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

With a slew of good corporate earnings this week, Power believes the broader market will still be positive going into year end.

“The theme of the week is that there’s a pretty bright light at the end of the tunnel, and we’re going to have a bright Christmas,” he said.

“We’ve had the seasonal weakness in September and October, and the market is usually positive going into December and January.”

“There’s no reason why it won’t be so this year, and we’ve positioned ourselves to take advantage of that,” Power continued.

Power likes the look of Volpara Health (ASX:VHT), which delivered its strongest ever cash receipts for Q2 FY22 this week, with other key metrics also breaking records.

For the third quarter running, the breast imaging medtech company achieved record quarterly cash receipts from customers of NZ$7.1m, up approximately 52% compared to the previous corresponding period (pcp).

Overall, Volpara added more than US$1.2m annual recurring revenue in Q2 FY22, an increase of more than 92% on its previous best Q2.

“We think the next two quarters are going to be strong for Volpara, which in part will be driven by a major radiology conference in Chicago in late November,” Power said.

Morgans has maintained its Add recommendation for VHT, given the broad technology stack that creates a compelling offering to clients for the early detection of breast cancer.

“We also see the lung cancer screening space as highly compelling, given the size of the opportunity in the US.”

“So buy this name,” Power emphasised.

Morgans has a 12-month price target on VHT of $1.87 vs the current market price of $1.21.

Power’s take on other ASX health stocks this week

The wireless wearable electromyography specialist, Control Bionics (ASX:CBL), generated cash receipts of $0.9m for the quarter which was below Morgans’ expectations, however Power believes its outlook is improving.

“Management has announced two new products due for release in Q2 of FY22, which will provide a compelling addition to their suite of products,” Power said.

CBL is also trialling a new rental model in Australia, to gain access to a larger number of patients.

In addition, revenue in the US should pick up according to Power, as reseller partner Numotion is currently training their sales team and conducting demonstrations, which should result in higher levels of sales.

Morgans has a speculative buy on CBL, with a 12-month price target of $1.42 vs the current market price of 50c.

Rapid testing provider Genetic Signatures (ASX:GSS) has just reported a record quarterly sales revenue of $12.4 million, an increase of 129% over the previous quarter.

GSS designs and manufactures a suite of real-time Polymerase Chain Reaction (PCR) products for the routine detection of infectious diseases under the EasyScreen brand.

“I believe rapid testing will be with us for an extended period of time, perhaps for the next three to five years as there will be elements of testing that will still go on around the world,” Power told Stockhead.

Brisbane-based Impedimed (ASX:IPD) has just completed a $35m insititutional placement to fund its product, data and software enhancements.

With the cash in hand, the company will be in a position to accelerate sales in its oncology products, while still investing in other key focus areas of renal failure and heart failure.

“The next 12 months should really good for Impedimed with this injection of capital,” Power said.

ScoPo’s Powerplay

Power’s stock of the week is Virtus Health (ASX:VRT).

VHT is down 12% over the past month, since the ACCC was granted a court order by the Federal Court to temporarily block VHT’s acquisition of the Adora Fertility clinc from Helius.

“The fall in the share price has created a buying opportunity, with over 30% upside to our target price, and an attractive fully franked yield of 4.5%.”

Power believes Virtus will benefit from our changing society towards having more babies through IVF cycles.

“Medicare statistics show fresh cycle volume growth flat for the last three months, however the strong start to FY22 gives us confidence the balance of the year will maintain this momentum. “

Morgans has an Add recommendation on VRT, with a 12-month target price of $7.13 vs the current market price of $5.14.


Virtus Health share price today:



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