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Published to the market and investors on 28^th November 2018 @ 10.39am (London time).

 

Nexstim OYJ (NXTMH-FI): Reverse stock split to improve trading conditions
Recommendation: OUTPERFORM
Target Price: EUR8.40 (from EUR0.28)
Current Price: EUR1.24 (CoB on 27^th November 2018)

KEY TAKEAWAY

Nexstim announced the completion of a reverse stock split at a ratio of 1:30 in order to improve trading conditions. We therefore adjust our target price in line with the share consolidation and continue to believe that the shares represent an asymmetric risk profile considering current trading levels. In our view, the diagnostics segment represents a solid valuation floor with limited downside risk and potential for market expansion. The recent signing of the distribution agreement with Ampere Medical Limited in Hong Kong and the fact that both product lines are well-differentiated from the competition leaves limited commercial execution risk and minimal regulatory risk. Hence, we reiterate and maintain our OUTPERFORM recommendation and adjust our target price on a purely technical basis to EUR8.40 (from EUR0.28) to reflect the share consolidation.

1:30 reverse stock split to improve trading conditions

Nexstim announced the completion of the reduction of the quantity of its shares resolved at the Extraordinary General Meeting on 21st November 2018. The share consolidation was carried out so that each 30 shares of the company prior to completion of the reverse stock split corresponds to one new share. 42,721 new shares were issued in order to make the number of shares held by individual investors divisible by 30, bringing the total number of outstanding shares in the market to 3,261,475 following the annulment (including the issuance of 9,000 new shares to the company). We highlight to investors that this is solely a technical adjustment with the purpose of making the shares more marketable, however, this could have minor effects on liquidity as the number of shares in the open market decreases. As a result of the adjustment, the price of each share increased proportionally from EUR0.05 (CoB 23rd Nov) to EUR1.58 (as at market opening 26th Nov).

First NBT system for applications in depression already installed in Hong Kong

Nexstim recently announced the signing of a distribution agreement with Ampere Medical Limited, a Hong Kong-based specialist neuromodulation distributor, thus opening avenues for Nexstim to tap into a market of over 200,000 patients suffering from depression in Hong Kong. Ampere Medical Limited has already received its first order from a TMS Centre under the Smile and Face Medical Group in Hong Kong, which validates both Nexstim's technology as well as the distribution agreement and could pave the way for further deals providing access to the Mainland China market.

Development of wireless EMG devices funded by Business Finland

Nexstim recently secured EUR342k of R&D loans from Business Finland, a public funding agency for research funding in Finland. The development project is part of ELASTRONICS, Finland's largest research project for the development of wireless Electromyography ("EMG") devices. Nexstim uses EMG to measure muscle responses in patients in order to determine the intensity of therapy and to establish input intensity in patients undergoing functional brain mapping before neurosurgery. A wireless system would provide an easier and more comfortable alternative to the wire-based systems Nexstim currently uses. The funding provides the company with an invaluable opportunity to optimise its system while creating momentum by taking part in the ELASTRONICS research project.

We adjust our target price to EUR8.40 (from EUR0.28) to account for share consolidation

We value Nexstim using a DCF approach using a WACC of 14%, which yields a fair value of EUR8.40 per share. We also determined the fair value of the diagnostics business using an EV / Sales analysis, which yields an NPV of EUR7.0m and a valuation floor of EUR17.3m including EUR10.3m cash (June 2018). NBT represents additional upside, bringing the total equity value to EUR27.7m. We reiterate and maintain our OUTPERFORM recommendation and adjust our target price to EUR8.40 (from EUR0.28) in line with the 1:30 share consolidation.

Kind regards,

Martin Piehlmeier | Analyst

goetzpartners Healthcare Research Team | Research Team

goetzpartners securities Limited

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