• ASX health sector outperforming the broader market but remain flattish for week
  • CSL reports solid FY23 results after record plasma collections and lift in sales 
  • Cochlear FY23 sales revenue increases 19% on pcp to a record $1.956 billion

Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 26 years, explains what the movers and shakers have been doing in health and gives his ASX Powerplay.

Sometimes, especially during the work week, its seems like there are just not enough hours in the day. How much sleep do you get during the working week?

Conducted by Penn State researchers, a recent study indicates that insufficient sleep on workdays could influence a person’s heart rate and systolic blood pressure.

Furthermore, the findings imply that weekend efforts to compensate for lost sleep might not fully restore cardiovascular wellbeing to its original state.

The study’s results were featured in the journal Psychosomatic Medicine.

For the study researchers recruited 15 healthy men between the ages of 20 and 35 for the 11-day in-patient study.

During the initial three nights of the investigation, participants were permitted to sleep from 10pm until 8am. On the fourth night, the sleep window shifted to 12:30am to 5:30am, a pattern maintained for the following five consecutive nights.

During the last two nights, participants were once more allowed to sleep from 10pm to 8am. Throughout the day, researchers measured the participants’ resting heart rates and blood pressure at approximately two-hour intervals.

The study revealed a consistent rise in participants’ heart rate by approximately one beat per minute (BPM) for each day observed.

Initially, participants had an average baseline heart rate of 69 BPM. Even after the second night of recovery sleep, the average heart rate remained at 78 BPM.

Furthermore, the researchers noted an incremental increase of approximately 0.5 millimeters of mercury (mmHg) per day in participants’ systolic blood pressure (SBP). At the beginning, the average baseline SBP was 116 mmHg. After the participants’ second day of recovery sleep, the average SBP elevated to 119.5 mmHg.

Researchers in the future would like to recruit a mix of men and women as participants in a similar study.


To markets…

At 12.20pm (AEST) on Friday the S&P/ASX 200 Healthcare index (ASX:XHJ) was up 2.3% for the past five days, although Power noted it was 1.9% off its 2023 high on August 1.

Meanwhile, the benchmark S&P/ASX 200 (ASX:XJO) was down 2.6%  for the past five in a tough week for global markets driven by China slowdown fears and rising bond yields. It is now 3.9% off its 2023 high on July 27.

China data released this week showed July industrial output and retail sales growth coming in below forecasts.

China’s PBOC responded by cutting its key rate by 15bp, while authorities halted the release of youth unemployment figures, which were seen by experts as a key indication of the country’s slowdown.

The healthcare market is in the thick of reporting season, which Power says has been mostly positive.

“At the end of the first major week of reporting the health care sector has been mainly positive with good results from the big end of town, although Sonic and ResMed (ASX:RMD)  have disappointed investors,” he says.

CSL plasma collections hit record high

Healthcare giant CSL (ASX:CSL) has reported its full year FY23 results with record plasma collections and underlying profit (NPATA) of $2.61 billion,  up 20% on a constant currency basis to $2.86 billion.

CSL reported NPAT of $2.19 billion, down 3% on pcp, and delivered a full year dividend of US$2.36, up 6% on pcp. CSL says its performance in FY23 was delivered against a challenging operating environment.

Its Behring business rebounded strongly driven by exceptional growth in immunoglobulin sales and plasma volumes up 31% and now at record levels.

CSL says improved social mobility post-Covid, targeted marketing campaigns and enhanced digital initiatives to attract donors all contributed to the unprecedented growth.

The cost of collecting plasma, which includes donor compensation and labour, declined ~14% over the previous year and ~17% down from the peak in March 2022.

The significant increase in plasma supply underpins CSL’s ability to manufacture plasma products and meet the underlying patient demand for core plasma products.

However, the company says it’s not been immune to inflation and currency headwinds, with its focus on improving efficiencies across its global network of manufacturing sites helping to reduce the impact.

In FY24, NPATA is anticipated to be in the range of ~$2.9 billion to $3 billion at constant currency basis.

“The outlook for CSL is looking pretty good which has sparked a bit of the rally,” Power says.

“A lot of the healthcare names are saying procedural volumes are getting back to pre-Covid levels and in the case of CSL the collections are coming back on-stream.

“We maintain our positive stance on CSL, which is a key portfolio holding for a lot of our clients.”

Morgans has an Add rating on CSL and has lifted its 12-month guidance to $328.20 from $323.


Cochlear’s record revenue – hear hear!

Hearing tech company Cochlear (ASX:COH)  announced full year sales revenue increased 19% on pcp to a record $1.956 billion, while statutory net profit rose 4% to $301 million on pcp.

FY24 underlying net profit guidance range is $355-375 million, a 16-23% increase on FY23 and forecast to be driven by a combination of revenue growth and improved net profit margin.

Cochlear implant units were up 16% driven by a combination of market growth, improved clinical capacity, and market share gains.

Covid-19 catch-up surgeries also played a part in the surge, with the company successfully launching the Cochlear Nucleus 8 Sound Processor late in the second quarter.

The newly launched product generated strong demand for Cochlear implant systems and sound processor upgrades during the second half.

COH has a strong balance sheet and cash flow generation, which supports the 21% increase in the final dividend to $1.75/share, taking full year dividends to $3.30 per share.

In FY24, the company expects to deliver underlying net profit of $355-375 million, a 16-23% increase on FY23, which is expected to be driven by a combination of revenue growth and improved net profit margin.

Morgans has maintained its Add rating on COH but lifted its 12-month target price to $269.40 from $250.60.


Sonic healthcare profit sinks 53% as Covid-19 testing reduces

Australia’s second biggest healthcare company Sonic Healthcare (ASX:SHL)  dropped almost 6% on Thursday after announcing its FY23 results including total revenue falling 13% to $8.17 billion for the full year, driven by an 80% decrease in Covid-19 related revenue and NPAT down 53% to $685 million.

SHL says its base business revenue (excluding Covid-19 services) grew 11% in total versus FY22 and organically by 7% on a like-for-like basis.

However, Power says it’s not all bad news with management accelerating reduction in pandemic legacy costs outlining numerous near/medium term drivers to improve margins and profitability.

Drivers include acquisition synergies, fee indexation and contracts, procurement benefits, infrastructure rationalisation, an enhanced US revenue collection system (recovery in the mid/high single digits) and digitalisation of pathology.

“We believe SHL has turned the corner on the pandemic and is in a strong position, with solid base business growth and accelerating cost outs, along with ample liquidity for capital management and M&A,” Power says.

Morgans maintains an Add rating on SHL but has reduced its 12-month target price from $38.96 to $36.55.


Increased revenue from North America drives ProMedicus

Health imaging company ProMedicus (ASX:PME)  reported FY23 revenue from ordinary activities of $124.9 million, up 33.6% on pcp and net profit of $60.6 million, up 36.5% on pcp.

PME says its solid FY23 results were mainly driven by increased revenue from North America, which was up 41.8% while Australian revenue was up 9.4% on pcp.

Its European business revenue decreased by 12.2% due to one-off revenue coming from the extension of the German government hospital contract in FY22, which was not replicated this year.

During the year, PME made key announcements including three contract wins with a combined minimum value of $16.5m with Montage Health, Children’s Hospital of Philadelphia, and Bay Imaging Consultants.

“It was an absolute ripper and their share price was up about 5% on the day of reporting,” Power says.

“They came in at the top end of analysts’ expections and while they don’t provide guidance for the next financial year I think most of the analysts are expecting EPS growth and we’re expecting over 20% growth in profits for next year.”

Morgans has moved its recommendation from a Reduce to a Hold with a 12-month target price of $66 from $61.35/share.

“We’re looking for any weakness which might occur around $65 to start building a position.”


Troubled Ansell FY23 results in line with expectations

Ansell (ASX:ANN) has released its FY23 results which were in line with expectations including sales down 15% to US$1,655.1 million, EBIT down 15.8% (6.7% in constant currency) to US$206.3 million and net operating cash flow dropping 34.8% to US$74.3 million.

Operating in the personal protective equipment space (PPE) space ANN has been served with a shareholder class action filed in the Supreme Court of Victoria by the law firm Slater & Gordon on behalf of the lead plaintiff, Michael Gary Warner.

“Not much to say on Ansell as it had been pre-released and there had been a downgrade so not a lot of news there… happy to sit on the sidelines,” Power says.


The CSL,COH, SHL, PME & ANN share price today:


ScoPo’s Powerplay – Monash IVF

Fertility company Monash IVF Group (ASX:MVF) is Power’s stock of the week which is forecast to report its FY23 results next week.

“Its share price has been very solid and we don’t expect any issues with the result and think it will be in line with their guidance and the outlook for the IVF player is looking pretty good,” Power says.

“We are expecting EPS growth next year of around 10% and they are growing their market share both organically and through acquisitions.”

He says at its investor day earlier this year the company showcased the high calibre of the senior management team including operational, scientific and medical directors.

Morgans has an Add rating and 12-month target price of $1.29/share.


The MVF share price today:


The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.

Disclosure: The author held shares in CSL and Sonic Healthcare at the time of writing this article.