.42 and we upgrade our recommendation to Buy from Hold."

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