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goetzpartners securities Limited
Mauna Kea Technologies SA (MKEA-FR): Q4 performance generating momentum for
2019
18-Jan-2019 / 10:52 GMT/BST
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*Published to the market and investors on 18th January 2019 @ 9.58am (GMT).*
*Mauna Kea Technologies SA (MKEA-FR): Q4 performance generating momentum for
2019*
*Recommendation: OUTPERFORM*
*Target Price: EUR4.10*
*Current Price: EUR2.28 (CoB on 17th January 2019) *
*KEY TAKEAWAY*
Mauna Kea reported Q4/2018 financial results slightly below our expectations,
however, with sales of EUR2.1m (37% YoY), Q4 represents the strongest quarter
for Mauna Kea in 2018, thus highlighting the increasing traction for Cellvizio
and validating the transition to the new pay-per-use ("PPY") model in the US.
Total sales were largely driven by consumables sales of EUR0.8m, of which
EUR0.3m were associated with PPY (112% YoY). As we expected, FY2018 revenues
from Cellvizio straight sales declined (-13% YoY) as a result of the move to
the new sales model, but this decline was offset by an increase in consumables
sales and services, bringing FY2018 sales to EUR6.8m (1% YoY), slightly short
of our FY2018E estimate of EUR8.3m. We remind investors that low utilisation
of PPY systems still represents a main risk, in our view, but we continue to
believe that the new PPY model will translate into sustainable future growth.
We maintain and reiterate both our OUTPERFORM recommendation and EUR4.10
target price.
*Strong Q4 performance expected to carry forward into 2019E*
Q4 results highlighted the growing momentum of Cellvizio in the US, suggesting
that investments into the commercial infrastructure made throughout 2018 are
starting to pay off. In Q4, 19 new consignment systems were placed, compared
with 20 new systems in Q3, 11 systems in Q2 and 5 systems in Q1, bringing the
total number of new consignment systems placed in 2018 to 55. As discussed
previously, we consider installed base growth a key performance indicator and
the large number of new systems installed in 2018 reflects positive momentum
for the PPY model that we believe will carry over into 2019E and pave the way
for an increasing stream of recurring revenue in the future. We believe low
utilisation rates of consignment systems pose the biggest risk to sustainable
future growth, but we anticipate strong consumables sales growth in 2019E due
to revenue realisation from Cellvizio systems installed throughout 2018 and
increasing adoption driven by further clinical validation.
*Consumables sales in 2018 offset revenue lag associated with PPY model*
The fact that Mauna Kea was able to achieve 1% overall revenue growth in
FY2018 despite a 13% reduction in straight sales shows that the company can
achieve solid sales with PPY, while removing the barrier to adoption of large
upfront costs, thereby maximising Cellvizio's penetration and installed base.
The reduction in system straight sales was offset by 17% and 6% increases in
consumables sales and services, respectively. The strong consumables sales are
testament to the increasing utilisation of Cellvizio. In fact, consumable
reorders and PPY probe orders represented 90% of total consumable probe
shipments in FY2018, compared with 81% in 2017. With an extended installed
base and increasing utilisation, Mauna Kea is well-positioned to capitalise on
opportunities that emerge from combined use with complimentary technologies
that we believe will increasingly develop as the company adds to its already
extensive regulatory portfolio.
*We maintain and reiterate our target price of EUR4.10*
We maintain and reiterate our target price of EUR4.10 per share, which is
based on an EV / Sales multiple approach using our EUR25.1m revenue estimate
for 2022E, a multiple of 4.0x, a discount rate of 11% and a probability rate
of 75%. We continue to believe that Mauna Kea is well-positioned to enter a
period of accelerated growth as the new commercial strategy and strong sales
infrastructure start to pay off and revenues from systems consigned in 2018
continue to be realised throughout 2019E. We maintain and reiterate both our
OUTPERFORM recommendation and EUR4.10 target price.
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 /
healthcareresearch@goetzpartners.com
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