Healthcare: A hot sector to look at - API, SIG, COH

Healthcare: A hot sector to look at - API, SIG, COH

The healthcare sector is one of the most extensive sectors in the stock market. The healthcare industry is considered as the most complex industry to comprehend compared to other industries such as financials, consumer staples, real estate, utilities, telecom, energy, industrials, and materials. The sector plays a critical role in any economy, both in terms of the products and services it provides and the returns it offers to the investors, especially during times of uncertainty.

Coronavirus has impacted industries all over the world, including the healthcare industry. Countries are under partial/complete lockdown to control the rapid spread of the coronavirus and try to break the chain. Despite the lockdowns, pharmacy services, considered essential services, will remain functional for citizens. In Australia, pharmacy networks have reported a surge in demand, primarily driven by panic-buying due to the coronavirus crisis. The demand for healthcare products and services has turned the attention towards healthcare companies with some of the companies doing considerable well in the current turbulent scenario.

Australian Pharmaceutical Industries Limited (ASX:API) disclosed that it is witnessing augmented like-for-like sales throughout its Priceline Pharmacy network. Another healthcare company Sigma Healthcare Limited (ASX:SIG) has reported increased demand for its products and stated that the Company would continue to operate with and help the pharmacy brands, suppliers, customers, and the government during the coronavirus outbreak. Further, the healthcare sector player Cochlear Limited (ASX:COH) stated that they had not seen any interruption in the manufacturing supply chain due to this pandemic.

To Know More, Do Read: Healthcare stocks reacting to Corona Fears

Let us look at how these three healthcare sector players are performing - COH, API, SIG


Australian Pharmaceutical Industries Limited (ASX:API)

An ASX-listed health and beauty company, Australian Pharmaceutical Industries Limited is engaged in providing business advisory services, retail services, wholesale product delivery, as well as marketing programs. The Company is considered as one of the leading wholesale distributors of pharmaceutical along with allied products in Australia.

On 25 March 2020, the Company provided an update highlighting the impact of COVID-19 and trading updates in the Company’s letter to its shareholders.

Impact of Coronavirus & Trading Update

Regarding the impact of COVID-19, the Company mentioned that its approach during this pandemic has been to keep the safety and wellbeing of employees as well as customers paramount in decision making. API have processes in place to protect people from, and to lessen the spread of, coronavirus infection wherever possible.

These processes are applicable to operations at the pharmacy distribution centres, retail stores manufacturing sites, clinics, along with support offices of the Company.

Moreover, API stated that it has a strong management team in place to manage the Company through this pandemic. However, the situation is unstable, and it is not able to provide profit guidance for the second half of FY2020. API also mentioned that it could not forecast how long the improvement in like-for-like sales will continue.

Stock Information

On 26 March 2020, the stock of API ended the day’s trade at $1.220, a decline of 1.215% compared to its previous close. The Company has a market cap of $608.43 million and approximately 492.66 million shares outstanding. The 52-week low and high prices were $1.005 and $1.570, respectively. API has a P/E ratio of 10.380x and an annual dividend yield of 5.67%.

Sigma Healthcare Limited (ASX:SIG)

Healthcare sector player Sigma Healthcare Limited is engaged in providing a range of high quality, inexpensive private & exclusive label products and is a leading network of independent as well as franchised pharmacy stores such as Amcal, Chemist King, Discount Drug Stores (DDS), Guardian, PharmaSave, and more.

On 25 March 2020, the Company updated the market with its annual report (year ended 31 January 2020) highlighting its financials and the outlook for the fiscal year 2021.

The group financial highlights of the Company

Outlook:

  • Sigma Healthcare highlighted that it had had a robust start to the year, with coronavirus influencing volumes.
  • The underlying business continues to have a positive outlook, though timing and quantum will continue to be affected by COVID-19.
  • The Company mentioned that it had not provided formal guidance for the fiscal year 2021.
  • After finalisation and approval, the Company would provide an update on sales and leaseback transaction.
  • The Company will continue to operate with and support the pharmacy brands, suppliers, customers, and the government during the coronavirus outbreak.

Related: Is SIGMA a good healthcare stock to look at?

Stock Information

On 26 March 2020, the stock of API ended the day’s trade at $0.680, a decline of 0.73% compared to its previous close. The Company has a market cap of $725.66 million and approximately 1.06 billion shares outstanding. The 52-week low and high prices were $0.450 and $0.750, respectively. API has a P/E ratio of 12.3690x and an annual dividend yield of 8.03%.

Also Read: COVID-19 Uncertainty forces Companies to Withdraw Guidance and Dividend

Cochlear Limited (ASX:COH)

A medical device company, Cochlear Limited is into the development and supply of implantable hearing solutions to provide a lifetime of hearing outcomes. Currently, the Company is operating through the segments spanning across Americas, EMEA and the Asia Pacific regions and sells its products in more than 100 countries.

COVID-19 update

  • In line with Cochlear’s 16 March 2020 market update, the COVID-19 pandemic is expected to have a significant negative impact on cochlear implants for an uncertain period as elective surgeries are deferred across a growing number of countries.
  • Recovery of cochlear implant activities in China has begun following the mandatory shut-down, with Chinese surgery volumes currently above 60% of pre-COVID-19 levels despite Beijing and Wuhan remaining under shut-down.
  • Moreover, Cochlear mentioned that at this stage, the Company had not seen any disruption to its manufacturing supply chain, even though it continues to monitor the external environment closely.

The company mentioned that there is a significant impact expected from COVID-19 surgery deferrals, which could impact the revenue, Cochlear revealed its revenue by geography as well as by its products. 

Revenue by geography

  • Cochlear highlighted that China recovery subsequent COVID-19 outbreak-related mandatory shut-downs, with Chinese surgery volumes currently more than 60% of pre-COVID-19 levels despite Wuhan and Beijing remaining under shut-down.

Revenue by Products

  • The Company stated that material proportion of the cochlear implant market relates to implants for children.
  • Cochlear mentioned that the clinical demand for implantable hearing solutions is anticipated to remain stable over the medium and long-term, particularly as the deferred surgery backlog is addressed.

Stock Information

On 26 March 2020, the stock of API ended the day’s trade at $182.170, an increase of 8.435% compared to its previous close. The Company has a market cap of $9.72 billion and approximately 57.83 million shares outstanding. The 52-week low and high prices were $154.600 and $254.400, respectively. API has a P/E ratio of 46.650x and an annual dividend yield of 1.49%.


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This website is a service of Kalkine Media Pty. Ltd. A.C.N. 629 651 672. The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine Media does not in any way endorse or recommend individuals, products or services that may be discussed on this site. Our publications are NOT a solicitation or recommendation to buy, sell or hold. We are neither licensed nor qualified to provide investment advice. 

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