Agfa Healthcare announced yesterday during trading it has been awarded a new three-year, multi-source contract by the group purchasing division of the Premier healthcare alliance, Premier Purchasing Partners.
By the terms of the agreement, Agfa HealthCare will provide film and medical imagers at competitive terms and conditions to the alliance's 2,500 member hospitals and 75,000 other alternate healthcare sites in the United States.
Our View:
This contract with Premier is a renewal of a deal that has been in place for 16 years, meaning there will be very limited or no incremental impact on sales. Moreover, an Agfa spokesperson declared in the press that the value of the contract is around € 20m per year, which is negligible compared to HC sales (€ 1.2bn per year).
Conclusion:
No impact on our estimates or investment case. We reiterate our Accumulate rating and € 3.8 target on Agfa. We consider the Agfa share to be cheap at current levels, but the high silver prices will continue to weigh on results, especially during 2Q11, making it hard to find short-term triggers for the share.