Good EBIT growth
Stratec Biomedical (SBSG.XETRA) has published initial FY13 data, with full disclosure due on 29 April. Sales were €128m, up 4.6%. The margin growth indicates better service part sales with some increase in construction revenues (diagnostics systems). Some of these revenues are likely to be due to income recognition from the contract cancelation in July 2013. There was a €0.9m write down. Excluding exceptional items, EBIT rose 16.5% to €20.4m (15.9% of revenues). Guidance is for sales to rise to between €174m and €201m by FY17. EBIT and cash should grow more strongly.
Preliminary FY13 results statement
Stratec’s full figures will be announced on 29 April. Revenues for 2013, up 4.6% at €128m, comprise actual instrument and subsidiary sales, service part sales and recognised development revenues. On a preliminary basis, Edison estimates construction and subsidiary revenues at €89m, up 3.5%, service parts at €26.5m, up 6.5%, and recognised development revenues at €11m. EBIT, driven by service part revenues, was €20.4m up 16.5% (excluding a €0.9m one-off charge). Stratec is revising its accounting system and balance sheet presentation from April to enable ongoing revenue recognition. EBIT will not be affected.
Guidance of 8-12% revenue growth to 2017
Management’s 2014-17 guidance, stated with the preliminary announcement, is for revenue growth of €174m to €201m by 2017 based on 8-12% compound growth. The two major contracts signed in 2013 will help this growth. The one signed in December is especially significant as it is linked to production in China for the Asian market. Edison expects EBIT to grow faster than this, driven by the new product launches in 2012 and 2013, but revenue expectations have been reduced.
Valuation: Strong Q114 growth and a dividend rise
Stratec has a strong core business in mainstream diagnostics and a developing presence in the potentially very fast-growing molecular diagnostics area. There is a strong pipeline of new launches over 2014-15 with the innovative Quanterix system due for clinical launch in H214. Guidance is for revenue growth of 8-12%, but EBIT growth could be 15-20% if service part revenues develop. Higher growth could support a normalised P/E of around 25x, indicating about €37/share. The figures do not include any compensation for the contract cancelled in July 2013 or insurance payments for the May 2013 flooding. Given strong Q114 reported growth, the recommended dividend payment is likely to be increased.
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