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C-rad, the corps is alive!

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Thought it would be a great idea to spend some time taking a new look at C-rad, sorry for writing this in bad english but hopefully investors outside Sweden might find it useful. It seems like there is something going on after one of the best weeks in a long time, +12% in a very robust way. The rallies we have seen in C-rad over the years have been crazy, pushed up to 25kr by punters that wants to make some quick money. It has always been followed by dissapoitment and we have gone back to the 15 level again. I have many times been tempted to trade this stock but I would kill my self if I would be left on the station when the train gets going!

So why do I think something is happening? The strong performance we have seen this week has been on back of a change in the balance of supply and demand. The nr 1 broker on the Stockholm Stock Exchange, SEB (ENS), have bought around 100k shares. Why is that intresting you might think... well, first of all its very rare to see SEB active in C-rad, their clientbase is not daytraders or shortterm punters, their clients are institutions and wealthy individuals. If you look at the pattern, they started on Tuesday the 14th of July and bought around 50k shares. First they tried to be passive and waited on the bidside for someone to hit them but it didnt happen so after lunchtime they ran out of patience and started to lift offers. The stock closed up a couple of percent at 17,3kr. The day after they took it easy and bought only small, but yesterday and today they bought another 50k shares using the same strategy. Most of the time when C-rad have started to get some momentum the sellers have woken up and pushed it down, but not this time. Could be just the fact that almost everyone in Sweden is on vaccation, or that the holders, for once, want to sit thight and wait for good news. I would not be surprised if the buyer this week is a classic institutional investor that is buying a small position to see what happens. If it starts to outperform they might start building a longterm position and that is exactly what we want! 100k shares is 1,8m sek, for a fund of lets say 1bn this is just scaps, its 0,18% of AUM, so if they decid to take the position up to lets say 1% that equals 500k shares. That would take the game to a new level, those shares would then dissapere from the freefloat and that would be nice. So why would an institutional investor dip their toes in C-rad?

Patience is a virtue!

I have spent the day reading old reports and listening to conference calls and it might be that C-rad is turning the page and will start to deliver. First of all I think the interface vs Varian Truebeam is one or two weeks away. In the conf call for Q1 (8th of May) Tim Thurn was convinced this would be done before vaccation. Either it has been further delays (clearly negative for the stock) or it will be presented during July. C-rad have sold systems including this interface and they have to deliver it to clients shortly. Dont think the pressrelease will be a massive positive reaction (some expectations are build in to the shareprice already) but clearly positive.

The GE deal

I looked at the first press release from February 2013, and clearly this has taken way too much time. The way mr Hedlund descibed it was just not correct and he misguided the sharesholders. But that was more than 2 years ago and there has been progress, Tim talks about this in the last conf call in a more positive way than we are use to. I think the odds are good that the interface for Sentinel will be presented second half of 2015. With both Truebeam and GE interfaces done, C-rad will cover 95% of the market for Linacs and CT-scans. The GE-deal will be an OEM contract that could generage large volumes, most likely lower margins than 60% (the communicated target) but will add substantially to the topline. Another intresting point around GE is that it would make sens for them to buy C-rad. I konw C-rad is way too small for them but imagine the value they could create by distributing C-rad products. Most likely it wont happen but, it makes more sens than for Elekta to buy C-rad.

Gemini, do or die!

C-rad have put a lot of time and money lately to get this product on the market. In Q1 this product they did a test of the quality of the product, with sucessful outcome. They are done with the tecnical aspects of the product. The issues seems to be to find a way of assembly the product in a robust way. Over the years it has been a lot of talk about Gemini, C-rad made demontrations at Estro in April last year, at Astro in September but issues with producing the product in a robust way caused delays. Tim is very confident that the product will be ready and be offered to clients by the end of this year. Its a high end product and its very important that we dont start selling a product that makes the clients dissapointed.

Q2 expectations

C-rad will report numbers for Q2 on the 14th of Aug. It seems like the order momentum from Q1 has continued in to Q2. Have in mind that the second and third quater are the weakest. So far in Q2 C-rad have presented sale of 8 systems. (the order in Italy was included in the Q1 figures). But I dont expect to top the order intake from first quarter of 22m but I expect around 17-18m, Q2 2014 was 11m so we are still looking at +50%. The sales figure should be decent with strong delivery to client and should end up around 20m. I think there is a decent chance to get a break even on bottom line this time. Cash flow should be decent, we had some projects that where invoiced late March, the recievables increased with 9m so that should support the operative cash flow. The cash position after the right issue and selling options to the staff, should be around 26-27msek.


At 18,50 C-rad got a market cap of 380msek, with at least 25m in cash, the EV is around 350msek. For a company with less than 100m in revenues for 2015 and a bottom line at break even, the valuation is challenging, but lets look at 2016 and 2017. With Gemini, the Truebeam and GE interfaces done, I expect full year revenues for 2016 at around 125msek (+50%) and order intake of around 150m. Then it starts to look more attractive, but the most important year will be 2017 (based on company targets). Its not that far away and if the order momentum continues we should be looking north of 200m in orders and 180/190 in revenues. With a grossmargin of 65% and good economics of scale we should be able to have a net profit of around 50m or 2,50kr per share, a company with a revenue growth of 50% should be trading at least 25 times earnings, which gives us a market cap north of 1bn sek, and a share price of 60kr. Remeber this is rather optimistic but far from a blue sky scenario...

Its a long way to go but I think we will see good progress in the second half of 2015 and thats why institutional investors starts to look at C-rad.


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