COMPANY Compumedics (CMP) | |
RECOMMENDATION Buy | PT $1.40/share (+47%) | High Risk |
EVENT FDA approval for MEG | Some blue sky is delivered |
KEY POINTS |
·US FDA approval for CMP’s new generation brain wave scanner makes tripling of EBITDA to $24m within three years more tangible. This helps CMP’s EV/EBITDA reduce from 20.7x to 5.8x. |
·In operational terms, CMP can double the FY’20F EBITDA of $7.3m from selling 2,000 premium sleep and brain diagnostic devices at $20,000 with just three new brain scanners @ $5,000,000 each. |
·Two main hurdles for this new brain scanner (MEG) are cleared: One – Win major contract vs. global peer (and see it retire); and, Two – Today’s FDA validation which allows reimbursement to start. |
· We stay with our forecast of a significant ramp-up over three years to EBITDA of $24m, with 30% from Base and 70% from Step-outs (MEG, eHealth/Somfit) |
·CMP reiterated its FY’20 EBITDA target of $6.5m to $7.5m in January 2020 without any contribution from MEG. Around 80% of the EBITDA is likely to come in 2H. CMP reports on 25 February. |
FY’21F METRICS PER 16.6x | EV/EBITDA 11.4x | Yield 1.5% |
LINK TO RESEARCH REPORTRR_CMP_200218 (8 pages) |
CMP MANAGEMENT AT PAC PARTNERS OFFICE |
Melbourne – Tuesday 24 March – 12:30pm |
Sydney– Wednesday 25 March – 12:30pm |
INVESTMENT VIEW |
We retain a Buy on CMP and expect it to re-rate towards 12 Month Price Target of $1.40/share (+47% today) with: - Base (sleep & neuro diagnostic devices & services) deliver reliable growth with the dual premium and mid offers, and eHealth moves into growth leverage after the USA backbone build.
- Blue sky from Step-outs becoming more tangible with new orders of MEG in 2H’20F with US FDA approval granted today, and a distribution partner for SomFit which we expect by end CY2020.
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(20min delay)