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ScoPo’s Powerplays: Who’s pulling for a health sector recovery?
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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.
First a note on things are are definitely not powerplays. In fact, it’s a case of repurposing for a Chinese manufacturer who made 10,800 plates, mugs and tea cups to mark the Queen’s 70-year reign, only to discover a spelling mistake.
Below a picture of the Queen are the words: “To commemorate the Platinum Jubbly of Queen Elizabeth II.”
The memorabilia is now being sold on a clearance website touted as for fans of both the Queen and BBC sitcom Only Fools and Horses as a favourite phrase of character Del Boy is “lovely jubbly”.
To the healthcare sector, where an uptick this week is not a typo. While volatility has continued to play out in global markets, the ASX health sector is regaining some strength on the back of promising results from blood products giant CSL (ASX:CSL).
CSL delivered a 5% jump in revenue for H1 FY22, underpinned by strong growth in its leading haemophilia B product Idelvion, and specialty products Kcentra and Haegarda.
The company also reported strong performance from its influenza vaccines business, Seqirus. Despite the top line growth, net profit declined 5% to $1.76 billion compared to the pcp.
Before Wednesday’s 5% surge following CSL’s earning report, the health sector was down 2% for the week. Today, the five-day chart data shows the broader market is up 0.50% and the healthcare sector up ~5.33%.
CSL shares jumped 8.5% on Wednesday in its best trading day since March 2020 and are currently trading at ~$277.
“CSL has really been hemorrhaging over the last five months but it has rebounded nicely over the last week,” Power said.
Ansell (ASX: ANN) was up 3.44% in the past five days to $26.79 after a Friday morning rally helped its recovery from a case of long COVID. Operating in the personal protective equipment (PPE) space, Ansell this week reported EBIT fell 24% to US$111 million in H1 FY22, despite a 7.6% increase in sales to around US$1 billion.
The company forecasts its medical glove margins will fall over the coming year. Morgans has reduced its 12-month target price from $28.95 to $27.53 for Ansell.
“Ansell’s results were pre-guided but they’ve flagged they will still have some supply chain issues in the second half,” Power said.
Pharmaceutical distributor EBOS (ASX:EBO) was up 0.21% to ~37.68 after reporting a 12.8% increase on pcp in first half revenue to $5.3 billion. Its underlying NPAT rose 15.8% to $109.3 million.
Both its Healthcare and Animal Care segments performed strongly, but EBOS warned that ongoing disruptions caused by COVID-19 variants could have an adverse effect on its trading performance for the remainder of FY22.
Health imaging company ProMedicus (ASX:PME) was down ~2.46% to ~$44.21 despite record half-year results.
Revenue grew 40.3% to $44.3 million, while net profit rose 52.7 per cent to $20.68 million. The company is now business debt-free with cash reserves up $14.91 million to $76.17 million.
“ProMedicus is a strong business that just keeps getting better with a lot of new deals and (is) highly profitable,” Power said.
Medtech company Impedimed (ASX:IPD) announced a deal with Balboa Research and Frenova Renal Research to conduct the initial observational trial for its SOZO platform to treat patients with end stage renal disease.
The deal boosted its share price 2.78% this week to ~18 cents.
“Impedimed have entered into an impressive partnership so are in pretty good shape,” Power said.
Stocks to watch
Power said fertility company Virtus Health (ASX:VRT) will be worth watching next week, as the company is due to release its results on February 22 and the exclusivity period for UK private equity firm Capvest Partners takeover bid is expiring.
Capvest is facing competition from another private equity player BGH Capital with the two bidders having to decide their next move.
The Virtus share price is ~7.31 with Capvest’s current bid price almost 30 cents higher at $7.60.
Hearing solutions giant Cochlear (ASX:COH) is due to release its half yearly results next week. The company has not provided guidance but its share price is starting to recover as elective surgeries return to normal globally.
“It would be interesting to see their results but we would think it will be to the upside.”
ScoPo’s Powerplays
Power’s stock of the week is fertility company Monash IVF Group (ASX:MVF) which has risen ~0.18% to $1.12 in the past week.
The company recorded adjusted NPAT of $13.4 million for H1 FY22, above guidance of $13 million. Revenue was up 11.2% to $101 million, while EBITDA rose 8.5% to $26.8 million.
Monash declared an interim divide of 2.2 cents per share. Medicare numbers showing more women undergoing IVF treatment with the easing of COVID-19 lockdowns is expected to boost future earnings.
Morgan’s has increased its Monash 12-month target from $1.09 to $1.20 per share.
“It’s been a key pick for quite a while and delivered a good set of numbers,” Power said.
There’s speculation Monash may be the next target of a takeover bid, following in the footsteps of Virtus.
“We see this as a solid result for MVF, with favourable industry conditions and M&A activity in the space so the market should like this result,” Power said.
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