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Future of Healthcare and IVF Businesses: Lens on FPH, SHL, MVF, VRT

  • June 30, 2020 12:20 AM AEST
  • Hina Chowdhary
    Director, Equities Research Hina Chowdhary
    1463 Posts

    Hina Chowdhary is the Director, Equity Research at Kalkine and has an extensive experience of about 15 years in the area of Research, which includes 5+ years in Equities Research particularly.She has earned a Master of Science degree from the renowne...

Future of Healthcare and IVF Businesses: Lens on FPH, SHL, MVF, VRT

Summary

  • The Australia and New Zealand fertility market are anticipated to see considerable developments in the future due to the higher number of infertility cases.
  • Healthcare businesses are witnessing enormous opportunities amid COVID-19 pandemic, due to increased demand for mask, sanitisers, ventilators etc.
  • Fisher & Paykel released its FY2020 results with NPAT soaring by 37%, and for FY21 it is anticipating NPAT in the range of NZ$325-NZ$340 million.
  • Sonic Healthcare anticipates its earnings in line with the FY2019 while Monash IVF expects its NPAT to be down by 55% for the second half of FY20.
  • Post COVID-19, Virtus Health to focus on business development and health partnerships.
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Australia has a robust healthcare system that is deemed as one of the best across the world. According to the Australian Healthcare and Hospitals Association (AHHA), in the Australian healthcare sector, the total expenditure is nearly A$140 billion. This amounts to over 9.1% of GDP (Gross Domestic Product), near the mean compared to the other OECD nations.

COVID-19 Pandemic has impacted almost every sector across the world. However, it has given rise to several opportunities as well, and the healthcare sector is one of the beneficiaries. Amid the crisis, some healthcare companies are witnessing profits while some IVF businesses are predicting a fall in profits due to COVID-19-induced preventive measures.

However, according to media reports, the Australia and New Zealand fertility services market are anticipated to witness considerable development moving forward due to the higher number of infertility cases, developing trend of delayed pregnancies, increase in technological progressions in fertility procedures, and the availability of several fertility clinics and trained medical specialists.

Let us now discuss the outlook for ASX-listed healthcare and IVF stocks- FPH, SHL, MVF, VRT

Fisher & Paykel Released its FY2020 Results, NPAT Up by 37%

A leading medical device manufacturer Fisher & Paykel Healthcare Corporation Limited (ASX:FPH) is engaged in development as well as the marketing of products that are used in acute & respiratory care, surgery and in the therapy of obstructive sleep apnea.

On 29 June 2020, Fisher & Paykel revealed its results for FY20 (ended 31 March 2020).

  • Operating revenue was reported to be NZ$1.26 billion, up 18% as compared to the previous year, or 14% in constant currency (cc).
  • The net profit after tax (NPAT) reported at NZ$287.3 million, up by 37%.
  • R&D investment was around NZ$118.5 million or 9% of revenue.

The highlights from FY20 results are shown in the below image-

Outlook for FY2021

The Company disclosed that for the first three months of the fiscal year 2021, growth in its hospital product group has continued to increase, with hardware growth greater than 300%, and hospital consumables showing ~33% rise, as compared to the first three months of the fiscal year 2020.

In the homecare product group, the Company is witnessing evidence of both a lower Obstructive sleep apnea diagnosis (OSA) rate, and OSA masks resupply levels at the beginning of the fiscal year 2021 returning closer to projected levels compared to the elevated levels at the end of FY20.

For the first three months of FY21, Homecare growth has therefore been closer to the FY20 full-year rate.

Fisher & Paykel also provided guidance assumptions for FY21:

  • Respiratory hospitalisations peak in the first quarter due to COVID-19 pandemic, return to normal by the beginning of the second half.
  • Obstructive sleep apnea diagnosis rates decreased in the first half, now returning to normal by the second half.
  • The exchange rates assumed - NZD:USD 0.64, NZD:EUR 0.57.

Based on these assumptions, FPH is anticipating operating revenue of nearly NZ$1.48 billion and NPAT to be in a range of NZ$325-NZ$340 million.

The capital expenditure of FY21 is projected to be nearly NZ$160 million.

Stock Information: On 29 June 2020, FPH last quoted at A$31.670 up by 6.885% with a market cap of nearly A$17.03 billion.

Sonic Healthcare Foresees Flat Earnings Despite COVID-19 Pandemic

ASX-listed healthcare sector player Sonic Healthcare Limited (ASX:SHL) is headquartered in Sydney and provides its services around the world. The Company offers primary care medical services, laboratory as well as imaging services.

On 24 June 2020, SHL revealed that for the 8.5 months to mid-March 2020, trading results were consistent with the earnings guidance as disclosed previously. Though, in late March, the Company encountered a dramatic decline in the numbers of patients as well as revenues across international businesses due to pandemic and related preventive measures.

In FY19, the reported statutory EBITDA of Sonic Healthcare was nearly A$1.075 billion. SHL now anticipates reporting similar underlying EBITDA for the fiscal year 2020, which does not include the impact of the new lease accounting standard AASB16 that went into effect from 1 July 2019.

Moreover, the Company continues to perform a vital frontline role in tackling the pandemic, with its laboratories in Australia, Europe, and the US, testing thousands of patients per day for coronavirus infection.

Stock Information: On 29 June 2020, SHL last quoted at A$30.280, in line with the previous close, with a market capitalisation of nearly A$14.39 billion.

Monash IVF Provided Business Update, NPAT Anticipated being down by 55%

ASX-listed IVF company Monash IVF Group Limited (ASX:MVF) provides assisted reproductive technologies (ART) along with tertiary level prenatal diagnostics. MVF also offers a complete range of specialist diagnostic gynaecological and obstetric ultrasound as well as fertility treatments to its patient.

Monash IVF, on 29 June 2020, provided a business update and impact of COVID-19 on the Company after its previous COVID-19 update issued on 27 April 2020. The Company also announced the FY20 profit guidance and anticipates adjusted NPAT for the second half of 2020 will be down by 55% on pcp to A$4.6 million, having been deeply impacted by COVID-19 pandemic. Accordingly, Adjusted NPAT for FY20 will be almost A$14.0 million.

Stock Information: On 29 June 2020, MVF last quoted at A$0.535, down by 4.464%, with a market cap of nearly A$17.03 billion. With a market cap of almost A$218.2 million, the stock has ~389.63 million shares trading on ASX.

Virtus Health to Focus in Business Development & Health Partnerships

Sydney-headquartered ASX-listed health care company Virtus Health Ltd (ASX:VRT) provides Assisted Reproductive Services (ARS) across the globe. Virtus Health offers various fertility care, specialist pathology including day hospital services. The Company is providing its service via 43 fertility clinics, seven day hospitals, seven diagnostic labs in five countries.

Country-wise Operational Highlights:

  • In Singapore, operations continued. However, due to the second wave, a slowdown of operations was observed.
  • In Europe, Denmark and Ireland have resumed IVF operations. However, the United Kingdom preparing to reopen.
  • In Australia, fertility clinics continued IVF from 27 April 2020 onwards; and ARS, as well as non-IVF elective surgery, resumed operations with increased safety protocols.

With this Virtus Health also shared its future roadmap during and post COVID-19 pandemic:

There is a large trial underway for a promising AI tool for boosting IVF success. Australian fertility experts are investigating the technique that utilises artificial intelligence (AI) to improve the probabilities of a successful pregnancy. Hence, in the future, there shall be an excellent opportunity for Virtus Health in IVF.

 

Stock Information: At the end of day’s trade, VRT stock traded at A$2.860, dropping by 3.704% on 29 June 2020. The market cap of VRT stood at A$238.76 million.

 

 


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