DMS : A disappointing Q1 18...and a few question marks

Our target price goes down quite substantially. This reflects lower expected earnings and the doubts we have on the group. Even if the new segments could be successful (which has yet to materialise), the core Imaging segment is hardly making any progress in terms of either activity or profitability. We have to be convinced by the strategy of the group, while the new financing lines raise the question of future acquisitions and probably entail risks of dilution. In other words, the market will have to finance the development of the group, with no visibility on how/when the group intends to use these lines.

We have substantially cut our sales and earnings forecasts after a quite weak Q1 18 which comes after a disappointing H2 17 in the historic Imaging business, while the new activities (Wellness and Biotech) are so far very small contributors. This may change in the future, but the track-record so far is not impressive and management's credibility has to be restored.

Since our valuation is based on sales multiples, it of course goes down with lower sales forecasts, in particular due to the weak Imaging business and despite the fact we have modelled in growth for the new segments.

Our DCF valuation goes down, despite the fact we have now included the growth expected in the group’s new segments. On the one hand, the latter could support the group’s top-line and profits but, on the other one, we fail to see real triggers for the Imaging business while management seems more focused on new businesses as opposed to the historic business, which still represents (by far) the bulk of the group’s activities.