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

At the time of writing, the Healthcare index (XHJ) is down almost 5.75% over the past week, compared to the broader market which fell by 0.70%.

Market volatility this week has led to chunky falls in some healthcare names, but Power believes this volatility will lead into a rally by Christmas.

“September and October are traditionally the weaker months of the year, and December and January are usually stronger,” Power told Stockhead.

“So the question we’ve go to ask is, will the volatility we saw in September continue into October? My view is that we will continue to see that, and have a rally into Christmas.”

Power says there’s a lot of things creating nervousness in the market, but reckons that interest rates will remain low and the broader market will shrug off the recent China concerns.
 

This week’s biggest movers

In healthcare, we did see share price falls this week, as a broad-brushed selloff swept the local market.

Both CSL (ASX:CSL) and Pro Medicus (ASX:PME) tanked by 7%, on no news.

Cochlear (ASX:COH) was also down 7%, following a patent infringement complaint by the University of Pittsburgh filed in Texas against two of Cochlear’s USA subsidiaries.

Cochlear believes that none of its products infringe the University’s patent, and will defend the lawsuit.

Meanwhile at the smaller end of town, Atomo Diagnostics (ASX:AT1) surged by almost 15% this week.

“AT1 is in the rapid testing space, which is hot property right now,” Power said.

Micro-X (ASX:MX1) also rose 6.5% this week, after announcing a couple of contract wins with the US Government’s Department of Homeland Security for the design of a Miniature X-Ray Baggage Scanner.

MX1 develops technology to miniaturise x-rays, which has applications not only in a hospital setting but also in security and military.

Power said Morgans has a speculative Buy recommendation on the stock with a price target of 58c vs the current price of 33c.

“We think MX1 is undervalued compared to its comparative company in the US, and that MX1 has a superior product,” said Power.

ImpediMed (ASX:IPD) is up 9% after announcing the inaugural SOZO Heart Failure Program has been established at the Advocate Health Care’s Heart Institute in Chicago.

The institute consists of 26 hospitals and over 500 sites of care.

The company also signed a deal with the Icon Group to roll out 13 SOZO units to establish lymphoedema screening services for breast cancer patients across Australia and New Zealand.

Icon Group is Australia’s largest dedicated cancer care provider, with 31 cancer centres in the country.

“We’ve got a key inflection point coming for ImpediMed, with the publication of their data due in October,” Power said.

Australian Pharma Industries (ASX:API) meanwhile, has opened its books and allowed Sigma Healthcare (ASX:SIG) to undertake due diligence, after receiving a takeover offer of $1.57 a share.

The API board has considered the proposal and determined that it’s superior to the proposal from Wesfarmers (ASX:WES) at $1.55 per share.
 

ScoPo’s Powerplay

Power’s stock of the week is IVF company, Monash IVF Group (ASX:MVF).

Monash recently posted strong FY21 results, with full year NPAT up by 61.5% to $23.3m.

“They’re running with strong industry trends as a beneficiary of COVID, with behavioural change in priorities towards families expected to continue,” Power said.

“Monthly Medicare cycle data also shows that strong fresh cycle growth is set to continue in FY22, suggesting stronger growth than just pent-up demand alone,” Power said.

“We view this as an industry wide acceleration and a shifting focus to families as a beneficiary of COVID.”

“So we’ve adjusted our forecasts for IVF cycle growth to continue at sustained levels, and return to growth in FY23,” he added.

Morgans has 12-month target price on MVF of $1.09, against the current share price of 94c.

Monash IVF share price today:


 

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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