ScoPo’s health powerplays: ‘A great start to reporting season for healthcare’
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Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 24 years, explains what the movers and shakers have been doing in health and gives his ASX powerplays.
It’s been a good week for healthcare with Virtus Health (ASX:VRT), EBOS Group (ASX:EBO) , Pro Medicus (ASX:PME), Sonic Healthcare (ASX:SHL), Ansell (ASX:ANN) and CSL (ASX:CSL) all releasing positive earnings reports, Scott Power said.
Virtus finished the week up 2.5 per cent to $6.17 after the fertility company raised its dividend following first-half earnings that were well ahead of expectations.
“They posted a very strong set of numbers, and we’ve moved our price target to just over $7,” Power said.
Ebos finished the week down two per cent to $27.05 despite the healthcare products supplier reporting half-year net profit grew 13.7 per cent to $92.9 million, beating expectations.
All divisions except consumer products improved, and the Kiwi company is looking to add to the two acquisitions it made during the half.
“Very strong set of numbers, they didn’t miss a beat, and we’ve moved our price target to just under $29,” Power said.
(The price target had been $25.94, and, to be precise, is now $28.90).
Ansell finished the week up 4.1 per cent to $39.75 after the global glovemaker announced record sales driven by unprecedented pandemic-related demand.
“We’ve upgraded our recommendation on Ansell to an add,” Power said. Morgans has raised its price target to $44.45, from $36.06.
Sonic Healthcare finished the week down 0.2 per cent to $34.22 after COVID-19 testing drove better than expected results for the laboratory diagnostic company. Still, Morgans decreased its target price from $37.32 to $36.15, while maintaining its “add” rating.
Pro Medicus shares finished Friday at $47, up 4.2 per cent for the week and 37.6 per cent for the year, after the enterprise imaging company reported its first-half underlying net profit had risen 25.9 per cent to $18.76 million.
Morgans has increased its price target on Pro Medicus to $41.30, from $35.02, and moved to an “add” to a “hold” recommendation, given the recent strength in PME’s share price.
“We still really like that story,” Power said of the company, which has won six major new public tenders worth a total of $147 million in the past seven months.
PME says those “extraordinary” numbers are unlikely to be sustained, but it still has a strong pipeline of pending deals.
CSL meanwhile finished the week down 0.8 per cent, to $274.43, after “solid” first-half results, with better-than-expected profit and revenue growth following outstanding flu vaccine sales.
Still, Morgans decreased its FY21-23 earnings estimates for Australia’s third-biggest company and reduced its price target from $306.70 to $301.10. It rates CSL a “hold” and calls it a “core holding”.
Bard1 Life Sciences (ASX:BD1) finished the week at $2.83 — up 64.5 per cent for the week and 316 per cent for the year — after the cancer diagnostics company announced progress on its blood tests for ovarian and breast cancers.
“People are asking a lot of questions as to what’s driving all that, and I think the answer is, apart from their doing some interesting science, I think there’s some smart money slipping in behind it,” Power said.
Another diagnostic company, Proteomics International Laboratories (ASX:PIQ), gained 21.5 per cent for the week to finish at $1.045 on progress for its blood test for diabetic kidney disease, while bowel cancer test company Rhythm Biosciences (ASX:RHY) gained 9.1 per cent to $1.44.
RHY is up 64.6 per cent in 2021 after leading the healthcare space with a 669 per cent gain in 2020.
All three companies are working on simple, inexpensive blood tests to detect cancer and disease.
Also, Neuren Pharmaceuticals (ASX:NEU) finished the week down 3.5 per cent to $1.375 despite expanding the potential indications for its drug candidate NNZ-2591 to include another neurodevelopmental disorder, Prader-Willi syndrome, while Aroa Biosurgery (ASX:ARX) gained 0.8 per cent to $1.21 after announced a pilot study indicating its sheep-gut tissue reconstruction product could be used under surgical tissue flaps.
Power is watching Nanosonics (ASX:NAN) which reports its first-half earnings on Wednesday.
“Their share price has been weak, and we’re looking for some commentary around the launch of their second product, which is being delayed,” he said of the ultrasound probe disinfection company.
“We’re watching with great interest what they’re going to say.”
Depending on what the company says, their share price could slip further, Power said. (At Friday’s close of $6.33, it’s already down 21.2 per cent for the year).
But Morgans would use that as a buying opportunity. “Their story, we really like, long term,” he said.
Overall, says Power, “it’s been a great start to reporting season for healthcare. At the smaller end, we’re seeing some very strong share prices moves.”
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