ScoPo’s health powerplays: What to look for this earnings season
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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.
We’re coming into earnings season over the next two weeks, that time when companies release their audited earning figures for the six months to December 31.
“It’s just deluge of information, companies are trying to get their messaging clear — and when you’re got multiple companies reporting each day, it’s a case of trying to work out what’s really relevant,” Scott Power says.
“I think it’s trying to get an idea of where the company is guiding investors to, how they see the new normal.”
For example, with the fertility companies – Monash IVF (ASX:MVF) and Virtus Health (ASX:VRT) – there’s no way the pent-up demand that’s being released now is sustainable, “but the question is, what’s the new normal,” Power said.
“That’s truly hard for the companies to work out, and it’s really hard for investors, but that’s the sort of commentary we’re looking for – clarity around guidance.”
Next week large-cap healthcare players CSL (ASX:CSL), Sonic Healthcare (ASX:SHL), and Cochlear (ASX:COH) will be releasing their earnings, along with mid-cap imaging company Pro Medicus (ASX:PME) and small-caps Mach7 Technologies (ASX:M7T) and Virtus.
“CSL’s been relatively flat over the past year,” Power said, so “getting some commentary around their guidance is key.”
Sonic has done better – its shares are up 10.7 per cent from a year ago, and up 6.7 per cent this year.
The global medical laboratory company is benefiting from the increase in volume as it processes COVID-19 tests, so it’s worth watching to see if they expect that to continue, Power said.
Then there’s the two enterprise imaging companies, Pro Medicus and Mach7, whose shares are up 65 per cent and 80.3 per cent from a year ago, respectively.
The two companies have blown through Morgans’ price targets, so the stockbroker is looking for continued positive commentary.
Morgans is also looking for positive news from Virtus.
“We’re expecting a really good result from them, a bumper result,” he said.
Capital raisings were a theme all last year, as companies seemingly had no trouble raising funds to survive the pandemic.
“We saw it virtually all last year, and that hasn’t stopped,” Power said.
“Medicinal cannabis is becoming much more accepted, and I think will continue to gain investor interest,” Power said.
Starpharma (ASX:SPL) had an excellent week with its shares gaining 24.2 per cent to $2.36 after announcing it would work on projects with AstraZeneca and Merck & Co (MSD).
“That’s really really strong,” Power said.
Pharmaxis (ASX:PXS) finished the week up 1.2 per cent to 8.8c after exporting its first shipment of the cystic fibrosis drug Bronchitol to the United States, making it eligible to receive another US$3 million ($4 million) from its US distributor.
“That was a major milestone for them, that has been 10 years in the making,” Power said, referring to the difficulty Pharmaxis had getting the Bronchitol approved.
Overall the healthcare sector was down 0.59 per cent for the week, while the All Ordinaries dipped 0.44 per cent.
Power still likes Latin America-based imaging company Imexhs (ASX:IME), whose shares are up 42.9 per cent to $2.30 so far this year.
“Their share price has been up strongly, and that’s worked really well for us,” Power said.
Imexhs reported its fourth-quarter figures on January 29.
“The key thing there is the company guiding the market towards achieving a cash flow positive situation over the next 12 months,” Power said.
His other pick is digital health company Opyl (ASX:OPY), which was the subject of a Stockhead feature last week as it achieved net positive cashflow from operations. The company’s business involves helping pharmaceutical companies conduct clinical trials.
“We’re always looking for you little gems, and pardon the pun, it is a gem. I think very much under-discovered, doing some very interesting and important areas in social health and social media.”
The views, information, or opinions expressed in the interview in this article are solely those of interviewee Scott Power and do not represent the views of Stockhead.
Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.
At Stockhead we tell it like it is. While Opyl is a Stockhead advertiser, they did not sponsor this article.