TS03 Inc Trust Units TSTIF

Desjardins' Take

[lematou22]

TOS analyst day and operations update—Getinge shows strong commitment,2017 outlook positive
The Desjardins Takeaway TSO3’s analyst day and operations update highlight the strong progress in 2016 and positive outlook for 2017 and beyond.
Discussion and commentary from three Getinge personnel who presented at the analyst day show that Getinge is a committed partner; they clearly conveyed that they believe TSO3’s technology will be disruptive to the sterilization industry and are confident the companies are poised for a strong ramp in sales/installs in 2017.
We reiterate our Buy rating. Highlights Getinge support is strong.
Three representatives from Getinge presented a clear message that it is committed to TSO3. A sales rep stated he has a busy installation schedule ahead, the success rate on sales has improved and customer references are in place to drive more orders from a robust sales funnel. Meanwhile, a Getinge executive indicated it had been more cautious and slower than it needed to be when establishing the go to market strategy in 1H16, but now has sales teams engaged and ready to drive sales and deliver strong growth in 2017. The representatives also indicated that further customer endorsements (potentially imminent) such as from Mount Sinai in December and possibly more claims (see below) should help accelerate adoption. Further, a taped customer testimonial provided a strong endorsement of TSO3’s technology, including ease of use, throughput/versatility benefits and future usage potential. Additional claims. There was significant attention on the pursuit of claims for sterilization of duodenoscopes, which have been linked with hospital-acquired infections and patient deaths. TSO3 and its consultants are confident of getting more claims, with filings expected in mid-1H17. The plan is to systematically seek claims for individual scope models/manufacturers, which would further cement TSO3’s technology leadership and expand the addressable market. However, investors should recognize that the path to widespread sterilization of scopes would not be straightforward and that the process could take a while. Tweaking estimates. We updated our estimates to reflect the 30 units shipped in 4Q and baked in a bit more conservatism in our 2017 sales ramp, but left our longer-term forecast unchanged. Valuation While we made a few small estimate changes, there is no material impact on our C$5.50 DCF-based target.

Recommendation We reiterate our Buy rating