FIRST BERLIN. PULSION Medical Systems AG. Rating: Strong Buy 2005 Price Target: 6.60 Risk Rating: Medium. Initial Report.

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1 Initial Report PULSION Medical Systems AG Primary Exchange: Frankfurt Prime Standard Symbol: PUS ISIN: DE Company Profile is a Medtech company focussed on the development, production and distribution of monitoring and diagnostic systems, and related products. The company is head quartered in Munich, Germany and as of 31 October 2004 had 82 employees. Key Points We are commencing our coverage of Pulsion Medical Systems AG, a leading suppliers of medical monitoring systems, with a Strong Buy recommendation and a 2005 price target of Last week Pulsion released a strong set of preliminary numbers for Revenues at 16.3m were 19% up year on year as a result of in particular the growing momentum behind the company s core technology PiCCO. EBIT at 1.2m was significantly above 2003 figure of - 0.4m and represent the company s first full year to be profitable. We believe that Pulsion is well positioned to really become in the next years a key player in the world monitoring system market. In particular we think the company has a real chance with its PiCCO technology to capture significant amounts of market share from the market leaders in the Cardiac Output market: Abbott and Edwards Life Sciences. Pulsion management have given EBIT guidance for 1.5m in However, we think this guidance is very conservative, despite the fact that Pulsion will have additional expansion related costs. Our EBIT projection is 1.995m which represents an EBIT margin of 11%. Risks Our risk rating on the stock is Medium and regard the following as the main risks to our price target: changes in national healthcare policies, difficulties with gaining product approval, small size of company and possible technology changes. Important disclosures are at the back of this report 1/12 Financial History & Projections - US GAAP Germany Pharma / Heatlhcare Medical Technology Rating: Strong Buy 2005 Price Target: 6.60 Risk Rating: Medium 2003A 2004E 2005E 2006E Revenue m Yr/Yr Growth 19% 20% 16% 32% EBITDA m EBIT m Net Income m EPS l Company Data (as of 30 September 2004 unless otherwise noted) Market Capitalisation ( ) m Shares Outstanding ( ) 9.443m Cash and Cash Equivalents (end of 2004 estimate) Working Capital Total Fixed Assets Total Intangible Assets Total Shareholder s Equity Stock Overview Apr-04 Jun-04 Aug-04 Oct-04 Dec-04 Feb m 3.972m 0.686m 8.551m Source: Bloomberg & First Berlin Current Price ( ) Week Range 3.09 / 5.27 Free Float (according Deutsche Boerse) 74% Average Daily Share Volume (year) 23,828 Analyst Information Gerard Reid First Berlin Group Schumannstr Berlin Tel. +49 (0) m gerardreid@firstberlin.com Fax +49 (0)

2 Company Background was founded in 1990, with the objective of becoming a technological leader in the area of less invasive diagnostic, monitoring and therapy management systems for use in operations and intensive care units. The company was listed on the Frankfurt stock exchange in 2001, raising 14.75m in the process. The company has been running profitably on a quarterly basis for the last year and 2004 was the first full year the company achieved a positive net income. As of 30 September 2004 the company had more the 360 patents either in operation or in process. Its biggest market is Europe, where the company generated 92% of its revenues in the first nine months of The management board of Pulsion comprises the CEO and founder, Dr. Ulrich J. Pfeiffer, the CFO Stefan Land, and COO Matthias Bohn. They have been working together since the IPO and are considered a tight-knit and competent team. KI Medical Services Hungary Pulsion: 25% Local mgmt: 75% Chart 1 Company Structure PULSION Medical Systems AG Munich Pulsion Medical Inc. USA Pulsion: 100% Pulsion Benelux n.v./s.a., Gent, Belgium Pulsion: 7.4% Local mgmt: 25.1% Pulsion France Sarl. Lille, France Pulsion: 90% Local mgmt: 10% Pulsion Medical Systems UK Ltd. Uxbridge Pulsion: 51% Kilmal Ltd.: 49% Pulsion Iberica S.A: Madrid, Spain Pulsion: 60% Infortenica: 40% Pulsion Pacific Pty Ltd. Sydney Australia Pulsion: 51% Local mgmt: 49% Source: Company, First Berlin The Pulsion Group comprises of one fully owned distribution subsidiary in the US, as well as five partly owned distribution subsidiaries in Belgium, France, the UK, Spain and Australia. In these subsidiaries local management and/or the local distribution partner has a minority stake. The company also has a 25% stake in KI Medical Services, a Hungarian manufacturing company. Product Portfolio The company s product portfolio consists of monitoring systems, and the consumables or diagnostic pharmaceutical agents which are required for their daily usage. Pulsion s main products are: PiCCO This device uses a hemodynamic monitoring method to provide minimally-invasive and continuous monitoring of cardiovascular functions. It has been the Pulsion s main product since its IPO. The device can only be used with specially designed disposables or more precisely, thermo-dilution catheters. These disposables are used to measure the change in blood temperature which happen after a cold bolus has been injected into the body. This product has both EU and US approval and the company generates the vast bulk of its revenues from this product and its related disposables. The company also offers VoLEF, an add in monitor which can be used with PiCCO s latest version PiCCOplus. VoLEF measures the right and left heart function and end-diastolic volumes. LiMON This device is a non-invasive system for diagnosing and monitoring the liver function. It needs to be used with Pulsion s own diagnostic agent ICG-PULSION. This product is at the very beginning of its life cycle. ICG-PULSION This pharmaceutical product, otherwise known as Indocyanine green (ICG) has been in successful use for more than 40 years. Produced synthetically from chemical raw materials, this well-tolerated diagnostic agent is an infrared light absorber and fluorescent agent that can be detected in the body through its concentration level. It has a wide range of applications in the areas of cardiovascular and liver diagnosis and microcirculation. Pulsion requires the use of ICG with both its LiMON and IC-VIEW systems. The difficulty for the product and thus LiMON and IC-VIEW, has been that the use of ICG was until recently only permitted in Germany and Israel. In the course of 2004 approval was also received in eight EU countries incl. the UK. We expect EU wide approval this year and management have told us that they are working on achieving FDA approval in the US as well. We do not expect that before the middle of IC-VIEW This non-invasive system is designed for microcirculatory diagnostics. It takes the form of a digital video camera, an infrared light source and the video processing software, IC- 2/12

3 CALC. This system is used together with the diagnostic agent ICG-PULSION and allows the real viewing and recording of tissue perfusion and organ blood flow. CeVOX This is the company s latest product which was launched in summer The device continuously measures oxygen saturation within the blood and is designed to allow the monitoring of the central venous oxygen saturation (ScvO 2 ). Disposables in the form of fiberoptic probes are needed to use this device. This device allows the early detection of sepsis, one of the most common causes of death among intensive care patients. Active marketing of the product is set to begin in Q CiMON The company is also working on this monitor which will continuously monitor intra-abdominal and intra-thoracic pressure. This should enable the early detection of intra-abdominal problems in critically ill patients. Details Installed Capacity 30 September September 2004 Growth PiCCO % PiCCO Philips % LiMON % IC-VIEW % PiCCO Kits % Table 1 Source: Company accounts The above figures show the number of total number of installed figures for the year ending 30 September There was growth across the board with the number of installed monitors for PICCO, LiMON and IC-VIEW, increasing year on year by 18%, 20% and 18% respectively. This bodes well for the future generation of revenues from the Pulsion core revenue generator disposables. The only negative point is that approximately only 10-20% of the PiCCO Philips machines are is usage. The main reason for this is that the Philips monitors give the users the option to use PAC. For this to change Pulsion needs to put more work into education/marketing. Strategy and Business Model Pulsion s main goal is to achieve sustainable market leadership for the PiCCO technology. To do this the company is licensing its technologies to the major monitoring system manufacturers. It also changed its US strategy from trying to build up its own direct sales network to focus on actively seeking a larger co-operation partner with more financial clout and distribution power. We believe this to be an intelligent strategy, as Pulsion alone has neither the market power nor the financial muscle to make a serious impact in the US market. In addition, the company wants to further improve its range of diagnostic medical equipment and related services. It has some interesting products on the market (like IC-VIEW and LiMON) but these products are very early on in their product life cycles and are probably around the stage where PiCCO was three years ago. Pulsion s business model is to sell or lease its monitoring systems to hospitals and then to supply obligatory consumables (either the diagnostic agent, ICG-Pulsion or disposable catheters). The company s core revenue generator comes from selling high margin consumables. In the first nine months of 2004, 66% of all revenues were generated from the sale of disposables. Approximately 14% of revenues were generated from the sale of the diagnostic agent, ICG-Pulsion, and the remainder were revenues from the sale or leasing of monitors. The company distributes its products to German speaking countries from its head office in Munich. In addition the company has distribution subsidiaries in France, Belgium, UK, Spain, Australia and the US. Pulsion has agreements with a further 40 distribution companies for other non-core markets. Finally, Pulsion has distribution/licence agreements with a number of large producers in the medical systems area. Foremost among this is the longstanding agreement with Philips Medical Systems (since 1998) under which Pulsion s PiCCO-technology has been offered as an integrated module into Philips monitoring systems. This agreement was amended in July 2003 so as to allow Pulsion to offer PiCCO to other monitor manufactures. In November 2003, Pulsion announced that it had signed a worldwide licensing agreement for PiCCO with Dräger Medical Systems, Inc., a subsidiary of Dräger Medical, a 65:35 joint venture company between Drägerwerk AG and Siemens AG. Under the agreement the PICCO technology will be integrated into the Dräger Infinity Patient Monitoring System, which is a comprehensive vital signs monitoring and patient information management solution that delivers patient data. In Q4 2004, the company announced that their PiCCO would also be integrated into the monitoring systems of Spacelabs Medical and GE Healthcare. 3/12

4 Although these agreements are a step in the right direction we feel strongly that PiCCO will not become the Gold Standard for haemo-dynamic monitoring without Pulsion achieving success in the US. For the first nine months of the year in 2004, the company generated 1% of revenues in the US (approximately 115,000). This is a tiny sum in what is the largest medical market in the world. We believe the company should even consider selling PiCCO s US rights to achieve the recognition that success in the US would bring. In addition, the company signed a licensing agreement in Q with Carl Zeiss AG relating to the integration of IC- VIEW technology into Carl Zeiss neuro-surgical microscopes. In addition, Zeiss agreed to recommend the use of ICG- PULSION with those microscopes. This should enable the company to make significant market progress in the coming years. Pulsion s Markets and Competitive Position Product Indication Market Size PiCCO haemodynamic monitoring 2bn LiMON Liver functioning monioring 280m IC-VIEW Perfusion Imaging 190m CE-VOX ScvO 2 140m CiMON Intra-abdominal events 170m Table 2 Source: Company, First Berlin The market for haemodynamic monitoring is worth approximately 2bn p.a.. The market is currently dominated by the US companies Edwards Lifescience and Abbott Laboratories, who between them control approximately 90% of the world market with the Gold Standard, pulmonary artery catheter (PAC) products. There are serious limitations with regards to PAC products (invasive, risky to patients, high costs of usage) and there are a whole host of technologies which have been developed as competing technologies. However, none have had any real impact on the market share of PAC products. Some alternative products for example, Lithium Dilution, developed by LiDCO Ltd., have such disadvantages (use of potentially toxic substance lithium) which outweigh any advantages they claim over PAC. The other technologies: Gas Rebreathing technique, the Oesophageal Doppler Probe and Electrical Impedance Cardiogrpahy offer some relative advantages over PAC but none of them can offer the accuracy of measurement or medical acceptance of Pulsion s PiCCO technology. A detailed analysis of the advantages and disadvantages of the competitive methods can be seen in table 3 on the next page. A part of the difficulty for the competitors of PAC has been the market power of Edwards Lifescience and Abbott Laboratories. However, perhaps a greater challenge has been in persuading the medical community to change technology and most importantly of persuading the big three monitor producers: GE Healthcare, Philips Medical Sytems and Draeger Medical Systems that the product was worth being integrated into their larger modules. Two of the big three Monitor producers, Philips Medical Sytems and Draeger Medical Systems, have signed licensing agreements with Pulsion and the third, GE Healthcare, has recently agreed to link Pulsions s PiCCO to their Unity Solar and Dash monitoring systems. We believe these agreements are definitely going to enable Pulsion to bring its technology mass market and are of the opinion that the technology could finally begin to take market share from the current Gold Standard product, the Pulmonary Artery Catheter (PAC). In our view, Pulsion s IC-VIEW product offers the greatest growth potential over the next three years. The company estimates the market could be worth 190m p.a.. Our extensive enquiries back up this figure. The licensing agreement with Carl Zeiss is important because it gives the product access to Zeiss excellent worldwide distribution channels and we are expecting substantial growth starting in H There is one major competitor in this sphere, Novadaq Technologies whose SPY Intra-operative Imaging System has recently received approval from the U.S. Food and Drug Administration (FDA). As LiMON is not licensed in the US, Novadaq has a first mover advantage there. We do not expect any of Pulsion s other projects to have any substantial effect on revenues over the next three years. Pulsion estimate that the potential size of the LiMON market is 280m, the CE-VOX market approximately 140m and the CiMON 170m. 4/12

5 Comparison of Cardiac Output Monitoring Products PiCCO PAC - Pulmonary Artery Catheter Lithium Dilution Oesophageal- Doppler CO2 (Gas) Rebreathing Technique Bio Impedance Company Pulsion Medical Systems AG Edw ards Lifesciences Inc., Abbott Inc. LiDCO Ltd. Deltex Medical Group Novametrix Medical Systems, Innovision A/S Cardiodynamics Int. Corp., Hemosapiens Inc., Manatec Biomedical Product PiCCO modul in CMS monitors Vigilance, OptiQue et al. LiDCO, LiDCO Plus, PulseCO CardioQ NiCO, Innocor BioZ, TEBCO, PhysioFlow Measuring Method Thermodilution, pulse contour cardiac output Thermodilution Lithium dilution, pulse contour cardiac output Oesophageal Doppler UltraSound Gas (CO2) rebreathing in a breathing circuit Measurement of thorax resistance Advantages Minimally invasive Clinically Accepted (Standard Procedure) Volumetric measuring (allows measurement of lung water) Real-time monitoring of cardiac output Continuous monitoring Short response time (12 Seconds) Suitable for long term monitoring Suitable for paediatric patients Allows measurement of multiple parameters especially pressures Semi-continuous monitoring Suitable for long term monitoring Minimally invasive Minimally invasive Minimally invasive, No central venous or arterial catheters needed Real-time monitoring of cardiac output (PulseCo) Continuous monitoring (PulseCo ONLY) Results quickly obtained Suitable for long term monitoring Short time to operation Probe is re-usable Real-time monitoring of cardiac output Non invasive with very low costs Low risk of iinfection Suitable for risk patients Real-time monitoring of cardiac output Easy to use Highly user friendly Continuous monitoring Results quickly obtained Can be used in surgery Very accurate Short time to operation Results quickly obtained Suitable for long term monitoring Short time to operation Disadvantages Bolus injection for calibration Highly invasive Venous and arterial access mandatory Artificial respiration Mandatory (Novametrix) Limited clinical 'Know How' Central venous and arterial access mandatory Risk of catheter related infections Not suitable for paediatric patients Highly skilled personnel needed Blood Withdraw al LiDCO: No long term or continuous monitoring Applicable in operating room or intensive Care Unit ONLY (Novametrix) Not suitable for Paediatric and lung disease patients Interfering signals possible, therefore accuracy doubtful Highly skilled personnel needed (to interpret data) Limited volumetric Measuring PulseCO: calibration via lithium dilution method No long term measurement No long term measurement & no real time monitoring Risk of catheter related infections Risk of catheter related infections No continuous measurement / monitoring Risk of allergic reactions & eczema The fact that Lithium is potentially toxic Can be problematic when patient is conscious Does not work during surgery or in patients who have recently had either cardiac or abdominal surgery Long time to calibrate & the need to re-calibrate 5/12

6 Recent Results Last week Pulsion released a strong set of preliminary numbers for Revenues at 16.3m were 19% up year on year as a result of in particular the growing momentum behind the company s core technology PiCCO. EBIT at 1.2m was significantly above 2003 figure of - 0.4m and represent the company s first full year to be profitable. At the end of December the company had liquid assets of 4.5m which was at similar levels to last year. We do not have additional information about the 2004 balance sheet. However, Pulsion s balance sheet as of the 30 September 2004 may be described as stable with working capital of 8.134m, long term liabilities of 3.422m and shareholders equity of 8.551m. However, we are of the opinion that the company s balance sheet is not strong enough to allow the company to seriously capitalise on its excellent PICCO technology. In particular, we do not believe that the company has the financial resources to make a serious strategic move in the US. looking at 1.428m or 0.15 in EPS terms. In 2006 we are expecting a substantial jump in revenues which will come largely from the new agreements with Zeiss and Dräger. We are looking at 32% revenue growth in 2006, and are projecting revenues of 25m, with EBIT of 3.950m, net income of 3.155m and EPS of There are two caveat to these projections. The first is the effects that changes from US-GAAP to IFRS could have on the company results. We are of the opinion that this will not have a significant effect on earnings due to the already conservative accounting policies of management. The company will switch to IFRS in Q1 of this year. The second is that the company has losses on its books which can be used in the future to limit tax payments. The use of such losses could have a positive effect on earnings but it is next to impossible for us to predict this Outlook Our opinion is that 2005 will be a significant year for Pulsion. We are expecting EU wide approval for ICG-PULSION which will allow the company introduce this drug as well as LiMON and IC-VIEW to those markets. One result will be a substantial increase in revenues from ICG-PULSION which we expect to increase by 20% this year. This is of course closely related to the sales of IC-VIEW which we expect to also grow substantially due to the new licensing agreement with Carl Zeiss. We are also of the opinion that revenues from PiCCO will increase significantly this year. We believe that revenues from disposables will increase by 25% in 2005 due to the large increase in PiCCO machines leased or sold last year. In addition, we expect a large increase in the number of PiCCO devices to be sold in particular in the second half of 2005, due mainly to the new agreement with Draeger. Overall, we are expecting revenues of m which is 16% up year on year. Pulsion management have given EBIT guidance for 1.5m in However, we think this guidance is very conservative, despite the fact that Pulsion will have additional expansion related costs. Our EBIT projection is 1.995m which represents an EBIT margin of 11%. In terms of net income, we are 6/12

7 Peer Group Valuation German Medtech Companies Name Market Cap Enterprise Value P/E 2005 P/E 2006 EBITDA 2005E EBITDA 2006E EV/EBITDA 2005E EV/EBITDA 2006E in m in m in m in m DRAEGERWERK AG -VORZ AKT GERATHERM MEDICAL AG N.A. N.A. N.A. N.A. N.A. N.A. BIOLITEC AG STRATEC BIOMEDICAL AG UMS UNITED MEDICAL SYS INTL W.O.M. WORLD OF MEDICINE AG N.A. 6.6 N.A. Average PULSION MEDICAL SYSTEMS-REG = Cardiac Output Companies Name Market Cap Enterprise Value P/E 2005 P/E 2006 EBITDA 2005E EBITDA 2006E EV/EBITDA 2005E EV/EBITDA 2006E in m in m in m AORTECH INTERNATIONAL PLC N.A. N.A. N.A. N.A. N.A. N.A. CARDIODYNAMICS INTL CORP DELTEX MEDICAL GROUP PLC N.A N.A. N.A. N.A. EDWARDS LIFESCIENCES CORP LIDCO GROUP PLC N.A. N.A. N.A. N.A. N.A. N.A. ABBOTT LABORATORIES Average PULSION MEDICAL SYSTEMS-REG Sources: Bloomberg, First Berlin Due to the difficulties in accurately predicting Pulsion s revenues and earnings beyond a three year period, we consider it inappropriate to use a discounted cash flow model to value the company. It is next to impossible for us to predict how much market share Pulsion will take away from its major rivals for PiCCO, Edwards Lifescience and Abbott Laboratories. Our own feeling is that PiCCO will continue to gain market share over the next three years. We are assuming for our model, a conservative 0.5% gain per year (i.e. 10m) over the next three years but it could be much higher. If it is only 0.25% higher than this then our model in terms of valuation is nearly 50% out. As a result we have decided to use a peer group analysis in valuing Pulsion. We use two alternative peer groups: one is a group comprising Germany s Medtech companies whilst the other is made up of companies who offer competing products to PiCCO. Pulsion is currently trading at just a little over 15x 2006 earning per share which is a substantial discount to both the German Medtech group and the Cardiac Output sector. We feel that this discount is unwarranted given the company s pipeline and the substantial positive news we expect from the company in the coming months. In valuing Pulsion at 6.60 we use a 20x 2006 earnings multiple. This is currently the level that the average Cardiac Output sector company is trading. It is also a slight discount to the 24x multiple that German Medtech companies are currently trading at. 7/12

8 Technical Analysis Resistance 200 Day MA Support Source:Bloomberg & First Berlin From a near-term technical perspective, PUS shares are strongly positioned to breakout above resistance just above the 5.50 level. This view is underscored by bullish chart dynamics associated with the relatively brief correction of the primary rally, once momentum weakened. Given the absence of upside resistance levels beyond this niveau, we employed Fibonacci projections multiples measuring the current uptrend to determine mid- and long-term upside potential. Based upon these Fibonacci projection multiples, assuming the stock succeeds in breaking out, we believe will achieve a mid-term price target of 6.55 and reach fully potential at In view of these positive technicals, we believe an entry at current levels or on price corrections, makes sense and harbors substantial upside potential with little downside risk. Please note: In order to assist in investment timing, technical analysis can be a valuable tool. Technical analysis is more of a reflection of current investor psychology and not a replacement for fundamentals or a company valuation. It should be used in conjunction with fundamental analysis to plan entry and exit strategies. 8/12

9 Risks and Concerns Changes in national healthcare policies as well as budgetary restrictions at the hospital level could dramatically affect sales. Product approval for medical devices is extremely complicated and varies from country to country. If a product approval is delayed or not granted, projected revenues may not be realised. A related risk is the even more complicated approval process for the diagnostic agent ICG-PULSION. If this is not forthcoming in the whole of the EU and the US this could seriously effect the ability of LiMON and IC-VIEW to become successful products. Advances in technologies could make Pulsion s equipment outdated or obsolete. We do not believe that its products will suffer this fate and feel strongly that the company, being an innovative leader, will benefit from this process. Despite that Edwards Lifesciences are known to be working on non-invasive methods for haemo-dynamic monitoring. However, we do not believe this will reach the market for at least three years. Pulsion s balance sheet although stable does not allow for further growth and as a result we would not be surprised if the company goes to the market to raise capital in the form of either equity or bond issue. The greatest risk facing Pulsion is its relatively small size in terms of market power, access to the market and financial resources. This makes it very difficult for the company to bring its products successfully to market. Despite that we believe that the company is at an inflexion point in terms of the acceptance of PiCCO in the market and are very positive about the company s future. Recommendation We are commencing our coverage of, a leading suppliers of medical monitoring systems, with a Strong Buy recommendation and a 2005 price target of This price target has been set on the basis of a comparative analysis and the resulting valuation corresponds to an undemanding EV/2005 Sales multiple of 1.7 and a 2006 P/E of 20. We believe that Pulsion is well positioned to really become in the next years a key player in the world monitoring system market. In particular we think the company has a real chance with its PiCCO technology to capture significant amounts of market share from the market leaders in the Cardiac Output market: Abbott and Edwards Life Sciences. For the current year we are projecting revenues of m (16% growth), EBIT of 1.995m, net income of 1.428m and an EPS of We are looking at 32% revenue growth in 2006, and are projecting revenues of 25m, with EBIT of 3.950m, net income of 3.155m and EPS of Our risk rating on the stock is Medium and regard the following as the main risks to our price target: changes in national healthcare policies, difficulties with gaining product approval, small size of company and possible technology changes. 9/12

10 Income Statement Analysis 2003A 2004E 2005E 2006E All figures in TEUR TotalA TotalE Q1E Q2E Q3E Q4E TotalE TotalE Revenues 13,698,000 16,391,000 4,500,000 4,450,000 4,600,000 5,400,000 18,950,000 25,000,000 Cost of Goods Sold -3,689,000-4,225,000-1,100,000-1,050,000-1,250,000-1,520,000-4,920,000-6,400,000 Gross Income 10,009,000 12,166,000 3,400,000 3,400,000 3,350,000 3,880,000 14,030,000 18,600,000 Depreciation, Depletion & Amortization -1,059,000-1,156, , , , ,000-1,090,000-1,400,000 Selling, General & Administrative Expenses -9,579,000-10,043,000-2,767,500-2,714,500-2,852,000-2,876,000-11,210,000-13,500,000 Other Income/Expense - Net 312, ,600 67,500 66,750 65,950 64, , ,000 Earnings Before Interest and Taxes (EBIT) -317,000 1,216, , , , ,800 1,995,000 3,950,000 Interest Expense on Debt 475, ,560-77,000-78,500-78,000-76, , ,000 Pre Tax Income -792, , , , , ,300 1,685,000 3,650,000 Income Tax -189, ,500-39,500-42,000-32,000-55, , ,000 Minority Interest 107, ,000-22,000-22,000-22,500-22,500-89, ,000 Net Income -710, , , , , ,800 1,427,500 3,155,000 EPS Shares outstanding 9,443,000 9,443,000 9,443,000 9,443,000 9,443,000 9,443,000 9,443,000 9,443,000 EBITDA 430,000 2,123, , , ,000 1,004,000 2,820,000 5,350,000 Ratios Gross Profit Margin 73% 74% 76% 76% 73% 72% 74% 74% EBIT-Margin 2% 7% 10% 12% 6% 14% 11% 16% Net Income Margin 5% 4% 7% 8% 3% 11% 8% 13% Expenses as % of revenues Purchased materials and services 27% 26% 24% 24% 27% 28% 26% 26% Selling, General & Administration 70% 61% 62% 61% 62% 53% 59% 54% Q-Q Growth Total revenues % -1% 3% 17% - - Operating income % 14% -47% 177% - - Net income/ loss % -5% 22% -37% - - Y-Y Growth Total revenues 19% 20% 21% 14% 19% 10% 16% 32% Operating income 88% 484% 106% 140% 2% 127% 64% 98% Net income/ loss 79% 190% 333% 478% -9% 120% 124% 121% 10/12

11 CashFlow Analysis 2003A 2004E 2005E 2006E All figures in TEUR TotalA TotalE TotalE TotalE TotalA TotalE TotalE TotalE Operating cash flow 833,000 1,883,000 1,931,000 3,531,000 Capex 982,000 1,100,000 2,100,000 1,600,000 Free cash flow -149, , ,000 1,931,000 Investments in new company Operating cash flow/share Free cash flow/share Balance Sheet Analysis All figures in TEUR 2003A 2004E 2005E 2006E Assets Cash and Cash Equivalents 4,596 4,800 4,900 5,300 Inventories 4,287 4,050 4,700 5,200 Trade accounts and notes receivables 3,254 3,000 3,400 4,500 Others ,400 2,300 Total Current Assets 12,842 12,810 14,400 17,300 Intangible Assets ,020 1,030 Property, plant and Equipment 2,876 2,750 2,900 3,000 Noncurrent financial assets Others Total Non-Current Assets 3,652 3,993 4,570 4,830 Total Assets 16,494 16,803 18,970 22,130 Shareholders' Equity & Debt Amounts due to banks + capital lease obligations Advanced received payments Trade payables and otherliabilities 959 1,500 1,550 1,600 Accruals 1, ,230 1,480 Other current liabilities 2, Current Liabilities 4,972 4,170 4,500 4,800 Amounts due to banks + capital lease obligations 832 1,100 1,200 1,300 Others 2,376 2,600 2,900 3,000 Long term Liabilities 3,208 3,700 4,100 4,300 Share Capital 9,443 9,443 9,443 9,443 Capital Reserve 19,750 19,750 19,750 19,750 Accumalted deficit -20,674-20,036-18,609-15,454 Others Total Shareholders Equity 8,207 8,793 10,225 12,885 Shares of Other Shareholders (Minorities) Total Shareholders Equity & Debt 16,494 16,803 18,970 22,130 Ratios Current ratio Quick ratio Equity ratio 50% 52% 54% 58% Inventory turnover ratio (in days) Debt to equity ratio Net debt 3,584 3,070 3,700 3,800 11/12

12 First Berlin Policy In an effort to assure the independence of First Berlin research neither analysts nor the company itself trade or own securities in subject companies. In addition, Analysts compensation is not directly linked to specific financial transactions, trading revenue or asset management fees. Analysts are compensated on a broad range of benchmarks. Furthermore, First Berlin receives no compensation from subject companies in relation to the costs of producing this report. Analyst Certification I, Gerard Reid, certify that the views expressed in this report accurately reflect my personal and professional views about the subject company; and I certify that my compensation is not directly linked to any specific financial transaction including trading revenue or asset management fees; neither is it directly or indirectly related to the specific recommendation or views contained in this research. In addition, I possess no shares in the subject company. Rating System First Berlin s investment rating system is five tiered and is a function of our expectation of return (forecast price appreciation and dividend yield) over the next 12 months. Our investment ratings are as follows: STRONG BUY: Expected return greater than 20% BUY: Expected return greater than 10% HOLD: Fairly valued REDUCE: Expected return between -10% and 0% SELL: Expected return to depreciate by more than 15% In addition, we have a SPECULATIVE BUY recommendation for stocks which we believe have the potential to give a return of 50% or more but which also we expect to be exceptionally volatile (movement up or down of 50% or more). Risk Rating Our risk ratings are Low, Medium, High and Speculative and are a reflection of expected price volatility, the strength of the balance sheet and the predictability of earnings. Additional Disclosures This report is not constructed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer would be illegal. We are not soliciting any action based upon this material. This material is for the general information of clients of First Berlin. It does not take into account the particular investment objectives, financial situation or needs of individual clients. Before acting on any advice or recommendation in this material, a client should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only; such opinions are subject to change without notice. In addition, investors should assume that First Berlin has sought or is seeking a professional relationship with subject companies First Berlin GmbH. All rights reserved. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without First Berlin s prior written consent. The research is not for distribution in the USA or Canada. When quoting please cite First Berlin as the source. Additional information is available upon request. 12/12