QT Vascular

UOBKayhian on 2 June 2014

FY14F PB (x): 6.4
FY15F PB (x): 7.3
Led by a CEO and founder with an impressive track record, QTV expects to deliver a
stellar 2014 as sales volumes gain mass with the entry of Cordis (J&J). The US and
Japan will deliver in the short term while a coronary launch will pump medium-term
growth. The highly-anticipated drug-coated Chocolate PTA is in the pipeline. We
provide a sensitivity analysis of our fair value estimate. Maintain BUY. Target price:
S$0.51.
The US and Japan will drive volume surge this year, after QTV commenced its
distribution agreement with Cordis (J&J) in Feb 14 and two of its products were
approved for marketing in Japan. Cordis (J&J) will initially focus on selling the
Chocolate PTA in the US, where it has a potential client reach of over 1,500 accounts
vs QTV’s current 150-client portfolio. We are also optimistic on Japan as the
GliderXtreme PTA was designed specifically to cater to the Japanese profile. With 23%
of its 130m-population over 65 years old, we see good potential for strong demand. We
estimate transfer prices in Japan to be 30-40% higher than in the US and Europe, and
15% higher than China’s. Sales to at least double in 2014 as the group builds its
capacity from over 10,000 units in 2013 to 30,000 this year, mainly to be supplied by
third-party manufacturers. We expect strong, double-digit qoq growth as the group
ramps up progressively.
Maintain BUY and target price of S$0.51. Our target price was derived using a 2015F
P/S ratio of 10x, which is based on completed comparable medical device M&A deals
beginning 2012. Assuming a max multiple of 14x, our fair value for QTV would be
$0.71 but this is not our base-case scenario.