GREY:TSTIF - Post by User
Comment by
anon314on Jul 07, 2014 7:13pm
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Post# 22723008
RE:$1.75
RE:$1.75From Sara Elford's Canaccord Genuity Report of 7 May 2014
Investment recommendation
No change to our SPECULATIVE BUY rating or C$1.75 target price following the release of TSO3’s Q1/14 results and AGM webcast. The core tenets of our investment thesis remain as follows: (1) the technology platform is game changing and applicable across multiple products and end-markets; (2) the business model is excellent (very healthy, high- margin recurring revenue from captive consumable sales based on the in-use installed base); (3) cash balance is sufficient to fund current burn rate past mid-2015; (4) U.S. clearance is still a matter of when and not if, in our opinion; and (5) our view that TSO3 should be an acquisition target following a successful FDA outcome. The overwhelming risk has been and continues to be timing.
Valuation
Our target price is easily supported by our DCF analysis (20% discount rate). We use the expected economic splits under the old 3M agreement even though TSO3 currently retains all of the potential value. Either way, the company’s business model is a potential cash cow as the installed base builds thanks to low-capital intensity and a high-margin consumables business. It continues to be our view that U.S. regulatory approval is required to unlock this value.