Financial Daily from THE HINDU group of publications
Sunday, Apr 02, 2006
Financial Daily from THE HINDU group of publications Sunday, Apr 02, 2006 |
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Investment World
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Public Offer Markets - Recommendation Sowmya Sundar
At the higher end of the price band, the offer is priced at 28 times its trailing four-quarter per-share earnings on expanded equity. The offer price is justified considering that the company is in a high-growth niche business of making patient monitoring systems. These systems find good demand in the West and the industry is expected to grow at 15-20 per cent annually. A majority of the company's products are exported. The company has, over the past few years, expanded its product range and its marketing reach by acquiring companies and is in a position to tap into the expanding market. Recently it acquired a German company, Eurocor. With this acquisition, Opto's portfolio expands to invasive healthcare products. The funds raised from the public offer will be used to upgrade its manufacturing facilities, establish more marketing offices in other European countries and for setting up an R&D facility. The company also plans to indigenise certain components that were earlier imported. These investments could pay off in the long term. The current offer will dilute the existing equity by 15 per cent. We expect the earnings growth to more than compensate for the equity dilution. The stock has upside potential from a long-term perspective.
More Stories on : Public Offer | Recommendation | Medical & Surgical Equipments
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