<p>Health Care Equipment &amp; Services<br/>Jan 2009<br/>Selectivity Remains Key<br/>Value emerging but too early to adopt a bullish overall stance. The<br/>risk/reward is attractive with 14% upside to our sector market cap if all stocks<br/>were at our price targets. On the other hand the sector’s on a 2009 P/E of<br/>12.4x (c. 35% market premium) and 8.6x EV/EBITDA. Whilst some stock<br/>valuations look relatively ‘cheap’ the market in our view is factoring in<br/>reasonable risk premium. In such instances we would rather wait for more<br/>clarity. We prefer stocks with relatively low earnings uncertainty, compelling<br/>strategies and generally strong balance sheets.<br/>Top picks. Axis-Shield, CareTech* and Dechra – all Buys<br/>Key changes. Of particular focus has been Synergy’s 2010 numbers. We<br/>fundamentally like Synergy but have progressively come to the view that it is<br/>not totally immune to a global recession. Adjusting our various divisional<br/>assumptions and factoring in a