Pressemitteilung BoxID: 699719 (Geratherm Medical AG)
  • Geratherm Medical AG
  • Fahrenheitstrasse 1
  • 98716 Geschwenda

Solventis Wertpapierhandelsbank

(PresseBox) (Geschwenda, ) Geratherm reported in the H1 report 2014 via a share increase of 2% at apoplex a proceeds gain of 560 t €. The valuation of apoplex is estimated at 28 m €. Based on the valuation of apoplex (Geratherm's holding: 59.1%) less the book value at Geratherm, the holding's value is equal to a per share valuation of 3.27 € for Geratherm.

For the first time Geratherm achieved more than 5 m € (+2% vs.prev. yr.) in quarterly sales and to a large extent the company was able to compensate for the disappointing Q1 (Brazil). For the H1 period EPS increased at an above-proportion rate to .14 €, thereof .10 € was from Q2. We increase our share price target to 9.65 € (old target: 8.52 €) and confirm our recommendation to buy the shares of Geratherm.

With a sales increase of 77.8% the area Respiratory showed the best performance. The development was mainly influenced by the start-up (April 2014) of the Geratherm subsidiary, Sensor Systems. Sensor Systems manufactures filters and sensor systems for pulmonary function measurements. Against the background is the insourcing of these products due to strong growth in turnover with disposable products.

Sales in South America (Brazil) clearly increased showing an improvement to 1.6 m € (Q1: .6 m €) in H1, and the gap vs. the previous year was markedly reduced. We anticipate this trend will continue in H2.

Geratherm received orders from Brazil to equip some 100 clinics with the Geratherm Medical Warming Systems.
Order volume is approx. 5.2 m €, we expect delivery (against cash advances) will take about 15 months.

The area Warming Systems (Sales H1'2014: 310 t €, prev. yr. 390 t €) was strengthened thru the Takeover (100%) of the insolvent LMT Medical Systems, Lübeck, on 1 July 2014. LMT manufactures MRT capable incubator systems (patent secured) for infants born preterm. Now this company will market warming systems for pediatrics as well. We estimate sales for Warming Systems 2015 to be some 4 m €.

Cardio/Stroke (apoplex) sales H1 increased 7.5% to 228 t €. The EBIT loss of 39 t € was cut in half. With increasing sales the earnings leverage is large. We expect positive earnings for the first time in 2014. We anticipate further stroke center (hospitals) affiliation and progress with established doctors.

Transformation gaining momentum
Despite an improving Q2 development, sales for the largest division, Healthcare Diagnostic, in H1'14 (total sales %: 71, EBIT portion: 72%) came in about 1 m € lower than the previous year - see table 1, page 4. For the full year we estimate sales in the division will not totally reach the level of 14.8 m €. Beginning in 2015 we expect moderate growth thru the opening of new markets for gallium thermometers (China, Russia) as well as buildup of the product group Women's Care.

In the figure set for 2015 we estimate one will be able to clearly recognize in the forefront higher value medical products with complex approvals and unique features. This transformation will complement growth and allow for increasing margins, in our opinion.

Medicin Technology increasing profitability
The founding of Sensor Systems caused a one-off gain of .2 m € (included in EBITDA) in H1. The adjusted EBITDA (after one-off gain) in H1 came in at 1.2 m € (margin: 13% vs. 11.6% in '13), and the reported EPS .09 (prev. yr: .12 €). The EPS decline was mainly due to the lower financial results; in H1'14 no proceeds were realized from the sale of securities (prev. yr: .3 m €). The adjusted EPS in H1'13 amounted to .06 €. The profitability of Geratherm (excluding security sales) clearly improved in H1'14 in comparison to the previous year.

For 2014 we do not expect any proceeds from security sales and we have not assumed this for coming years.

Solid Financials
With an equity ratio of 69% Geratherm continues to have a solid equity position. Liquidity and securities amounted to 12.7 m € or 2.57 € per share (prev. yr: 2.81 €) in H1. Financial debt outstanding with banks amounted to 4.9 m € (prev. yr: 5.2 m €). Cash on hand includes 560 t € realized from the capital increase at the apoplex medical technologies GmbH subsidiary (Geratherm's stake 59.1%).

Valuation indicates further room for appreciation
The book value of Geratherm at the end of June 2014 amounted to 7.26 € per share according to our calculation. The apoplex valuation of 28 m € is included in our calculation. The book value of Geratherm allows for a solid base, and further room for appreciation for the share price. Our DCF model confirms the conservative valuation and room for value appreciation. The DCF model applies planned estimates for all areas of business - see page 5.

Based on our dividend estimate for 2014 of .25 € (prev. yr: .24 €) and the current share price of 8.30 €, the dividend yield of 3% is also attractive.

After H1 reporting we come up with a new fair value of 9.65 € per Geratherm share (old fair value: 8.52 €). We increase our price target to our new fair value and confirm our recommendation to buy the shares of Geratherm.