ScoPo’s Powerplays: ‘Big haircuts’ for ASX health stocks – Morgans reviews quarterly results
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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.
Need an ultrasound? Well, a new device by MIT engineers that sicks to skin like a Band-Aid could in the future provide continuous ultrasound imaging of your organs for 48 hours.
Presently ultrasound images require bulky, specialised equipment only available in medical facilities, but engineers have designed a new ultrasound sticker.
Researchers applied the stickers to volunteers’ skin to produce live, high-resolution images of major blood vessels and deeper organs such as the heart, lungs and stomach.
The stickers captured changes in underlying organs as volunteers performed various activities, including sitting, standing, jogging and bike riding.
Their current design requires connecting the stickers to instruments that translate the reflected soundwaves into images.
The researchers point out that even in their current form, the stickers could be applied to patients in the hospital, like heart-monitoring ECG stickers, and continuously image internal organs without requiring a technician to hold a probe in place for long periods.
The team is working toward making the ultrasound stickers wireless, wearable imaging products that patients could take home from a doctor’s office or even buy at a pharmacy.
“We envision a few patches adhered to different locations on the body, and the patches would communicate with your cellphone, where AI algorithms would analyse the images on demand,” the study’s senior author professor of mechanical engineering and civil and environmental engineering at MIT Xuanhe Zhao said.
It’s all about the theme of Hospitals without Walls in modern healthcare.
And a much-needed July rally seems to be sticking into August. By 12.45pm (AEST) on Friday the S&P/ASX 200 healthcare index (ASX:XHJ) rose 2.64% for the past five days, surpassing the S&P/ASX 200 (ASX:XJO) index up 0.82%. The XHJ is up more than 6% in the past month.
“I’m feeling very relieved as we’ve been sitting in the shadows for 10 months and since the start of July the sun has come out on the sector and we’ve seen pretty significant share price appreciation,” Power said.
The small and mid caps stocks have recently reported quarterly results with Morgans healthcare analysts revising many companies down. But Power said that doesn’t necessarily mean bad news.
Power said macroeconomic outlooks of higher inflation and rates along with derating of growth and more speculative stocks meant price targets Morgans had weren’t going to be achieved.
“Our 2023 and in particular our 2024 forecasts were too optimistic across the board and we were just too bullish so wanted to wait for the quarterly results to come through,” he said.
“We wanted to get back to something more realistic and what we have now are numbers we think companies can really deliver on.
“We also cut target prices for valuations somewhere between 30% to 50% so big haircuts but given share prices have fallen so much we still have big upsides to the new price targets.”
Power said there has been several capital raises in the healthcare sector this week. Health imaging company Imexhs (ASX:IME) announced it had received binding commitments for $2 million via a placement to sophisticated and institutional investors. It is also undertaking a non-renounceable pro-rata entitlement offer to raise a further $2 million.
Medical Developments International (ASX:MVP) has launched a $30 million capital raise to execute further growth. MVP aim to raise $15 million from a placement and $15 million from a one-for-9.5 non-renounceable entitlement offer.
Cannabis stock Creso Pharma (ASX:CPH) has also announced firm commitments to raise $7m equity at 4c a share, with $1.74m of the placement cornerstoned by CPH directors Bruce Linton, Adam Blumenthal and William Lay (subject to shareholder approval).
“There’s more capital flowing back into the space,” Power said.
“After a bit of a hiatus for the last few months, there’s companies looking to raise some money.”
ResApp (ASX:RAP) saw its share price increase more than 66% to 19 cents this week after pharmaceutical giant Pfizer increased its bid for the Brisbane-based smartphone-based respiratory diagnostic maker.
In an announcement to the ASX, ResApp on Wednesday said Pfizer has “increased the proposed consideration to $0.208 per ResApp share, matching the preferred value and within the assessed value range of $0.146 to $0.279 per ResApp share determined by BDO Corporate Finance”.
Telix Pharmaceuticals (ASX:TLX) has seen its share price up more than 62% in the past month to $7.79 after a series of positive announcements.
Telix announced positive regulatory progress for its core prostate and kidney cancer imaging programs in the Asia Pacific Operating Region, including progress in the major market of China with its strategic partner Grand Pharmaceutical Group.
“Telix is making its way back to all time highs of $8.82 and that’s off a low of $3.50 at one point so they are doing well,” Power said.
Ramsay Health Care (ASX:RHC) has also been in the news this week following its ongoing funding dispute with medical insurer Bupa, terminating its agreement and leaving patients in limbo. The Private Health Insurance Ombudsman is now offering to mediate between the parties.
Meanwhile, US private investing giant KKR is still doing due diligence and pondering a takeover of Ramsay.
“We think the numbers are probably under a little bit of pressure but that’s being overshadowed by KKR coming back and reigniting its takeover offer for Ramsay and we think it’s a stock worth watching,” Power said.
Sleep treatment medical supplies company ResMed (ASX:RMD) is Power’s stock of the week, having seen its price rise ~9% in the past month.
ResMed is due to report its June quarterly results next week.
“We are positive on ResMed and think it is a good portfolio stock,” Power said.
“They’ve had a couple of good announcements recently and is another company which fits into the ‘Hospitals without Walls’ theme and treating remotely and using data to detect conditions early.”
The views, information, or opinions expressed in the interview in this article are solely those of the interviewee 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.