OTTOBOCK (+) : Thoughts on share price correction

Research evidence excerpt

OTTOBOCK (+) : Thoughts on share price correction

EQUITIES

MEDTECH & SERVICES

OTTOBOCK OUTPERFORMPRICE* EUR60.1  TARGET PRICE EUR84 (UPSIDE 40%)

FLASH NOTE

Thoughts on share price correction

Hugo Solvet BNP Paribas London Branch (+44) 203 430 8478 hugo.solvet@uk.bnpparibas.com

What happened?

OBCK will hold their AGM today. Ahead of the event, a vocally bearish hedge fund published a report (as reported by

Bloomberg). Below we discuss some of the key debates in response to investor questions. We note that the company

has not specifically responded to today’s hedge fund letter, but we leverage prior disclosures/analysis in commentary

below.

BNPP View:

(1) Debt of the family holding with OBCK stake put as a collateral. KKR, Carlyle, Hayfin, Macquarie could seize the

shares if the family holding defaults. The report argues that this represents a liquidity overhang and puts the margin call

levels at around EUR38.6/s (30% below current share price). One could argue that a return of PE fund could help

improve liquidity which is a pushback on most small/mid cap. Placement risk/overhang isn’t new, in our view.

(2) Claims of “cash withdrawals” from OBCK over the years seems to be coming from regular annual dividend payments.

We leave at the discretion of investors to judge if the payout ratio is adequate. Benchmark analysis in our initiation

report here.

(3) aggressive accounting e.g. capitalized R&D - BNPP metrics adjusts for this in our valuation of the company. See

initiation report here.

(4) High share of Net Income coming from Russia, they argue c35% which seems exaggerated given the HSD% of total

group sales are coming from Ukraine/Russia. Our maths implies c10% of group u/l EBITDA assuming all spike event