AGFA, Niche player in consolidating market
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The current AGFA management can present a good track record with better results over the last 12 quarters. The pension problem has probably prevented a takeover by a bigger player and complicates valuation. We have taken a very conservative view in this issue by adding the pension deficit to the financial debt. If Interest rates normalise, AGFA’s current equity value will double by itself. However, our expectations of sales growth, profitability and capital needs generate a fair value of 5.8 Euro or an upside of 111% on the currente share price.
Agfa-Gevaert develops, produces and distributes various analog and digital imaging systems and IT solutions, mainly for the printing industry and the healthcare sector, as well as for specific industrial applications. Co.'s operations can be divided into three business segments: Agfa Graphics, which provides integrated prepress products and services to the printing industry; Agfa HealthCare, which provides diagnostic imaging and healthcare IT products for hospitals and care centers around the world; and Agfa Specialty Products, which supplies a variety of film-based products to business- to-business customers outside the graphic and healthcare markets.
ValueScan operates as a team of independent analysts with strong industry track records. Valuation is based on a standardised method for all companies, independent of their size or sector . Each report delivers a long term analysis of the business plan and cash flows per segment. The model identifies 3 main drivers that are examined separately : Growth, Profitability and Capital needs. Most equity research overemphasises Growth and ignores Capital needs. An EVA analysis is presented to back test the results. Valuation theory is simplified to a level that strikes the right balance between complexity and flexibility. Valuescan operates fully independent from financial institutions, companies or other conflicts of interest. ValueScan analysts avoid mass investor happenings and herd behaviour. The ValueScan method assumes that eventually a company will reflect its true fair value when hype or over pessimism normalises.
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