market folly

We're posting notes from the London Value Investor Conference 2016.  Next up is Alex Morozov of Morningstar Equity Research who pitched long Elekta.


Alex Morozov's London Value Investor Conference Presentation

Investment idea: Elekta 

Elekta is a Sweden based company specialising in making radio therapy machines for patients with cancer. It’s not new technology but it is effective. Expect secular growth outside the US in radio therapy – 4-6% per year. Current guidelines call for radio therapy in 50% of cancer patients and the incidence of cancer is going up.

Elekta has a wide moat – there are two main players, Electa and Varian, that make radio therapy machines now that Siemens has exited the market.

Intangible assets: IP, brands, chemical databases, R&D productivity.

Switching costs: clinical relationships, there is a large installed base in large hospitals, re-training.  Aftermarket sales provide a lucrative revenue stream.

The share price has pulled back due to a slowdown in order growth, software issues, change of CEO, poor cash flow conversion. The company has been known to use aggressive accounting practices. R&D expenditure has been high.  Margins have bottomed and cash flow is improving. Valuation is attractive but patience will be required.



Be sure to check out the rest of the presentations from the London Value Investor Conference.