DJ Nexstim OYJ (NXTMH-FI): Reverse stock split to improve trading conditions
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goetzpartners securities Limited
Nexstim OYJ (NXTMH-FI): Reverse stock split to improve trading conditions
28-Nov-2018 / 13:09 GMT/BST
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*Published to the market and investors on 28th November 2018 @ 10.39am (London
time).*
*Nexstim OYJ (NXTMH-FI): Reverse stock split to improve trading conditions*
*Recommendation: OUTPERFORM*
*Target Price: EUR8.40 (from EUR0.28)*
*Current Price: EUR1.24 (CoB on 27th November 2018) *
*KEY TAKEAWAY*
Nexstim announced the completion of a reverse stock split at a ratio of 1:30
in order to improve trading conditions. We therefore adjust our target price
in line with the share consolidation and continue to believe that the shares
represent an asymmetric risk profile considering current trading levels. In
our view, the diagnostics segment represents a solid valuation floor with
limited downside risk and potential for market expansion. The recent signing
of the distribution agreement with Ampere Medical Limited in Hong Kong and the
fact that both product lines are well-differentiated from the competition
leaves limited commercial execution risk and minimal regulatory risk. Hence,
we reiterate and maintain our OUTPERFORM recommendation and adjust our target
price on a purely technical basis to EUR8.40 (from EUR0.28) to reflect the
share consolidation.
*1:30 reverse stock split to improve trading conditions*
Nexstim announced the completion of the reduction of the quantity of its
shares resolved at the Extraordinary General Meeting on 21st November 2018.
The share consolidation was carried out so that each 30 shares of the company
prior to completion of the reverse stock split corresponds to one new share.
42,721 new shares were issued in order to make the number of shares held by
individual investors divisible by 30, bringing the total number of outstanding
shares in the market to 3,261,475 following the annulment (including the
issuance of 9,000 new shares to the company). We highlight to investors that
this is solely a technical adjustment with the purpose of making the shares
more marketable, however, this could have minor effects on liquidity as the
number of shares in the open market decreases. As a result of the adjustment,
the price of each share increased proportionally from EUR0.05 (CoB 23rd Nov)
to EUR1.58 (as at market opening 26th Nov).
*First NBT system for applications in depression already installed in Hong
Kong*
Nexstim recently announced the signing of a distribution agreement with Ampere
Medical Limited, a Hong Kong-based specialist neuromodulation distributor,
thus opening avenues for Nexstim to tap into a market of over 200,000 patients
suffering from depression in Hong Kong. Ampere Medical Limited has already
received its first order from a TMS Centre under the Smile and Face Medical
Group in Hong Kong, which validates both Nexstim's technology as well as the
distribution agreement and could pave the way for further deals providing
access to the Mainland China market.
*Development of wireless EMG devices funded by Business Finland*
Nexstim recently secured EUR342k of R&D loans from Business Finland, a public
funding agency for research funding in Finland. The development project is
part of ELASTRONICS, Finland's largest research project for the development of
wireless Electromyography ("EMG") devices. Nexstim uses EMG to measure muscle
responses in patients in order to determine the intensity of therapy and to
establish input intensity in patients undergoing functional brain mapping
before neurosurgery. A wireless system would provide an easier and more
comfortable alternative to the wire-based systems Nexstim currently uses. The
funding provides the company with an invaluable opportunity to optimise its
system while creating momentum by taking part in the ELASTRONICS research
project.
*We adjust our target price to EUR8.40 (from EUR0.28) to account for share
consolidation*
We value Nexstim using a DCF approach using a WACC of 14%, which yields a fair
value of EUR8.40 per share. We also determined the fair value of the
diagnostics business using an EV / Sales analysis, which yields an NPV of
EUR7.0m and a valuation floor of EUR17.3m including EUR10.3m cash (June 2018).
NBT represents additional upside, bringing the total equity value to EUR27.7m.
We reiterate and maintain our OUTPERFORM recommendation and adjust our target
price to EUR8.40 (from EUR0.28) in line with the 1:30 share consolidation.
Kind regards,
Martin Piehlmeier | Analyst
goetzpartners Healthcare Research Team | Research Team
goetzpartners securities Limited
The Stanley Building, 7 Pancras Square, London, N1C 4AG, England, UK.
T +44 (0) 203 859 7725 | martin.piehlmeier@goetzpartners.com /
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