Niche provider in medical technology · 2015-05-11 · DR. KALLIWODA│RESEARCH 10th May 2007 COMPANY ANALYSIS Coverage: Since Q2/2007 EVENT: Results 2006 - Outlook Rating: BUY Risk:

DR. KALLIWODA│RESEARCH

10th May 2007 COMPANY ANALYSIS Coverage: Since Q2/2007

EVENT: Results 2006 - Outlook

Rating: BUY Risk:

Sector: Medical Equipment Fair Value (new): € 8.00 Last Price: € 6.60

Healthcare

Share Price Development Niche provider in medical technology

● Advanced technology for prevention of irregular heartbeat

● Great scaling effects in the production processcontribute to above average increase

Source: Cortal Consors (BNP Paribas)

● Geratherm understands to meet competition withsimple structures and processes

SWOT COMPANY DESCRIPTION HISTORY & ESTIMATES

+ large share of exports + scaling effects in core business + new potential found in the

segment temperature systems - patents ending - company size

Geratherm Medical AG is one of the leadingproviders of products in areas temperaturemanagement & telemedicine. Additionally,the company has been exceptionallysuccessful in healthcare investments foryears. Geratherm AG is headquartered inGeschwenda and employs 74.

0

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6.000

8.000

10.000

12.000

2001

2002

2003

2004

2005

2006

2007

E

2008

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2009

E

Geschäftsjahr

EuroUmsatzerlöse

EBIT

Jahresüberschuss

ANALYST

Dr. Norbert Kalliwoda; CEFADVFA-Analyst Dipl.-Kfm.+49 (69) [email protected]

See alsoKalliwoda Recommendationson Terminal: Bloomberg

ReutersThomson FinancialsJCF Factset

Copyright ® 2006 DR. KALLIWODA | RESEARCH

Figures in EUR 2003 2004 2005 2006 2007e

EPS (Dr. Kalliwoda Research) 0,35 0,30 0,32 0,42 0,45

Revenues (mln) 7,5 7,2 8,2 8,6 9,0

net Income (adj.) 1,6 1,3 1,4 1,9 2,0

EBIT (mln) 0,8 1,0 0,6 0,7 0,8

Working capital (mln) 10,3 10,7 12,5 12,9 14,3

Equity ratio (in %) 86,1 88,9 92,3 92,0 92,9

Price (curr) 6,60 Shares out (mln) 4,50

52W high 7,18 6M Avrg Vol (TEUR) 17,381

52w low 4,89 Free Float (in %) 31,50 %

Market Cap (mln) 29,7 Weight in GEX 0,055 %

Last Dividend 0,40 Kürzel GME

Accounting Stand. IFRS Reuters code GMEG.DE

Web Page www.geratherm.com WKN 549562

Source: DR.KALLIWODA | RESEARCH © 2007

_________________________________________________________________________________________________________

Company Analysis

Geratherm AG

09/06/2007

Page 2

www.kalliwoda.com Primary Research

Content

1 Company profile ........................................................................................................... 3

2 Business Development - Outlook................................................................................. 4

3 Products and Solutions ................................................................................................ 5

4 SWOT-Analysis ............................................................................................................ 7

5 Report Analysis............................................................................................................. 8

6 Financial Planning...................................................................................................... 10

7 Valuation ..................................................................................................................... 12

7.1 Discounted Cashflow Method.................................................................................... 12

7.2 Cost of Capital (WACC)............................................................................................ 13

7.3 Fair Value–Sensitivity .............................................................................................. 13

8 Comparative market rating (Trading Approach) ................................................... 15

9 Summary ..................................................................................................................... 19

10 Contakt ........................................................................................................................ 20

11 DISCLAIMER ............................................................................................................ 21

Company Analysis

Geratherm AG

09/06/2007

Page 3


Leader in technology fortemperature scaling aidedby Galistan’s clients

Geratherm is independent

exports and dominantmarkets

Management

Healtcare-Investments

1 Company profile

Listed at the Frankfurt Stock Exchange since 2000, Geratherm AGwith its headquarters in Geschwenda is specialized in thedevelopment, production and marketing of medical technology.Core activities of the company extend into tele-medical productsfor temperature measuring and recording of vital signs. Apart fromthat, the company offers temperature systems for diverse uses in ERand OR areas and rescue operations as well as the companyprovides screening solutions for the prevention of irregular heart-beat.Among its clients, other than hospitals and pharmacies, are wholesale distributors. In 2006 several new clients were acquired, amongthe ADAC, US Coastal Guard, as well as German and Swiss airtraffic rescuers. Geratherm AG currently employs 74 staff.

Exports are immense make some 80% of the company’s business. The most important markets other than Europe are the US andSouth American markets that make up 11% of the company’s business. Europe generates 40% of sales.

Management is made up of two. Chairman of the board is Dr. GertFrank and is responsible for personnel, technology, finance as wellas research and development. Member of the board Thomas Robstis responsible for making and sales.

In investment there has been a successful strategic change in thepast 2 years moving into healthcare. Due to the many years ofexperience management has with banks, and with the healthcaresector, these investments in name-brand healthcare stocks are notexposed any nominal risk.

Company Analysis

Geratherm AG

09/06/2007

Page 4


Company capital andshare-ownership

Nominal capital of Geratherm AG is split in 4.5mn stocks.Ownership distribution is follows per the due date:

GMF Beteiligungsberatung GmbH 60 %

Publicly held 40 %

2 Business Development - Outlook

In 2007 management expects a slight increase in sales andrevenues. Central for the company are activities in temperaturesystems and apoplex. With a new short-term engagement in thestock market within healthcare, the excellent financial result in2006 will be complete.

In 2006 consolidated sales of Geratherm holding rose by 4.9% to8.6mn Euro (previous 8.2mn). Analog diagnostics productstrimmed sales revenues slightly to 3.6mn Euro. Revenues in digitaldiagnostics products rose in contrast by 16% to 3.6mn (prev.3.1mn) Euro. Other products rose in sales by some 25% to 1.4mn(prev. 1.1mn) Euro. A large contribution to revenues was stockinvestments in healthcare. The financial result after these stockinvestments were made exceeded the operative result from corebusiness (0.6mn Euro EBIT) by 1.3mn Euro.

Moreover, the company profited from a low tax quota that was at2.91% in 2006. Debt with banks does not exist. The ordinaryresult rose to 1.9mn (1.4mn) Euro. Thus the result per shareamounted to 0.42 (0.33) Euro.

Company Analysis

Geratherm AG

09/06/2007

Page 5


3 Products and Solutions

Geratherm Medical reached its strong market position most of allwith its own products. Most meaningful is the business with digitaldiagnostics products that in the course of time are taking the placeof analog instruments in the markets. The range of products is wellrounded off with many innovative solutions for stroke preventionand temperature management.

Thermometers/Temperature monitors

Geratherm supports its clients with the measuring and controllingof body temperature. For continued supervision of bodytemperature there is the company’s product portfolio for active warming systems, temperature monitors as well as digital andanalog fever thermometers for targeted measuring. Being specialistfor pre-, intra and post-operative heating management as well as forambulance rescues, Geratherm has experience in ore than 3,000systems used world-wide for civilian and military uses.

Trends–Client requirements

Digital instruments replace analog thermometers

Increasing requirements for recording and replay

Active warming of patients during operations and rescue

Simple use, optics

Temperature taking via radio/infrared thermal measuring

Ear exams/forehead exams

Increasing use of IT

Tele-medical availability/internet compatibility

Environmental aspects (replacement of quicksilver with

environmentally neutral substances).

Company Analysis

Geratherm AG

09/06/2007

Page 6


Warming systems

Geraterm offers its clients warming systems for OR areas, care andrescue. During an operation the body loses significantly intemperature due to its restrained vital function. Because of this,hypothermia (body temperature below normal) may occur. Thisloss of body temperature can become critical during longeroperations. With the aid of Geratherm’s warming systems the loss of body temperature can be prevented. Geratherm hopes to get newcontracts for these warming systems with US rescue crews and theUS military.

Stroke prevention

The Stroke Risk Analyzer is for Geratherm’s subsidiary apolexmedical technologies an instrument that can diagnose cardio-vascular shock beyond a doubt. A particularity is that it isintermittent shock that is hard to diagnose. Cardio-vascular shockis one of the leading causes of strokes.

Company Analysis

Geratherm AG

09/06/2007

Page 7


4 SWOT-Analysis

The SWOT analysis shows significant indicators that are found in the company environment and itscompetition. Key indicators for strengths that work in positively with our prognosis are balanced out withpotential weaknesses and risks. In the past business year, successes from investments in stock exceededthe results of the core business significantly. We see potential for future success in the field of warmingsystems and in the prevention of heart-beat irregularities.

Strengths Weaknesses

■ Liquidity ■ Dependency on majority shareholders■ Return on Equity ■ Smallest and critical size of segment■ Capital Basis ■ Rel. low trading volume■ Client Structure■ Diversified range of operations

Opportunities Threats

■ Warming systems - contracts ■ Patent law suits■ Screening cardio-vascular shocks ■ Maintaining the lead over competition■ Participations in healthcare ■ Growing to critical size■ Prohibition of thermometers using quick-

silver■ Trend: Tele-medicine

Source: DR.KALLIWODA │RESEARCH 2007 ©

SWOT: Geratherm Medical AG

Company Analysis

Geratherm AG

09/06/2007

Page 8


0

20

40

60

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100

2002 2003 2004 2005 2006Business Year

Days Turn-aroundpayables (days)

0%10%20%30%40%50%60%70%80%90%100%

2002 2003 2004 2005 2006

Equityl Debt

Development of key expense

0.00 %10.00 %20.00 %30.00 %

40.00 %50.00 %60.00 %

2002 2003 2004 2005 2006

Business Year

Material quota

Personnel quota

5 Report Analysis

Following is the annual report analysis that draws on severalaspects that result from the report of capital, finance and revenue.The relatively small number of accounts outstanding shows goodclient payment willingness and a duly organized bulling office.The target for payments rose on average from 68 to 92 daysbetween 2002 and 2006.

The extraordinary high capital quota affects the credit worthinessquite positively and with it the continuity of the company.Considering the de facto independence from lender the companycan make own decisions. Within its peer group Geratherm Medicalhas the highest quota of company capital.

Geratherm Medical’s expense structure is mostly composed ofexpenditures for materials (47%) and for personnel (24%). Thequota for tax deductibles was only at 3% in 2006. Geratherm AGhas no significant inventory. Therefore, there is a rather low fixedcost and it has positive effects in the development of cost in casesales ease off. Also rather positive is the development in employeeproductivity that has increased from 91,000 Euro to 116,000 Eurobetween 2002 and 2006.

Company Analysis

Geratherm AG

09/06/2007

Page 9


0

500

1,000

1,500

2,000

2,500

2002 2003 2004 2005 2006

Financial result

Operative result

Develop. Profitability

0.00

5.00

10.00

15.00

20.00

25.00

2002 2003 2004 2005 2006

Business Year

Percent

Total profitability

Return on Equity

Sales profitability

Sales (Segments)

Others17% Analogue

Diagnosticsproducts

41%

DigitalDiagnostics

products42%

Sales (Regions)

USA19%

Others29%

Europe52%

The result of ordinary business consists of the company operativeresult and the company financial result. The chart below shows thatpart of the success was achieved with the help of short-term stockpurchases in healthcare. In 2006 the financial result amounted to1.3mn Euro and the operative result was at 0.6mn Euro.

The financial result thus made the quota for sales profitability hardto read. The quota for sales profitability was above average at 20%.Overall, the return of equity was positive at 10%. Due to the highrate of equity return, we issued a rating that is based on an excessratio.

Working capital rose slightly once again. Short-term activeaccounts secure fully short-term debt accounts on the due date.

The company portfolio is well-balanced. The core business inthermometers generates a relatively high cash-flow meanwhilethere is little investment required. However, analog instruments arebeing replaced by digital instruments. Therefore, sales fell foranalog diagnostics tools from 3.9mn to 3.6mn Euro at the sametime as sales of digital diagnostics products rose from 3.1,m to3.6mn Euro.

European business continues to be strongest with 3.5mn Euro insales revenues. Business slightly eased off in the European marketas well as in the US market in 2006. The quota for exports isrelatively high at 80% and grants the company independence fromdomestic markets of single countries.

Company Analysis

Geratherm AG

09/06/2007

Page 10


6 Financialplanning

Figures in TEUR 2001 2002 2003 2004 2005 2006 2007e 2008e 2009e

Aktiva

Intangible assets- R&D 387 396 386 321 369 356 365 365 365- Software 24 24 32 76 23 35 30 30 30- Goodwill 0 0 85 24 76 76 76 76 76

Inventories

- Properties 1806 1726 1650 1574 1499 1424 1400 1350 1300- Technical assets and machinery 0 0 0 0 258 229 250 260 270- Other assets, (BGA) 1173 849 597 476 77 127 125 125 125- Geleistete Anzahlungen 0 0 0 0 6 11 0 0 0

Finanncial assets 1,572 1,336 1,347 1,347 0 0 0 0 0

Latent tax 2521 2740 2920 2980 2963 2906 2800 2600 2400

Sum non-current assets 7483 7071 7017 6798 5271 5164 5046 4806 4566

Current assets

Inventories- Raw materials and supplies 491 430 471 550 550 979 750 800 750- Goods in process 493 661 638 711 592 674 650 700 750- Finished products 601 1,046 719 944 1,154 919 1,000 950 900

Trade accounts- Trade accounts receivable 1795 1263 1416 1337 1686 2195 2250 2300 2450- Tax refunding 80 116 0 0 0- Other fixed assets 224 266 174 184 36 57 50 50 50

Securities 0 0 1614 1967 3218 3786 4750 5000 5150

Cash & cash equivalents 7623 8162 7090 6382 5966 5130 6625 6914 7235

Sum current assets 11227 11828 12122 12075 13282 13856 16075 16714 17285

Total assets 18710 18899 19139 18873 18553 19020 21121 21520 21851

Shareholders equity and liabilities

Shareholders equity- Capital stock 4495 4461 4490 4500 4500 4500 4500 4500 4500- Additional paid-in capital 7499 7435 7530 7528 7570 7570 7570 7570 7570- Other reserves 30 0 2891 3381 3563 3479 5378 5378 5378- Capital dormant partners 0 0 1 31 62 57 10 10 10- Net income 1164 958 1559 1332 1427 1899 2,202 2,471 2,721

Sum shareholders equity 14819 15680 16471 16772 17122 17505 19,660 19,929 20,179

Long-term liabilities- Payments received (investments) 1255 1089 810 696 683 608 561 516 472

Sum long-term liabilites 2570 2135 810 696 683 608 561 516 472

Short-term liabilities- Financial liabilites (banks) 274 269 1045 660 0 0 0 0 0- Deposits received 0 0 73 14 2 23 0 0 0- Trade accounts payable 268 288 232 135 199 282 300 400 500- Tax liabilities 0 0 0 0 18 47 50 75 100- Other liabilites 779 527 508 596 529 555 550 600 600

Sum short-time debt 1321 1084 1858 1405 748 907 900 1075 1200

Sum liabilites 18710 18899 19139 18873 18553 19020 21,121 21,520 21,851

DR. KALLIWODA RESEARCH 2007 ©

Company Analysis

Geratherm AG

09/06/2007

Page 11


Profit & Loss/Budgeted Profit & Loss, Geratherm AG

Alle Angaben in TEUR 2001 2002 2003 2004 2005 2006 2007e 2008e 2009e

Sales revenues 7,255 6,699 7,457 7,186 8,191 8,589 9,018 10,010 11,512Increase of inventories of finished goods -121 280 -1 283 -180 24 0 0 0Company-produced additions to plant & Equipment 0 0 85 32 154 98 100 100 100Sonstige betriebliche Erträge 397 267 217 234 294 201 271 300 345

Material expenses -3,814 -3,033 -3,197 -3,034 -3,645 -4,095 -4,058 -4,505 -5,065

Cross income 3,717 4,213 4,561 4,701 4,814 4,816 5,331 5,906 6,892

Personnel expenses -1,748 -1,670 -1,764 -1,939 -2,069 -2,022 -2,255 -2,503 -2,878

Depreciation of intangible assets -594 -554 -502 -407 -370 -343 -451 -501 -576Other operating expenses -862 -1,281 -1,530 -1,323 -1,758 -1,793 -1,623 -1,702 -1,957

Operating profit 513 708 765 1,032 617 658 1,002 1,201 1,481

Dividends 0 0 211 189 79 67 75 80 85Income of at-equity investments 291 0 210 44 618 1,333 1,400 1,500 1,500losses of at-equity investments 0 17 0 0 0 -35 -100 -100 -100Expenses on securities -102 -182 0 0 0 -173 -200 -220 -240Other interest income and other earnings 339 278 262 124 126 108 100 110 120Interest expenses and other expenses -117 -84 -69 -94 -20 -2 0 0 0

Financial result 411 29 614 263 803 1,298 1,275 1,370 1,365

Profit before tax 924 737 1,379 1,295 1,420 1,956 2,277 2,571 2,846

Taxes on income and earnings 239 215 180 37 7 -57 -75 -100 -125

Net profit 1,163 952 1,559 1,332 1,427 1,899 2,202 2,471 2,721

Source: DR.KALLIWODA RESEARCH 2007 ©

Comment:

We expect rather modest rates of increase in the coming years. The expected annual growth of salesrevenues (CAGR) is in our planning at 5% and matches the average growth between 2001 and 2006.Meanwhile, we expect investments in materials to stay in proportion to sales revenues, 45%. Costs ofpersonnel are expected to bring no significant changes in the three years ahead. We arrive at cost ofpersonnel t at 25% of sales revenues.

Company Analysis

Geratherm AG

09/06/2007

Page 12


Entity Approach

3-Phase-Model

Terminal Value Growth of2,5 %

7 Valuation

7.1 Discounted Cashflow Method

In arriving at a fair value we applied a three-phase discounted cash-

flow model as well as the market data from peer-group competitors.

The data for our rating originated from the corporate reports.

The odd due date was paid consideration in figuring interest for an

even due date and in making deductions from the operative free

cash-flow. Due date is April 1st, 2007. As far as there was non-

essential capital, it was figured into dividends as its cash value.

The first detailled phase of our three-phase DCF Model

comprehends the business years 2006 to 2009. Phase 2 ( Cross

planning) includes 2010 to 2015.

Following this phase is the residual value phase that we have

calculated a rate of increase at 2.5% p.a.

Fair Value - Geratherm AG

2007e 2008e 2009e 2010e 2011e 2012e 2013e 2014e 2015e TV

Diskount rate 8.29

Multiplier 0.879 0.853 0.787 0.727 0.671 0.620 0.572 0.529 0.488 13.185

operative free cashflow s 2,042 1,962 2,205 1,307 1,369 1,313 1,360 1,498 1,569 1,569

Presend value of free cashflow s 1795.9 1673.2 1735.9 950.4 919.1 814.0 778.3 791.7 765.7 20682.9

Present value of cashflow s 10,224

Present value of terminal value 20,683 Shares No. (Mio): 4500

Sum of cashflow s 30,907

Third parties 121 Fair Value: 8.00

Not operationally needed assets 6,483

Entity Value 37,511

- Liabilities 1,515

Equity Value per 01th April 2007 35,996

Source: Dr. KALLIWODA | RESEARCH © Copyright 2007

Company Analysis

Geratherm AG

09/06/2007

Page 13


DCF-Parameter

Risk-free rate 4,04Risk premium 7,00Beta 0,85Longterm growth rate 2,5Cost of equity 8,95Cost of debt 4,59WACC 8,29

7.2 Cost of capital (WACC)

The discount rate was arrived at with weighted cost of capital. We

assume that the target for capital will improve in coming years.

Adjustments for debt to current interest were not made. Risk free

profitability is based on the average profitability of the 30-year

bond (source: Bourse Stuttgart).

Figuring a risk prime coheres with the capital asset pricing model

(CAPM) and covers in particular the systemic risks (market risk

prime esp. company specific risk). The market risk prime in our

model is based on publicized studies. The market risk primes that

were figured in university research depend on the market, time and

method and range between 6% and 8%. The applied Beta value for

company specific risk is fixed to the development of value in a

referential index, the Prime Health Index.

.

7.3 Fair Value–Sensitivity

Our arrived at fair value per share is at EUR 8.00. It is some 28.8%

above the current stock price (EUR 6.60). The modification of the

action parameter in terminal value is shown below in the sensitivity

analysis. It shows variance in our derived fair value in variant

scenarios. The shown rating range is between EUR 6.60 and EUR

10.70.

Company Analysis

Geratherm AG

09/06/2007

Page 14


Sensitivity: Equity

% WACC in %

7.09 7.39 7.69 7.99 8.29 8.59 8.89 9.19 9.49

1.50% 8.23 7.97 7.73 7.50 7.29 7.10 6.92 6.75 6.60

2.00% 8.70 8.39 8.12 7.86 7.63 7.41 7.21 7.02 6.84

2.50% 9.25 8.89 8.57 8.27 8.00 7.75 7.53 7.31 7.12

3.00% 9.90 9.48 9.10 8.75 8.44 8.15 7.89 7.65 7.43

3.50% 10.70 10.18 9.73 9.32 8.95 8.62 8.32 8.04 7.78


Grow th

Sensitivity: Market Capitalization

% WACC in %

7.09 7.39 7.69 7.99 8.29 8.59 8.89 9.19 9.49

1.50% 37.04 35.87 34.79 33.75 32.81 31.95 31.14 30.38 29.70

2.00% 39.15 37.76 36.54 35.37 34.34 33.35 32.45 31.59 30.78

2.50% 41.63 40.01 38.57 37.22 36.00 34.88 33.89 32.90 32.04

3.00% 44.55 42.66 40.95 39.38 37.98 36.68 35.51 34.43 33.44

3.50% 48.15 45.81 43.79 41.94 40.28 38.79 37.44 36.18 35.01


Grow th

Operative free cashflows

Detailed planning Gross planningFigures in TEUR 2007e 2008e 2009e 2010e 2011e 2012e 2013e 2014e 2015e

Sales revenues 9,018 10,010 11,512 12087.7 12,692 13,327 13,993 14,693 15,427Cashflow s from equity investments 1,275 1,370 1,365 500 500 400 400 300 300Operative result before interest and tax 1,002 1,201 1,481 1,556 1,633 1,715 1,801 1,891 1,985

- adjusted tax -386 -462 -570 -599 -629 -660 -693 -539 -556

=NOPLAT 1,891 2,109 2,276 1,457 1,504 1,455 1,507 1,652 1,729

+ Depreciation 450.9 500.5 575.6 500.0 500.0 500.0 500.0 500.0 500.0

Provisions 0.0 0.0 0.0 150.0 170.0 190.0 210.0 230.0 250.0

+ Increase (-decrease) Provisions 0 0 0 0 20 20 20 20 20

= (operative) gross cashflow 2,342 2,609 2,852 1,957 2,024 1,975 2,027 2,172 2,249

- Investments -300.0 -300.0 -300.0 -350.0 -350.0 -350.0 -350.0 -350.0 -350.0

Working Capital 14283 14630 14977 15277 15582 15894 16212 16536 16867

- Increase (+ decrease) of WC 0 -347 -347 -300 -306 -312 -318 -324 -331

= Operative free cashflow (oFCF) 2,042 1,962 2,205 1,307 1,369 1,313 1,360 1,498 1,569


Company Analysis

Geratherm AG

09/06/2007

Page 15


8 Comparative market rating (trading approach)

A rating for a company ought to cohere with the DVFA guidelines for company ratings in stock researchand be arrived at with at least two different rating approaches. Generally, there are capital value methodsas well as multiplication methods that are for plausibility reasons used for company ratings. Themultiplication method is based on a comparative approach that considers potential multiples and appliesthese to the rated company for capital market data and financial reporting of listed competitors.

Collective data sources:

financial reporting Geratherm AG as well as its competitors

sector information

stock exchange information FactSet JCF

Choice of competitors

The selection of competitive companies was made based on their sectorial characteristics as well as thecompany headquarters. An additional criterion in the first selection was not applied and we chose 9competitors as peer group. The peer-group competitors are as follows:

BB Medtech

BB Medtech AG is a holding corporation that holds participations in companies for medical technologyand related branches within the North-American and European markets. Share holding strategy is mostlyconcentrated on global medical instruments. This is where investment opportunities are available in greatnumbers. Predominately, BB Medtech holds shares to listed stock companies. Non-listed companieshave to remain within 10% of the portfolio.

Company Analysis

Geratherm AG

09/06/2007

Page 16


Drägerwerk

Dägerwerk AG develops, produces and distributes instruments and systems for medical and securitytechnology. In 2003 the company had a year of re-orientation in these two fields. In the way of thisorientation Dräger Aerospace GmbH (10th June, 2003) and along with it the entire aeronautical unit andthe business of Dräger Electronics GmbH as well as parts of Dräger ProTech GmbH were sold.Moreover, DrägerForum GmbH was closed. In 2003 the sale of Dräger InPlast GmbH and the IT firms ofDräger Holding Group were prepared. In contrast, the business of Dräger Medical was significantlystrengthened.

UMS

UMS Internationl AG offers innovative medical supplies in the fast-growing segment high-tech medicine.UMS is a pioneer in the transmobile use of MedTech systems and markets full-service provisions forclinics and specialist doctors. The future-oriented concepts include complete service for clients–rangingfrom systems management to use of qualified applications specialists and maintaining clinics fortherapies.

Wavelight

WaveLight AG s listed in the Prime Standard of Deutsche Börse AG since 2003 and develops, producesand distributes high-quality and complete product portfolios within ophthalmology and is a specialist foreye vision optics. An innovative and technologically leading product portfolio as well as a rather widedistribution network of its own and in cooperation with strategic partners are basis for WaveLight’s success at the market.

World of Medicine

The W.O.M. World of Medicine AG was founded in Berlin in 1977 and is considered one of the pioneersin minimal invasive surgery (MIC). Its increasing success within the field of surgery would be unheardof without products from World of Medicine. The medical device maker from Berlin has become theworld-wide leading provider of insufflators and pumps for MC.

Company Analysis

Geratherm AG

09/06/2007

Page 17


W.O.M. currently holds four companies in Berlin, Ludwigsstadt/Oberfranken and Orlando, Florida. Theholding is structured into Flow&Fluid (pumps, insufflators) and into Vision&Images (cameras, lightingsources, video documentation systems, lasers for minimally invasive surgery, Gamma Finder). Salesreached some 29mn Euro in the year 2006 and the company had an export quota of more than 70%.

aap implantate

aap implantate AG is a medical technology company listed in the prime standard at the Frankfurt StockExchange. The company operates in bio materials, fracture treatment and joint replacements. Thecompany increased sales 38% to 18.5mn Euro in 2006 (13.4mn Euro) and its bottom line showed 1.6mnEuro (665,000). Aap Group’s growth was mostly due to sales in bio materials (sales up 64% to 12.2mn Euro) and generates two-thirds of overall sales revenues by now.

Stratec Biomedical

Stratec Biomedical Systems AG designs, develops and produces fully automated systems for partners inclinical diagnostics and bio technology. These partners market systems world-wide as systems solutionsand usually in conjunction with its laboratories and science centers.

The company develops its products with its own patent rights for its technologies. Shares of the companyare traded in other segments with different name in the Prime Standard at the Frankfurt Stock Exchange.

Biolitec

Biolitec is the only provider world-wide for photo-dynamic therapy that includes all relevant corecompetencies –photo secessioners, lasers, light wave splitters. Apart from minimally invasive lasertreatment and the field of oncology, biolitec AG has unique core competencies in the area of esthetics.Biolitec is listed in the Prime Standard with SIN DE0005213409.

Carl Zeiss Meditec

Carl Zeiss Meditec AG develops, produces and distributes medical products and systems for eye caretreatment. At the core are systems for diagnostics and for eye defects as well as laser systems fortreatment. Four significant illnesses of the eye are refraction (short or long sightedness), cartaract

Company Analysis

Geratherm AG

09/06/2007

Page 18


Glaucoma and illnesses of the iris. Carl Zeiss Meditec considers itself a global leader in these fields fortechnology and innovation, especially for erbium lasers and spot scanning excimer lasers. Among theclients are physicists, clinics, laser surgery centers as well as opticians. Carl Zeiss Meditec has offices inmany countries among these are two production plants in the USA and in Germany as well as onesubsidiary in the important market of Japan.

Pulsion

Pulsion Medical Systems AG was founded in 1990 and has continuously become one of the leadingspecialists in the field of intelligent medical diagnostics and therapy management systems. It is listed atthe Frankfurt Stock Exchange since 2001. The continued development of innovative products in medicaltechnology is basis for the making expansion of an attractive end-sales business or sterile pharmaceuticalproducts.

Our estimates of Peers (in Euro)

Peer Group - Medical technology companies

Mio. € respectively Kurs Market EV€ per share Cap. 2006 2007e 2006 2007e 2006 2007e

BB Medtech 50.24 728.48 1,168.00 246.20 265.00 216.20 230.00 14.36 15.50

Drägerwerk 71.32 452.88 826.00 1,801.00 1,850.00 148.20 162.00 3.47 3.62

United Medical Systems 9.90 59.56 66.49 36.60 41.00 11.30 13.00 0.49 0.70

Wavelight 6.31 41.50 61.40 21.30 25.60 -698.00 -350.00 -0.13 -0.05

World of Medicine 5.70 51.30 48.30 30.90 35.00 2.80 3.00 0.29 0.33

aap Implantate AG 2.59 43.77 43.40 18.45 20.50 2.20 2.50 0.18 0.21

Stratec Biomedical 25.83 287.60 278.82 68.40 72.50 10.80 12.00 0.70 1.05

Biolitec 14.00 140.00 138.00 29.10 32.30 2.30 2.50 0.21 0.24

Carl Zeiss Meditec 18.20 1,479.00 1,458.90 390.60 415.00 48.00 53.00 0.82 0.89

Pulsion Medical Sys. 7.40 70.49 67.01 24.50 26.50 3.40 4.00 0.34 0.38

Geratherm 6.79 30.56 21.76 8.60 9.00 0.60 0.80 0.42 0.45

DR. KALLIWODA | RESEARCH © Copyright 2007

EBIT EPSSales revenues

Company Analysis

Geratherm AG

09/06/2007

Page 19


Multipliers and presentation of valuation spreads

in Mio. € respectivelyin € per share 2006 2007 2006 2007 2006 2007 2006 2007

BB Medtech 4.74 4.41 5.40 5.08 3.50 3.24 87.81 86.79

Drägerwerk 0.46 0.45 5.57 5.10 20.55 19.70 8.23 8.76

United Medical Systems 1.82 1.62 5.88 5.11 20.20 14.14 30.87 31.71

Wavelight 2.88 2.40 -0.09 -0.18

World of Medicine 1.56 1.38 17.25 16.10 19.66 17.27 9.06 8.57

aap Implantate AG 2.35 2.12 19.73 17.36 14.39 12.33 11.92 12.20

Stratec Biomedical 4.08 3.85 25.82 23.24 36.90 24.60 15.79 16.55

Biolitec 4.74 4.27 60.00 55.20 66.67 58.33 7.90 7.74

Carl Zeiss Medical 3.74 3.52 30.39 27.53 22.20 20.45 12.29 12.77

Pulsion Medical Sys. 2.74 2.53 19.71 16.75 21.76 19.47 13.88 15.09

Geratherm 2.53 2.42 36.27 27.20 16.17 15.09 6.98 8.89

Average 2.91 2.65 18.97 17.13 25.09 21.06 21.97 22.24

Median 2.81 2.46 18.48 16.43 20.55 19.47 12.29 12.77

Minimum 0.46 0.45 -0.09 -0.18 3.50 3.24 7.90 7.74

Maximum 4.74 4.41 60.00 55.20 66.67 58.33 87.81 86.79

Spectrum 25.0 23.9 11.4 13.7 33.8 30.4

24.2 22.2 11.1 13.1 27.7 28.1

Equity Value 24.59 23.03 11.23 13.42 30.72 29.23

Market Cap. 30.56 30.56 30.56 30.56 30.56 30.56

DR. KALLIWODA | RESEARCH © Copyright 2007

EBIT-MarginEV/Sales revenues EV/EBIT PE

9 Summary

When relating the rating models there is a relatively congruent impression of Geratherm AG. The ratingrange varies accordingly between 23.03mn Euro and 36mn Euro. Due to the solid core business, thecontinuously robust key report and revenue figures as well as the potential in the field of strokeprevention and warming systems, we consider the top rating scale for appropriate. Fair value forGeratherm Medical AG is consequently 8.00 Euro per share.

Company Analysis

Geratherm AG

09/06/2007

Page 20


10 Contact

Geratherm Medical AG

Fahrenheitstraße 1D-98716 Gschwenda

Telefon: + 49 (0) 36205 –980Telefax: + 49 (0) 36205 –98115

Web: [email protected]

Primary Research│Fair Value Analysis│International Roadshows

Unterlindau 2260323 FrankfurtTel.: 069-97 20 58 53Fax.: 069-13 30 38 52 26 2www.kalliwoda.com

Head:Dr. Norbert KalliwodaE-Mail: [email protected]

CEFA-Analyst; University ofFrankfurt Economics; Dipl.-Kfm.

Sectors: IT, Software, Electricals &Electronics, MechanicalEngineering,Logistics, Laser, Technology, RawMaterials

Dr. Thomas KrassmannE-Mail: [email protected]

Dipl.-Geologist, M.Sc.;Universityof Göttingen & RhodesUniversity, South Africa;

Sectors: Raw Materials, Mining,Precious Metals, Gem stones.

Wolfgang NeunerE-Mail: [email protected]

MBA (Candidate 2008 Uni. Iowa(US)) and Dipl.-Kfm. (MajorFinance and Monetary Economics2009).

Sectors: Banks, Financial Services,Real Estates - REITS.

Dr. Christoph PiechaczekE-Mail: [email protected]

Dipl.-Biologist; TechnicalUniversity Darmstadt; Univ.Witten-Herdecke

Sectors: Biotech & Healthcare;Medical Technology Pharmaceutical

Dr. Erik SchneiderE-Mail: [email protected]

Dipl.-Biologist; TechnicalUniversity Darmstadt; Univ.Hamburg

Sectors: Biotech & Healthcare;Medical Technology Pharmaceutical

David SchreindorferE-Mail: [email protected]

MBA, Economic InvestmentManagement (Candidate 2006);Univ. Frankfurt/ Univ. Iowa (US).

Sectors: IT/Logistics; QuantitativeModelling

Hellmut Schaarschmidt;E-Mail: [email protected]

Dipl.-Geophysicists; University ofFrankfurt.

Sectors: Oil, Regenerative Energies,Specialities Chemicals, Utilities

Nele RaveE-Mail: [email protected]

Lawyer; Native Speaker, GermanSchool London

Translations English

Also view Sales and Earnings Estimates: Analyst of this research: Dr.Norbert Kalliwoda, CEFADR. KALLIWODA│ RESEARCH on Terminals of

BloombergReutersThomson FinancialJCF Factset

Company Analysis

Geratherm AG

09/06/2007

Page 21


11 DISCLAIMER

BUY: On a basis of our prognoses the stock should have aperformance of at least 20% in the following 12 months.

ACCUMULATE: On a basis of our prognoses the stock should have aperformance of between 10% and 20% in the following 12months.

HOLD: On a basis of our prognoses the stock should have aperformance of between minus 10% and plus 10% in thefollowing 12 months.

REDUCE: On a basis of our prognoses the stock should have anunderperformance of between minus 10% and minus 20%.

SELL: On a basis of our prognoses the stock should have anunderperformance of at least minus 20%.

Additional Disclosure

DR. KALLIWODA | RESEARCH prepared this analysis on the basis of broadly accessiblesources, which are regarded as reliable. We work as precisely as possible. We cannot howeverguarantee for the balance, precision, correctness and wholeness of the information and opinions.This study does not replace personal advice. This study is not regarded as invitation to thepurchase or sale of the installation-instruments discussed in this study. Therefore, DR.KALLIWODA | RESEARCH advises to turn to your bank-advisor or trustees before aninvestment-disposition.

In the United Kingdom this document is only intended for distribution to persons described inSection 11(3) of the Financial Services Act 1986 (Investments Advertisements) (Exemptions)Order 1996 (in the latest amended version), and may not be passed on either directly norindirectly to another group of persons. Neither this document nor a copy thereof may be sent ortaken to or distributed in the United States of America, Canada or Japan or their territories orpossessions nor may it be distributed to a US person as defined by the terms of the USSecurities Act 1933 or to persons resident in Canada or Japan. Distribution of this document inother jurisdictations may be limited by law and persons in possession of this document shouldinform themselves of any restrictions and comply with these. Any failure to comply with theserestrictions may represent a breach of a current securities act.

DR. KALLIWODA | RESEARCH as well as co-workers may hold positions in any securitiesmentioned in this study or in connected investments and may increase or sell their holdings inthese securities or connected investments.

Company Analysis

Geratherm AG

09/06/2007

Page 22


Possible conflicts of interest

Neither DR. KALLIWODA | RESEARCH nor any affiliated companya) hold an interest of 1 percent or more of the equity capital of the company being covered

in this report;b) were involved in an emission of investments that is object of this study;c) hold a net-sale position of the shares of the analyzed business of at least 1 percent of

the share capital;d) have serviced the analyzed investments based on any contract with the emitter on the

stock exchange or in the market.

Through the assumption of this document, the reader / recipient accepts the obligations in thesedisclaimers.

DISCLAIMER

The information and opinions in this analysis were prepared by DR. KALLIWODA |RESEARCH. The information herein is believed by DR. KALLIWODA | RESEARCH to bereliable and has been obtained from public sources believed to be reliable. With theexception of information about DR. KALLIWODA | RESEARCH, DR. KALLIWODA |RESEARCH makes no representation as to the accuracy or completeness of suchinformation.Opinions, estimates and projections in this report constitute the current judgement of theauthor as of the date of this analysis. They do not necessarily reflect the opinions, projection,forecast or estimate set forth herein, changes or subsequently becomes inaccurate, except ifresearch on the subject company is withdrawn. Prices and availability of financial instrumentsalso are subject to change without notice. This report is provided for informational purposesonly. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy orsell any financial instruments or to participate in any particular trading strategy in anyjurisdiction. The financial instruments discussed in this report may not be suitable for allinvestors and investors must make their own investment decision using their ownindependent advisors as they believe necessary and based upon their specific financialsituations and investment objectives. If a financial instrument is denominated in a currencyother than an investor´s currency, a change in exchange rates may adversely affect the priceor value of, or the income derived from, the financial instrument, and such investor effectivelyassumes currency risk. In addition, income from an investment may fluctuate and the price orvalue of financial instruments described in this report, either directly or indirectly , may rise orfall. Furthermore, past performance is not necessarily indicative or future results.This report may not be reproduced, distributed or published by any person for any purposewithout DR. KALLIWODA | RESEARCH´s prior written consent. Please cite source whenquoting.

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