ScoPo’s Powerplays: ASX health stocks sprout 4.6%, as Volpara soars on first positive cash flow
Health & Biotech
Health & Biotech
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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.
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Researchers at the University of Colorado Boulder (CU Boulder) have found participating in community gardening reduces the risk of developing serious illnesses, including cancer and mental health disorders.
The randomised controlled trial (RCT) tracked the physical and mental health during and after a growing season of 145 participants who had never gardened before.
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The CU Boulder study published in the Lancet Planetary Health is the first RCT investigating the benefit of gardening, and community gardening in particular.
And ASX health stocks are growing nicely this week. At 11.40pm (AEDT) the S&P/ASX 200 healthcare index (ASX:XHJ) was up 4.6 % in trade for the past five days, while the benchmark S&P/ASX 200 (ASX:XJO) was up 2.3% for the same period.
Health imaging company Volpara Health Technologies (ASX:VHT) has achieved its first ever net cash flow positive quarter leaving it with a strong cash position at the end of Q3 FY23 with NZ$12m in the bank.
It was, as Power described, a terrific performance by VHT which was founded in 2009 and listed on the ASX in 2016. Other key highlights of Q3 for VHT, which specialises in the early diagnosis of breast cancer, include:
“The company told the market after they’d done a strategic review and new CEO Teri Thomas took the reins they expected to be cash flow positive in fourth quarter of FY24 and they’ve obviously achieved that well ahead of schedule,” Power said.
“They also done it using existing cash reserves and I think there was a fair bit of skepticism around that but a lot of that skepticism has been alleviated today.”
Power said VHT produced very big number in terms of cash receipts and net operating and investing cash inflow of $1.3 million.
“They did say there will be quarters where there will be negative cash flow but the overall trend is looking positive,” he said.
Power said its move to being cashflow positive will also help attract interest among institutional investors.
“The company’s line of sight to profitability and strong revenue cost with a market cap just short of $200 million means it will get on more radars of institutions,” he said.
Power said Morgans hasn’t changed any of its forecasts because “it was backing them to deliver” and has an Add and 12-month target price of $1.21 on VHT.
“There is still plenty of upside on our target price,” Power said.
Volpara is up more than 42% in the past month and 20% in the past five days.
While it dipped last week and Power couldn’t quite work out why, Telix Pharmaceuticals (ASX:TLX) is up ~9% this week after reported strong sales momentum in its Q4 FY22 results.
TLX achieved positive cash flow from operating activities. Net operating cash flow improved by $6.9 million over the prior quarter to a $1.6 million inflow for Q4.
Cash receipts from customers were $72.2 million, up 62% from $44.5 million in the prior quarter.
TLX reported Q4 FY22 revenue of $78.2 million from global sales of Illuccix, up 41% on the prior quarter.
TLX’s revenue from sales of its Illuccix kit for prostate cancer imaging in the US was up 43% to $76.8m on prior quarter, which it said was evidence of its strong growth trajectory.
“They have very good sales momentum coming through and the share price has responded to positively for the week,” he said.
“We think the market will be pleasantly surprised with what they deliver,” he said.
“I think they will all deliver good results in line with their guidance or slightly ahead,” Power said.
“This reporting season is going to be quite important because there is a view out there that there will be downgrades across the broader market.
“But when we look at our coverage list we are pretty confident with what our companies are going to report and that is being reflected in the share prices we’ve seen since the beginning of the year.”
Back in December, Power was feeling optimistic about healthcare for 2023 so he put together a basket of six stocks he thinks could do well this year.
He is continuing with his optimism theme, so much that this week he couldn’t narrow down just one stock of the week and was feeling pretty chuffed with the performance of his basket of stocks so far this year.
So let’s just do a quick early data update on their performance so far.
1. ProMedicus (ASX:PME) up 10.39% YTD
2. EBOS Group up 4.11% YTD
3. Neuren Pharmaceuticals (ASX:NEU) up 11.19% YTD
4. Proteomics International (ASX:PIQ) up 19.74%
5. Volpara Health Technologies up 49.52%
6. Nanosonics up 19.35%
“Our Morgans’ healthcare shopping list is performing well so far this year,” Power said.
“It feels like it could be a good year for healthcare.”
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