Ann: 2014 Results announcement, page-24

The play for AZV back at 5-15c was that it was cheap based on the valuation of a manufacturing business, that happened to be at the bottom of the cycle with an enormous existing customer base to sell their new product into once approval was received, and further upside to be generated from the potential transition to a middleware provider and the associated uplift in valuations that would come with this success. The manufacturing business has improved significantly for the reasons outlined (turn of the cycle and the benefit of the huge existing installed base/Tacera) but Nathan is correct that the business is undeservedly being valued on software type multiples without having successfully made that transition (at this stage anyway, it could change).

So anyone buying at these prices needs to be aware that the easy money has been made, and you are now buying the business in expectations of further improvement in the manufacturing business *and* successful transition to middleware. I would be careful to discard Nathan's opinion here as he is very well versed in whats happening within this market, far more so than I would presume any other poster here is, and the market is moving very quickly. The other big reason to buy is a take out offer, which from what I can see is a big goal for this management team, but the issue here feeds back into what Nathan is saying regarding multiples. To be taken out at this price would warrant software type multiples for a business that is as yet unsuccessful in making the transition to a successful middleware provider in the nurse call space (again, this may change). So if you are buying at or around these levels I think it is important to have a very strong opinion that AZV will be successful in making the transition, because if they are, then sure they are a takeover target and a price around these levels is surely achievable. But if not then I believe Nathan is correct and that this business should be viewed primarily as a manufacturing business and valued accordingly, with upside factored in from the *potential* transition to middleware, unless you have a very strong opinion that they will be successful (don't follow analysts into this by buying at new highs without knowing exactly what you are buying).

For disclosure, I was a big holder of AZV but have since sold my holding. I think its a great company and I hope they do very well for shareholders. I'll be following the story.