First Read: Ottobock SE & Co KgaA "Sensible deal in Norway, financial..."

Research evidence excerpt

First Read: Ottobock SE & Co KgaA "Sensible deal in Norway, financial..."

Forecast returns

Forecast price appreciation 19.0%

Forecast dividend yield 1.6%

Forecast stock return 20.5%

Market return assumption 7.7%

Forecast excess return 12.8%

Company Description

Ottobock is a German manufacturer of human bionics products, operating directly in 45

countries and serving more than 140 countries. This encompasses a product portfolio across

Prosthetics, Neuro-Orthotics, Digital O&P and Exoskeletons, split between the B2B category

(aka wholesale, c.50% of group) and the B2C category (aka retail, c.40% of group). The rest

of revenues are generated by businesses defined as non-core; some of these have been closed

down or sold, while others are scheduled for sale.

Valuation Method and Risk Statement

Risks generally applicable to the healthcare sector include: (1) development risk: uncertainty

regarding the timing, efficacy, and market potential of new products and technologies; (2)

commercial risk: threats from new/existing competition, pricing pressure; (3) regulatory risk:

timing/status of approvals, changes in labelling or new earnings on existing products and

technologies; and (4) currency risk: due to the mismatch between geographical location of

cost base and sales.

Company-specific risks to Ottobock include: loss of share in the B2B segment, particularly in

Europe where Ottobock makes up the majority of the market; competitive pressures from

new product launches or acquisitions undertaken in the B2C (patient care/retail) segment by

close peers; and any drastic changes to reimbursement within the human bionics industry

(though this has been stable for a long time, reimbursement can be subject to swift,

unpredictable and significant changes).