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 0.20%, compared to the broader market which ended 1.20% higher.

With the sharemarket pushing all time highs, Power believes investors are finding it difficult to find value in some of the bigger health names, but they’re not prepared to sell them either.

“There’s a lot of money waiting in the sidelines and hoping for a pullback,” Power told Stockhead.

“But if we go to the smaller end of the health market, there is currently no investor interest, a theme which has played out over the past month,” he added.

“We’re also now coming to the two busiest weeks of the year, with some big health names due to report their financials.”

 

All eyes on earnings

Next week will see some of the biggest health names in Australia report their earnings.

CSL (ASX:CSL) will be one of them, and Morgans thinks that CSL’s results will come in line with expectations but remain challenged.

CSL had earlier provided a full year NPAT guidance in the $2-$2.265 billion range, which is a 3-8% increase from the previous year.

According to Morgans’ research note, the catalyst for CSL’s growth is the improvement in its US plasma collections, which have risen after falling by 40% last year due to COVID-19.

In 2020, the company was forced to decline patients that wanted to sign up to its immunoglobulin-based therapies, after a significant decline in plasma collection.

“CSL is the biggest health company in Australia, and we believe it should be in most portfolios. We’re going to be using any weakness in its share price as a buying opportunity,” Power told Stockhead.

Morgans has a price target of $301.13 for CSL, with the stock closing at $298.304 on Friday.

Pharmaceuticals distributor Ebos Group (ASX:EBO) will also be reporting its earnings next week, on August 18.

The company has provided no guidance, but Morgans expects EBO’s full year EBITDA to come in at $362m, and a bottom line NPAT of $185m.

Power said he has a $31.03 target on EBO, with the stock price closing at $29.83 on Friday.

Other stocks that are expected to report earnings next week include Pro Medicus (ASX:PME), which Morgan expects to see another solid result from, albeit heightening risks on contract wins.

Morgans has a “reduce” recommendation on PME, with a price target of $49.69 vs Friday’s close of $56.05.

Other notable health stock announcements during the week

ResMed (ASX: RMD)

The giant medical device company announced a solid fourth quarter, helped by a device recall from its biggest competitor Philips. The company reported a 14% increase (against pcp) in Q4 revenue to $876.1 million. It also announced an 8% increase in its quarterly dividend to 42c per share.

ResMed’s results were better than expected, but the stock price still ended the week 0.53% lower to close at $37.38.

Power said Morgans is maintaining its “add” recommendation on RMD, with the Philips recall and people getting back into sleep clinics in the US being the two main short-term drivers.

ResMed is also on global fund manager T.Rowe Price’s watch list, who said that the company had qualities such as strong return on capital, and resilient earnings growth.

Rhinomed (ASX:RNO)

The shares of Rhinomed popped by as high as 80% on Wednesday, after announcing its first purchase orders from the government.

The company has commenced supplying one million of its SARS-CoV-2 Rhinoswabs to the NSW Health Pathology, as part of the department’s program to support testing capability.

Revenues from this initial order will represent approximately 25% and 35% of its unaudited FY21 revenues of $3.9m.

EmVision (ASX:EMV)

The medical imaging specialist rose by 16% on Tuesday after announcing that its 1st Gen portable brain scanner has now been completed and ready for testing.

It was an interesting milestone for EMV, as the 1st Gen device is the company’s first model intended for commercialisation.

Power says what’s good for EMV is also good for Micro-X (ASX:MX1), one of Morgans’ highly recommended stocks.

Opthea (ASX:OPT)

The retinal disease specialist announced that recruitment is now open to patients in Canada for the Phase 3 clinical trial of OPT-302, treating wet (neovascular) age-related macular degeneration (AMD).

This pivotal Phase 3 trial has actually already begun in the US, and the latest expansion into Canada represents a new geographical region.

Opthea is also currently working on ethics and regulatory approvals for other regions.

 

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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