Two growth scenarios
Stratec’s new guidance shows uncertainties over 2012 associated with the ongoing Gen-Probe acquisition by Hologic; the FDA has approved the Panther system. The c 9,500 system base yields high-margin spare sales and is expanding. DiaSorin placed 92 Liaison XL in Q1 and is ramping up. Stratec expects to achieve €160m sales in 2013 and could hit over €182m by 2014. EBIT in 2012 could be €21-26m.
Some uncertainties still for 2012
Removal of one uncertainty with FDA approval of the Gen-Probe Panther molecular diagnostics system should mean that 2012 revenues will be towards the upper end of the guided €125-139m. However, Gen-Probe is currently embroiled in a $3.7bn acquisition by Hologic to create a women’s health business. This means that the 2012 Panther US launch might be slower than expected. DiaSorin placed 92 Liaison XL systems in Q112 making 220 to date. Liaison XL is critical to DiaSorin’s new test growth and the move from the fiercely competitive vitamin D market. Swapping the XL for the old Liaison has barely started but is key to DiaSorin’s future.
Guidance trends: Both bullish and cautious
Stratec’s management has postulated a range of 14% to 16% CAGR to 2014. This means that the 2012 guidance of €125-139m is either €8m below the 14% trend or €3m above the 16% trend. By 2014 these CAGRs imply either €173m or €182m sales respectively. However, management also believes that 2013 sales will be around €160m as Panther and Liaison XL get a full year of marketing and as new systems come into the market. In 2014, the innovative Quanterix system could be launched; initial prototypes are working well, but FDA filings may make 2014 an ambitious target. There is a mismatch between the CAGRs and the more bullish 2013 expectation as the CAGRs imply slower 2014 growth. In practice, if the 2013 €160m target is achieved, 2014 growth could be above trend.
Valuation: strong 2013 outlook
Stratec has a robust long-term growth story and as the market uncertainties of 2012 resolve, these inherent strengths should become manifest. Guided 2012 EBIT is €21-26m, implying flat to 25% growth. In 2013, management expects scale economies and lower feasibility-study costs to improve EBIT to over 18%. With an EV of €330m based on March 2012 €25m cash, the mid-range FY12 EV/Sales is a high 2.5x; the mid-range 2012 P/E is 20x implying c 20%+ growth whereas the CAGR guidance is 14-16%. However, Stratec is a strong mid-term growth story not a short-term play.
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