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.
 

Theme of the week

Healthcare (XHJ) finished the week up 0.24%, compared to the broader market which ended 0.36% higher.

Power says the healthcare market has remained positive and elevated over the past week.

The biggest news for the week, from Power’s point of view, came from Nanosonics (ASX:NAN).

The ultrasound probe tech company posted a full year FY21 revenue of $103m, which was up 3% on the previous year.

More interestingly however, the company has released detailed information about its next major product, which is a flexible endiscope.

Although commercial launch is not expected until FY23 and will be subject to the completion of clinical trials and regulatory approval, the market seemed to like the news.

The NAN share price rose by 22% this week after the announcement.

The new development has also triggered a re-rating from Morgans, which now has a price target on NAN of $7.26 (up from $6.57), and a move in recommendation to Hold (from Add).

“Morgans was happy to take profits on that share price surge,” Power explained.

The other interesting news during the week was in the IVF sector.

Virtus Health (ASX:VRT) delivered a full year FY21 revenue of $324.6m, compared to FY20 revenue of $258.9m.

The company also entered into a binding agreement with Healius (ASX:HLS) to buy Healius’ Adora Fertility business and three co-located Healius Day Hospitals for $45m.

“We see the Adora acquisition as strategic with the 10x EBITDA multiple as full but fair,” Power explained.

“VRT will have estimated cost synergies of $1.5m. We’re seeing pricing opportunities and continued rational behaviour across this mature sector.”
 

Other interesting health sector news in the week

Monash IVF Group (ASX:MVF) posted strong FY21 results, with full year NPAT up by 61.5% to $23.3m.

“They’re running with strong industry trends as a beneficiary of COVID, with behavioural change in priorities towards families expected to continue,” Power said.

MVF has continued to deliver on increasing pregnancy success (up 4.5% since 2018), and has an ongoing R&D focus with innovative partnerships.

Dental facilities stock 1300 Smiles (ASX:ONT) has received a takeover offer from Abano Healthcare for $8.00 per share less dividends.

In an interesting turn of events, the offer comes less than two years after ONT’s attempt to secure Abano’s Australian portfolio of 116 practices.

“The hunter has become the hunted,” says Power.

He views the takeover deal as a good result and fair value for non-founding shareholders, considering the slight premium to Morgans’ previous target price of $7.82.

Protective personal equipment (PPE) specialist, Ansell (ASX:ANN), dropped 10% during the week after announcing FY21 results that were at the low end of guidance.

Power says the price drop presents a buying opportunity.

“Most of Ansell’s issues appear temporary,” he said.

Power believes that while the unprecedented demand for PPE will eventually slow, it is unlikely to fall off a cliff.

“It will merely shift from COVID-driven products to more differentiated ones on the back of vaccine rollouts and improving economic outlook,” he said.

Morgans has a 12-month target price of $43.64 on ANN vs current share price of $36.70.
 

ScoPo’s Powerplay

Power’s stock of the week is ImpediMed (ASX:IPD).

He said that all eyes are on the publication of IPD’s PREVENT data in a medical journal, expected in the next 60 days.

The PREVENT trial was conducted over six years, and patients being followed up to three years.

The aim was to determine if subclinical detection of extracellular fluid accumulation, via bioimpedance spectroscopy and subsequent early intervention, reduced the risk of lymphoedema progression, relative to the rate when using tape measurements.

“This is data that will have been absolutely scrutinised and peer reviewed,” said Power.

Morgans has a “speculative buy” recommendation on IPD, with a 12-month target of 20.6c vs current price of 13c.

 

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.

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