CMP 1.27% 40.0¢ compumedics limited

Hidden Champions : Recaps on CMP before interim report

  1. 327 Posts.
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    CMP interim report is likely to be release on 25 Feb 2015. I think it is a good time to discuss my take on the business.

    Its 5 core business:
    1. Sleep Diagnostics ( 6% of the market share )
    2. Brain Research Market ( 28% of the market share )
    3. Neurodiagnostics ( >1% of market share)
    4. Neuromedical supplies ( >1% of market share)
    5. Doppler Ultrasound ( >35% of market share)

    Pipeline develop:
    1. Sleep treatment
    2. Driver Vigilance Assist
    3. ehealth

    Tracking down CMP's previous forecasts, I found out the actual profit result is almost always lower than forecasts. For 2015 financial year, CMP forecasts NPAT of $2millions AUD, trading about P/E of 10. Presumably, half-year result should be about $1 m in NPAT.

    It is hard to predict how much NPAT will be but CMP has been building strong competitive advantages through strong investment of over 10% in R&D or through acquisition. For a long time, CMP has been hit with low profit margin, which leads its decision to move major manufacturing to South East Asia. Enough of history!

    Here's how I see CMP
    Its business lies in three areas: opportunity to leverage technology
    1. Sleep Diagnostics -> eHealth/Sleep treatment & Driver Vigilance Assist
    2. Brain Research/ Neurodiagnostics Market -> Driver Vigilance Assist
    3. Doppler Ultrasound -> eHealth & Stroke Prevention

    Its expertise in sleep diagnostics is supported by rich history in developing sleep diagnostic devices.
    Its expertise in Brain Research/ Neurodiagnostics Market is through acquisition of American Neuroscan.
    Its expertise in Doppler Ultrasound is through acquisition of German DWL electronishe Systeme.

    Maintaining leading technology advancement and leveraging them to create new markets is key to CMP.
    I believe CMP has been doing just that! eHealth development and continuous investment in R&D + potential Driver Vigilance Assist and Sleep treatment.

    While some might argue having three separate core business units dilutes the fund available to develop winner products, I think CMP has been operating in these businesses to evaluate "which business can be leveraged to create breakthrough" and explore "the possibility of combining some of the technology".

    With AUD is now only worth $0.77 USD, representing over 20% of discount, compared to last year.
    last year, 2014, profit of $0.9 millions AUD. Based on the current exchange rates, the same amount of profit would translate into at least $1.1 million AUD.

    My view is that the half year for 2015 is at least $1 millions. I prefer small caps and waiting patiently. Investing in CMP might not have the same level of excitement from investing in blue chips stocks and their dividend payout, because it offers so much more, "CMP might be the next ResMed, Market Cap of 11.38 Billions".

    CMP current cap is about $ 20 millions, still has room for 569,00% of return to catch up with ResMed. I am not joking, only if you're patient enough to hold the stock for the next 20 years. I will, based on the current development trend.
 
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