ASX health stocks fall in past five days, as broader markets lift higher\u00a0
\nChemist Warehouse merger target Sigma Healthcare FY24 results in line with expectations
\nSonic Healthcare to acquire Switzerland-based Dr Risch laboratory group for ~A$202m<\/p>\n
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.\u00a0<\/p>\n
How are your sleeping habits? Do you get enough sleep? \u00a0To better understand the relationship between poor sleeping habits and long-term chronic health conditions researchers at Penn State\u2019s College of Health and Human Development<\/a> identified four distinct patterns characterising how most people sleep, which are also predictive of long-term health.<\/p>\n Using a national sample of adults from the\u00a0Midlife in the United States study (MIDUS)<\/a>, the team gathered data on ~3,700 participants\u2019 sleep habits and their chronic health conditions across two time points 10 years apart. The data included self-reported information on sleep routines, such as consistency and length,\u00a0 perceived feelings of sleep quality, daytime alertness, type and number of chronic health issues.<\/p>\n Published in Psychosomatic Medicine<\/em><\/a>, the study\u2019s four key sleep patterns predictive of long-term health included:<\/p>\n Good sleepers with optimal sleep habits across all datapoints More than half of participants had suboptimal sleep patterns, either as insomnia sleepers or nappers. Persistent insomnia over a decade correlated significantly with a higher risk of chronic health problems like cardiovascular disease, diabetes, and depression.<\/p>\n Moreover, the study revealed that individuals tended to maintain their sleep habits over the 10-year period, particularly those with insomnia or who were habitual nappers.<\/p>\n Soomi Lee, the study lead associate professor of human development and family studies at Penn State, says there needs to be more efforts to educate people about good sleep health.<\/p>\n \u201cThere are sleep hygiene behaviours that people could do to improve their sleep, such as not using cell phones in bed, exercising regularly and avoiding caffeine in the late afternoon,\u201d she says.<\/p>\n \u00a0<\/p>\n And ASX health stocks like they could do with better sleep this week. At 12pm (AEDT) on Friday the S&P\/ASX 200 healthcare index (ASX:XHJ) was down 1.1% for the past five days,\u00a0 while the benchmark S&P\/ASX 200 (ASX:XJO) rose 0.6% for the same period.<\/p>\n Pharmaceutical distributor, Amcal\u00a0 and Discount Drug Stores brand owner and Chemist Warehouse merger target Sigma Healthcare (ASX:SIG)<\/strong><\/a> reported its FY24 result, which Power says was largely in line with expectations.\u00a0 He says EBIT was at the top end of guidance range when excluding the impact of merger transaction costs.<\/p>\n Total sales were down 9.2% to $3.3bn, largely driven by the disposal of its hospital business and higher sales of rapid antigen test (RATs) in FY23 that didn\u2019t carry through to FY24.<\/p>\n \u201cThis was broadly in line with our forecasts ($3,404m). Like-for-like sales were up 4.3%,\u201d Power\u00a0 says.<\/p>\n Other highlights of the results include:<\/p>\n Gross profit was $36.3m down 14.3% with gross margins 6.6% Power says initial merger costs accounted for $8.2m and without these costs EBIT would be $31.4m, in line with guidance of $26-$31m.<\/p>\n Furthermore, SIG\u2019s operating cashflow was $42m. Capex was $4.7m, with the company noting the business is now largely ex-capex and expected to remain in the $5-$10m range going forward.<\/p>\n In its announcement<\/a> SIG says the last 12 months had delivered meaningful progress in the execution of its franchise brand strategy, including the discontinuation of the Guardian pharmacy brand and an increased focus on the Amcal and Discount Drug Stores brands.<\/p>\n The company provided little commentary on the proposed merger with Chemist Warehouse but says it remains on track in preparation for its five-year supply contract to the Chemist Warehouse Group starting July 1,\u00a0 2024.<\/p>\n SIG submitted its submission to the ACCC in February, and on March 8 the ACCC kicked off a public consultation process and says they are \u201chopeful a decision from the ACCC in the second half of the calendar year, which will precede a number of other steps required to reach completion\u201d.<\/p>\n \u201cThis merger proposal is truly transformational for Sigma,\u201d CEO and MD Vikesh Ramsunder says.<\/p>\n \u201cIt will diversify our earnings and growth profile whilst also creating opportunities for Sigma to enhance the support provided to pharmacy owners, helping them to profitably grow their business and better support their communities.\u201d<\/p>\n Morgans has downgraded SIG from an Add to a HOLD and increased its 12-month target price to $1.14 from $1.07.<\/p>\n \u201cGiven where the share price is at the moment it is in the hold range,\u201d Power says.<\/p>\n \u201cWe\u2019re still waiting for information from the ACCC and that process has some time to play out.\u201d<\/p>\n \u00a0<\/p>\n Sonic Healthcare (ASX:SHL)<\/a><\/strong> has announced it is acquiring Switzerland-based Dr Risch laboratory group for ~A$202m.<\/p>\n Dr Risch employs ~650 staff across 13 laboratories and has a lab in Liechtenstein, with a full-range offering of routine and specialty laboratory testing and combined annual turnover of CHF102m (~A$176m).<\/p>\n The deal is expected to close by 31 March, with the transaction EPS accretive from CY25 and ROIC positive once synergies from multiple areas of infrastructure and operations are achieved.<\/p>\n SHL is an internationally renowned healthcare provider with specialist operations in laboratory pathology, radiology, general practice medicine and corporate medical services sits second behind CSL (ASX:CSL)<\/strong><\/a>\u00a0 on the the ASX\u2019s biggest healthcare stocks list.<\/p>\n Morgans has adjusted its FY24-26 estimates for SHL, with its 12-month target price increasing to $34.94 from $34.05 with an\u00a0 Add rating maintained.<\/p>\n \u201cSonic is one of our key picks in the large cap healthcare space,\u201d Power says.<\/p>\n \u201cThe share price has been fairly weak from the Covid period but it\u2019s a very good business, well run and we\u2019re happy to put it in client\u2019s portfolio.\u201d<\/p>\n \u00a0<\/p>\n Australia\u2019s largest private hospital operator\u00a0 Ramsay Health Care (ASX:RHC)<\/strong><\/a> has extended its service agreement with the Western Australian Government to continue operating the Joondalup Health Campus (JHC), including the public hospital,\u00a0 until June 2043.<\/p>\n The WA and Federal governments have a $269m joint investment in public services at JHC, transforming the site into one of the state\u2019s biggest health campuses.<\/p>\n RHC also announced a\u00a0 ~$190m expansion of private services at JHC including a new operating theatre complex and a 55% increase in bed capacity. The new facilities will open in early 2026.<\/p>\n In a note to clients, Morgan\u2019s healthcare analyst Derek Jellinek says\u00a0extension of the JHC services contract was widely expected, with RHC also previously flagging a major expansion of the private hospital at the site, consistent with its focus on selectively investing in facilities that strengthen its position and focus on growth in key specialty areas.<\/p>\n FY25 investment in greenfield and brownfield development pipeline is expected to range between $250-$300m,\u201d he says.<\/p>\n Jellinek says in FY24, the Australian division of RHC is targeting EBIT growth in the mid-single digits, driven by volume growth combined with productivity improvements coming from labour management and cost saving initiatives.<\/p>\n While growing volumes and numerous productivity initiatives portend an improving earnings profile, EU inflationary pressures, digital\/data investments and higher funding costs \u201cremain a drag on full margin recovery,\u201d he says.<\/p>\n Power says the RHC share price has been recovering from below $50 and is now up ~$55.<\/p>\n \u201cIt has been one of the laggards in the healthcare space but is now picking up a bit more momentum so that is encouraging,\u201d he says.<\/p>\n Morgans has an Add rating and 12-month target price of $69.66 on RHC.<\/p>\n \u00a0<\/p>\n \ufeff<\/span>\ufeff<\/span><\/span><\/p>\n \u00a0<\/p>\n US headquartered wound care company Avita Medical (ASX:AVH)<\/strong><\/a>\u00a0 is Power\u2019s stock of the week. AVH\u00a0 is expected to have its marketing application approved by the US FDA in late May for RECELL GO,\u00a0 which is an introduction of an automated workflow to its manually operated RECELL.<\/p>\n In October 2024 AVH announced the FDA requested additional information<\/a>\u00a0regarding its marketing application for its latest RECELL GO, resulting in a delay of four to six months in processing its premarket approval (PMA) supplement application for the device.<\/p>\n AVH\u2019s recently announced its fully year CY23 results, which Power says were in line with guidance and the highlight being 46% product revenue growth.<\/p>\n AVH has reconfirmed CY24 revenue growth of ~63%.\u00a0 Power says importantly, management has called out its expectation of achieving profitability by Q3 CY25.<\/p>\n He says given management\u2019s track record the target as achievable but key will be achieving approval of RECELL GO.<\/p>\n \u201cThe share price has come under a little bit of selling pressure so I think it is a really good opportunity leading into that key catalyst for them,\u201d he says.<\/p>\n Morgans has an Add rating and 12-month target price of $6.40 on AVH.<\/p>\n \u00a0<\/p>\n \ufeff<\/span><\/span>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.<\/em><\/p>\n Disclosure: The author held shares in Sonic Healthcare and CSL at the time of writing this article.<\/em><\/p>\n <\/span><\/p>\n The post ScoPo\u2019s Powerplays: Health stocks fall and how are your sleeping habits?<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"
\nWeekend catch-up sleepers, who have irregular sleep, specifically short average sleep duration, but longer sleep times on weekends or non-workdays
\nInsomnia sleepers with clinical insomnia symptoms, including short sleep duration, high daytime tiredness and a long time to fall asleep
\nNappers, who are mostly good sleepers but have frequent daytime naps.<\/p>\nTo markets\u2026<\/h2>\n
\nOther revenue was down 6.4% to $95.2m
\nOperating costs were down 10.7% to $261.8m, driven by simplification of the business and greater productivity
\nStatutory EBITDA was $51.5m up 3.9%, EBITDA margin was 1.6%
\nStatutory EBIT was $23.2m which was up 20.4% and NPAT was $4.5m
\nReduced its inventory balance by $103m, reflecting the divestment of its hospitals business.
\nEnded FY23 with net cash of $356.5m, reflecting the $400m equity raise completed in January<\/p>\nSonic to acquire Swiss Laboratory provider<\/h2>\n
Ramsay extends WA services contract<\/h2>\n
The SIG, SHL & RHC share price today:<\/h2>\n\n
ScoPo\u2019s Powerplay \u2013 Avita Medical awaits catalyst<\/h2>\n
The AVH share price today:<\/h2>\n\n