LifeWatch Shares Rise to 3-Year High on China Telecom Deal to provide medical smartphones and related services

January 24, 2014 Leave a comment

LifeWatch Shares Advance Most Since 2008 on China Telecom Deal

LifeWatch AG (LIFE), a provider of remote cardiac and other patient monitoring systems, rose the most in almost six years after a preliminary agreement to provide China Telecom Corp. (728) with medical smartphones and related services.

LifeWatch shares climbed as much as 29 percent, the biggest advance since April 2008. The stock was up 23 percent at 9.47 Swiss francs as of 11:42 a.m. in Zurich, giving the company a market value of 125.4 million francs ($138 million).

The agreement with China Telecom, the nation’s third-largest wireless company, may generate more than $400 million of sales over five years, LifeWatch said in a statement today. The binding memorandum of understanding provides a minimum purchase volume and China Telecom was granted exclusivity for the China territory, LifeWatch said.

The agreement “is a significant positive for the company and the stock,” Tom Jones and other analysts at Berenberg Bank in London, wrote in a note to clients. “It’s a step toward diversifying away from its core wireless cardiac monitoring business.”

The minimum sale alone of its health-enabled smartphone, called LifeWatch V, and the accompanying services, may lead to turnover rising by a third and a “multiplication” of earnings before interest and taxes this year, LifeWatch said.

“This cooperation is a great achievement and the confirmation of the right product and marketing strategy adopted by our CEO, Yacov Geva,” LifeWatch Chairman Kenneth Melani said in the statement. “We are very proud of our research and development team in Israel.”

LifeWatch Prospects

The final agreement is scheduled to be signed in March, LifeWatch said. The Swiss company said it expects to get the required regulatory approval in April, with sales of the smartphones to begin in the second quarter.

“Given the relative sizes of the two companies, should they be unable to agree on the final terms it would, in our view, be relatively painless for China Telecom to extract itself and far more burdensome for LifeWatch to enforce whatever binding terms the memorandum of understanding includes,” the Berenberg Bank analysts wrote today. “The question for the longer term is whether LifeWatch will become and remain a market leader in this space.”

To contact the reporter on this story: Albertina Torsoli in Geneva at atorsoli@bloomberg.net

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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