Scott Power: This sleep devices maker is dreaming big with its 2030 strategy

ResMed unveils its 2030 strategy with revenue expected to grow in high single digits for the next five years
With a weaker share price Power said Monash IVF could provide a buying opportunity ahead of its AGM in November
ASX health stocks up 1.7% in past five days, while broader market fall 0.85% as concerns grow about rising tensions in Middle East

Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 26 years, gives his take on the ASX health care sector for the week and his Powerplay.

Speaking with Stockhead, Morgans analyst Scott Power said that the big news for the week was ResMed (ASX:RMD) unveiling its 2030 strategy and reviewing the significant opportunities ahead at its investor day.

ResMed is a leader in obstructive sleep apnoea and other sleep-related respiratory disorders.

Power noted that the company has been a key pick of Morgans healthcare analyst Derek Jellinek’s for a few years now.

He said the 2030 strategy was focused on delivering a more integrated and intelligent ecosystem, transforming the consumer and provider experience to offer “better care, simplify the health journey, and improve access to therapies”.

“Their investor day was talking about the next five years and it was pretty interesting,” Power said.

“They’re expecting their revenue to grow at high single digits for the next five years and earnings or profits to grow at an even higher level.”

Power said ResMed has highlighted three growth areas.

“Obviously they have a strong brand in the sleep apnoea space, which they want to continue advancing, but are also looking to expand other market opportunities and have called out insomnia and other breathing disorders such as COPD (chronic obstructive pulmonary disease),” he said.

RMD will also continue to invest heavily in research and development.

“With an installed base of more than 28m patients in its AirView platform – and more than 8.3m patients registered to the myAir platform – RMD has integrated devices and data to improve provider efficiency and enable more personalised care,” Jellinek wrote in a note to clients.

“RMD plans to build upon this ecosystem with leading residential care software solutions to drive substantial revenue synergies, contribute to core demand generation, and provide cohesion for its AI-driven digital platform.”

Morgans has an ‘add’ rating and 12-month target price of $35.93 on RMD.

ScoPo’s Powerplay – Monash IVF Group

Scott “ScoPo” Power’s pick of the week is fertility play Monash IVF Group (ASX:MVF), which he believes could provide a good buying opportunity for investors.

“Their share price has been a bit weak since their full-year results and at their AGM, which will be November, they will provide a trading update,” Power said.

“The expectation is that the trading update will be positive and they’ve put on a number of fertility specialists and are picking up market shares and have made some acquisitions which have been nicely integrated.

“Operationally they’re in a very good position.”

Morgans has an add and 12-month target price of $154 on MVF.

ASX Health Care index

At 1pm (AEST) on Friday the S&P/ASX 200 Health Care index (ASX:XHJ) was up 1.7% for the past five days, while the benchmark S&P/ASX 200 (ASX:XJO) fell 0.85% for the same period.

“There’s a lot of macro head and tailwinds and noise out there but the markets are still pushing all-time highs,” Power said.

“There’s been some pretty bigs ups and downs this week with heightening geopolitical tensions in the Middle East and US elections getting closer.”

Furthermore, Power said substantial stimulus packages in China and the US Federal Reserve’s drop of interest rates by 50bps in September are still having an impact.

“There’s some rotation going on from the financials into the resources sector and that’s a function of better data coming out of China helping resource stocks,” he said.

What to watch – Quarterlies and AGM season

Power said quarterly reporting season is about to kick off along with annual general meetings for ASX health stocks.

“We will see companies providing first quarter updates for FY25 and more information coming through,” Power said.

“Seasonally, we are coming into the stronger months of the year of October, November and December. While September – usually a weaker month – was quite solid.

“The healthcare names haven’t done much this year but we’re looking for the end of the year to be fairly buoyant with recession fears fading, interest rates coming down globally and inflation more under control.”

Research Corner – Monash team cracks nerve code for heart health

The Monash-University led medical team that first recorded vagus nerve signals in humans has now isolated the electrical activity of individual neurones responsible for cardiovascular regulation.

Professor Vaughan Macefield was the first to record electrical signals from the vagus nerve in awake humans in 2020. Before his discovery, understanding of the physiology of this nerve – which supplies the heart, airways and other organs within the thorax and abdomen – came entirely from animal work.

Researchers from the Human Autonomic Neurophysiology Laboratory in Monash’s School of Translational Medicine have now isolated the activity of individual neurones within the vagus nerve.

By looking specifically for neurones that fire in sync with the heartbeat, the researchers could then identify those that are responsible for cardiovascular regulation.

“We have managed to isolate the activity of individual vagal neurones and identified those that are responsible for either informing the brain about cardiovascular function (afferent neurones) or controlling the rate of the heart beat (efferent neurones),” first author Dr David Farmer said.

Professor Macefield, who was senior author on the paper and is also a professorial fellow with the Baker Heart and Diabetes Institute, said because the activity of these neurones was likely altered in cardiovascular disease, it was crucial to understand how and why.

“This technique will enable these investigations,” he said.

You can read more about the research in The Journal of Physiology.

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.