GREY:TSTIF - Post by User
Post by
echo2on Jul 31, 2017 10:49am
209 Views
Post# 26528488
Canaccord Still Loves TSO3...
Canaccord Still Loves TSO3... Neil Maruoka, MSc, MBA | Analyst | Canaccord Genuity Corp. (Canada) | nmaruoka@canaccordgenuity.com | 1.416.869.3073 Jenny Wang | Associate | Canaccord Genuity Corp. (Canada) | jwang@canaccordgenuity.com | 1.416.869.3643 Matthew Reitsma | Associate | Canaccord Genuity Corp. (Canada) | mreitsma@canaccordgenuity.com | 1.416.869.7703 |
Company Update Q2 Preview Investment Recommendation TSO3 will report Q2 financial results on Wednesday, August 2. Despite a landscape shifting in favour of TSO3’s technology and a clear and unmet need to find better ways to sterilize flexible endoscopes, we nonetheless believe that the VP4 sales ramp in the second quarter will continue to be incremental. For the quarter, we forecast revenue of $5.5 million (based on an expected 42 units shipped, a sequential increase of 6 units compared to Q1) and adjusted EBITDA of ($0.9 million), compared to Street estimates of $4.9 million and ($1.1 million), respectively. We believe that VP4 has the potential to dominate the low-temperature sterilizer market; for those with a two to three-year time horizon, we believe that fundamentals remain intact, and we would recommend investors accumulate the stock at these levels. Investment Highlights • Potential for additional expanded claims in 2017. We believe that by seeking additional expanded claims for the sterilization of individual duodenoscopes, TSO3 has the potential to greatly expand the market opportunity for VP4. We expect these claims could be granted before the end of the year, which would provide significant potential catalysts for the stock. • VP4 launch should be steady, but extended claims drive upside to our peak forecasts. Given the long-sales cycle for low-temperature sterilizers, we do not expect the impact of extended claims to be felt for a few quarters. However, we believe that the upside potential from this market opportunity is immense. • The potential to be the dominant low-temperature sterilizer on the market. As a larger proportion of medical devices need to be processed using low-temperature sterilization, we believe TSO3 is best positioned to ultimately replace legacy technologies like steam sterilization. This advantage is due to VP4’s larger capacity and ability to process mixed loads relative to competitors, in our view. Valuation We value TSO3 based on a DCF model, using an unchanged 13.5% discount rate and 3.0% terminal growth. Based on this analysis, our target remains C$5.25, which represents an annualized return of 67.7% and continues to support our BUY recommendation.
|