Deltex - Flowing in the right direction
The recent H1’17 trading statement supports our view that DEMG has reached a turning point after a challenging period in UK. Total sales increased 7% to £2.9m. Analysing regional sales of single use probes associated with the CardioQ-ODM monitoring system: US revenues grew 35% from £0.9m, of which probe revenues were up more than 20% to c £1m.International sales were a weaker factor, 9% lower from £0.8m, although we note that this fall was linked to the timing of orders for Far Eastern and Latin American distributors which typically are confirmed in December.
Overall, we think that DEMG is well positioned to move forward, with a stronger base of US platform accounts providing margin expansion potential. With cost efficiencies in place, the period end cash position stood at £0.2m and then post period end the £0.55m placing of 16.3m shares in July provides a lean cash runway to end 2017.
With much of the uncertainty that has tainted DEMG’s prospects linked to historic UK commercial weakness, the outlook for the Group has now shifted towards rapid revenue growth, as our forecasts show. Our DCF valuation of DEMG remains at £30m, equivalent to 9.6p per share.
Deltex Medical Group is engaged in the manufacture and marketing of oesophageal Doppler haemodynamic monitoring systems used in surgery and intensive care. Through its subsidiaries, Co. is engaged in the manufacture and marketing of medical devices in the United States, Spain and Germany; and the provision of employee services. Co.'s product, CardioQ-ODM enables doctors to fine-tune a patient's cardiac performance during surgery using a technique known as Doppler-guided fluid management. The CardioQ-ODM directly measures central blood flows, the indicator of potentially harmful changes in haemodynamic status that are common to all patients having surgery.
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