A disappointing Q1 18...and a few question marks (DMS)
A disappointing Q1 18...and a few question marksOPINION CHANGE
CHANGE IN OPINIONAdd vs Buy
CHANGE IN TARGET PRICE€ 1.51 vs 2.11 -28.4%
Our target price goes down quite substantially. This reflects lower expected earnings and the doubts we have on the group. Even if the new segments could be successful (which has yet to materialise), the core Imaging segment is hardly making any progress in terms of either activity or profitability. We have to be convinced by the strategy of the group, while the new financing lines raise the question of future acquisitions and probably entail risks of dilution. In other words, the market will have to finance the development of the group, with no visibility on how/when the group intends to use these lines.
CHANGE IN EPS2018 : € -0.15 vs 0.01 ns
2019 : € -0.10 vs 0.06 ns
We have substantially cut our sales and earnings forecasts after a quite weak Q1 18 which comes after a disappointing H2 17 in the historic Imaging business, while the new activities (Wellness and Biotech) are so far very small contributors. This may change in the future, but the track-record so far is not impressive and management's credibility has to be restored.
CHANGE IN NAV€ 1.82 vs 2.72 -33.2%
Since our valuation is based on sales multiples, it of course goes down with lower sales forecasts, in particular due to the weak Imaging business and despite the fact we have modelled in growth for the new segments.
CHANGE IN DCF€ 1.51 vs 1.94 -22.0%
Our DCF valuation goes down, despite the fact we have now included the growth expected in the group’s new segments. On the one hand, the latter could support the group’s top-line and profits but, on the other one, we fail to see real triggers for the Imaging business while management seems more focused on new businesses as opposed to the historic business, which still represents (by far) the bulk of the group’s activities.
DIAGNOSTIC MEDICAL SYSTEMS SA, (formerly known as DMS), is a France-based company, which together with its subsidiaries, designs, produces and markets medical imagery devices dedicated to conventional and digital radiology as well as bone densitometry. The Company manufactures a range of products for bone densitometry examination, including the ultrasound imaging system UBIS 5000, Challenger Envision, Stratos dR and Stratos. In the radiology sector, its products include Baccara dRF 43, EOL, Platinum and Da Vinci solutions, among others. In addition, it offers such products as scanners, transcranial Doppler, and Giotto Image mammography system. The Company operates several direct subsidiaries, AXS Medical, Apelem SAS, which manufactures radiology equipment, Medilink SARL, which produces Doppler and bone densitometry devices, Apelem SA, based in Spain, Alpha MOS based in France and one indirect subsidiary, SA Apelem and one indirect affiliated company, Spectrap.
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