13 January 2009
Pan European MedTech
Outlook 2009
Yi-Dan Wang, ACA
Research Analyst
(44) 20 754 59999
yi-dan.wang@db.com
Scope for material outperformance
We believe that with a good balance of defensive and cyclical names, investors
have substantial opportunities to achieve sizeable positive returns from the Euro
MedTech sectors in 2009. We continue to o/w the defensive names (but more
selectively than before) and to u/w all of the cyclical names, at least in the early
parts of 2009. We expect the cyclicals to lose the >20% outperformance they
have achieved prematurely versus the defensives since early Dec 08 as adverse
FX and news of weakening demand pressure earnings estimates.
Deutsche Bank AG/London
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may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision. Independent, third-party research (IR) on certain companies covered by DBSI's research
is available to customers of DBSI in the United States at no cost. Customers can access IR at
http://gm.db.com/IndependentResearch or by calling 1-877-208-6300. DISCLOSURES AND ANALYST CERTIFICATIONS ARE
LOCATED IN APPENDIX 1.
Special Report
Top picks
Coloplast (COLOb.CO),DKK344.00 Buy
Smith & Nephew (SN.L),GBP478.50 Buy
Sonova Holdings AG (SOON.S),CHF59.95 Sell
Straumann (STMN.S),CHF183.70 Sell
Companies featured
Coloplast (COLOb.CO),DKK344.00 Buy
2008A 2009E 2010E
DB EPS (DKK) 21.69 20.55 25.97
P/E (x) 19.8 16.7 13.2
EV/EBITA (x) 21.0 13.8 10.6
Smith & Nephew (SN.L),GBP478.50 Buy
2007A 2008E 2009E
DB EPS (USD) 0.52 0.55 0.62
P/E (x) 23.3 13.0 11.5
EV/EBITA (x) 15.4 9.7 8.4
Sonova Holdings AG (SOON.S),CHF59.95 Sell
2008A 2009E 2010E
DB EPS (CHF) 4.58 3.93 3.87
P/E (x) 24.2 15.2 15.5
EV/EBITA (x) 20.6 12.4 13.4
Straumann (STMN.S),CHF183.70 Sell
2007A 2008E 2009E
DB EPS (CHF) 10.67 10.75 11.23
P/E (x) 31.2 17.1 16.4
EV/EBITA (x) 24.7 13.4 12.5
Synthes (SYST.VX),CHF132.10 Hold
2007A 2008E 2009E
DB EPS (USD) 5.48 6.62 6.88
P/E (x) 22.3 17.9 17.2
EV/EBITA (x) 14.8 11.5 10.9
William Demant Holding (WDH.CO),DKK208.00 Sell
2007A 2008E 2009E
DB EPS (DKK) 16.37 11.86 11.82
P/E (x) 30.4 17.5 17.6
EV/EBITA (x) 23.0 13.7 13.4
Nobel Biocare (NOBN.VX),CHF22.08 Sell
2007A 2008E 2009E
DB EPS (EUR) 1.34 0.89 1.00
P/E (x) 34.8 16.6 14.8
EV/EBITA (x) 26.3 10.6 10.0
Global Markets Research Company
Defensives: Buy S&N and Coloplast, but Hold Synthes
At only 12x 2009E P/E, we believe shares in Smith & Nephew (Buy, PT 665p) have
limited downside risks, but have the potential to deliver almost a 40% return to
investors in 2009. This reflects our view that investors have priced in an additional
30% cut to S&N’s consensus EPS estimates that has overestimated S&N’s
economic exposure materially. At 16x 2009E P/E (post EPS cuts for a more
negative FX), shares in Coloplast (Buy, PT DKK400 from DKK475) are not as
attractively valued as S&N. However, with negligible economic risks and a
reasonably supportive reimbursement environment, they offer investors good
quality growth at a decent valuation that we expect to achieve a 15% gain in 2009.
However, we have downgraded our rating on Synthes from Buy to Hold, following
exceptional 30% and 37% outperformances against the Swiss market and versus
the European MedTeh sector in 2008, respectively. We have become more
cautious about Synthes outlook given our concern that at 17x 2009E P/E, its
shares have not priced in much risk that its businesses may be more sensitive to
the economy than thought. Although it will be difficult to defer trauma procedures,
we feel investors need to appreciate that the incidence of fractures can be
exposed to the economy.
Cyclicals: Sell N. Biocare, Straumann, Sonova and William Demant
At 15.6x consensus and 16.5x 2009E P/E, the cyclicals in the Euro MedTech
sector are discounting limited additional EPS downgrades to estimates that we
believe is premature. Among them, we expect hearing aid names, W. Demant
(18x 09EP/E, Sell, PT DKK175) and Sonova (16x 09E P/E, Sell, PT CHF50) to have
the greatest downside risks as consensus has yet to reflect, in full, the demand
step-down seen in Sept/Oct 08 and the recent weakening of some of their key
currencies. On average, we expect them to lose 20% of their value through the
first few months of 2009 from multiple contraction with scope for further losses
from additional earnings downgrades given continuing news of weakening
demand for their products. Although the shares of dental companies, Nobel
Biocare (15.6x 09EP/E, Sell, PT CHF20) and Straumann (16.7x 09E P/E, Sell, PT
CHF165), are more attractively valued compared to hearing aid names, they also
have a 10-20% downside risks, near term, in our view. However, we could
become more +ve about them on evidence that their managements will take
significant measures to re-align their cost bases to their revenues in 2009 after 7
years of near 20% growth p.a. We believe shares in Nobel have the potential to
become the best performing stock in the later parts of 2009 given Nobel’s
substantial scope to turn around its operations and greatest economic exposure.

Table of Contents
Smith & Nephew ............................................................................... 3
Coloplast .......................................................................................... 14
Synthes............................................................................................. 20
Premium tooth replacements......................................................... 29
Nobel Biocare................................................................................... 31
Straumann........................................................................................ 37
Hearing aids (HA)............................................................................. 41
Sonova.............................................................................................. 44
William Demant ............................................................................... 47