30.04.2019 kl 13:34 3232

Norne kom nettopp med en oppjustering av kursmål på COV. Øker fra kr. 85,- til kr.90,-.
Imponert over kostnadskontroll og lansering av digital patologi on track.

Impressive cost discipline despite intense product development and launch phase

COV’s 1Q report impressed us on the cost discipline, while the key product launches are on track. Thus, we keep our Buy recommendation at a slightly higher TP of NOK 90/sh (85 previously).

Solid sales and lower costs in 1Qcov
ContextVision (COV) released its 1Q19 report on April 25th with sales of SEK 21.1m being only a bit above our SEK 20.7m projection. However, expensed costs were much lower than forecasted leading to a very strong EBITDA of SEK 6.1m vs SEK -0.7m in our estimates. Increased capitalization of R&D expenses on Digital Pathology played some role in the difference. However, combined OPEX and CAPEX were still lower by SEK 5.4m compared to our model. Strong results led to only small change in cash position – a decrease of SEK 0.7m vs the end of 2018.

Digital Pathology product launch this summer
The company indicated that it received positive feedback from user tests for Digital Pathology at three additional pathology centers in 1Q. Digital Pathology market entry is getting very close and Beta installations will take place this summer. In addition, the company is launching its new AI-powered
X-ray product in 2Q and several potential customer projects are already in the pipeline.

Positive stance maintained, as the fun begins
We have adjusted our model to reflect much higher capitalization of product development costs than before. However, we have still lowered the cost base slightly, as combined OPEX and CAPEX was still impressively below our estimates. We are encouraged by the positive user test feedback on the company’s first of many planned decision support tools (for prostate cancer). In addition, the endeavor into AI-powered products seem to have strong positive effects on the existing Image Enhancement business. The company maintains a clear market leader position there and the R&D investments ensures COV is at the forefront technologically. All in all, our DCF-based TP is upped to NOK 90/sh (85 previously) and we keep our positive stance awaiting exciting months and years ahead.

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