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Covidien Ltd. Update Report – 2Q 08 Results Strategic acquisitions and new product launches to boost sales growth NYSE Common Stock
Ticker: Target price: Current price:

11 July 2008

COV US$49.37 US$48.96

Direct calculated to the full report free of charge at a weighted average of target We have access the target price based on fundamental factors, using prices obtained using DCF and comparative valuation methodologies.

Fundamental research indicates a 1% upside in the NYSE common stock over the next 6-24 months.

We reiterate the NYSE common stock a HOLD rating with a 6-24 month target price of US$49.37 per share. The European stock is expected to appreciate 21% over the next 6-24 months as the 1% fundamental upside is augmented by 18 percentage points upside attributable to the anticipated appreciation of the USD against the Euro over the same period is further augmented by 2 percentage points upside attributable to the anticipated reduction in the European stock discount2 over the same period. We revert to a 6-24 month horizon as we now expect a significant currency impact on the European stock over 6-24 months3. We upgrade the European stock rating for Covidien from a SELL to a BUY with a 6-24 month target price of US$36.14 per share.

European Stock1
Ticker: Target price: Current price:


COV.F €36.14 €29.96

Supervisor: Ujwal Shah Analyst: Rupainka Rajan Editor: Adil Bahar, PhD Global Research Director: Satish Betadpur, CFA Next news due: 3Q 08 results, 05 August 2008

Investment horizon - short term actionable trading strategies
This report addresses the needs of strategic investors with a long term investment horizon of 6-24 months. If this report is provided to you by your broker under the Global Settlement, you may now also access (free of charge) the short term trading outlook that we publish from time to time for this issuer, looking at the coming 5-30 days for readers with a shorter trading horizon. These are available on-line only at

Report summary
Covidien Ltd’s (Covidien) 2Q 08 sales were marginally above our expectation, primarily due to higher than anticipated sales from the Imaging Solutions business. Robust sales growth during the quarter is primarily attributable to strong growth across its key business segments, namely; Imaging Solutions and Medical devices. Going forward, we believe the company’s strategic acquisitions in areas will support its revenue and profitability growth. Furthermore, the company’s upcoming launches during FY 2008 are also expected to support sales growth, going forward. Margins are also expected to improve due to the company’s restructuring program. Hence, our outlook for the company remains broadly unchanged.

Currency impact on the European stock
The impact by itself of the anticipated currency movements on the European stock (now €29.96), without considering changes in the share price, is positive and is expected to be: Over 6 months: €28.12 Over 12 months: €31.50 Over 24 months: €35.00

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Refer to page 5 for all footnotes