Healthcare Stars – CSL, RHC, SHL

  • Feb 07, 2020 AEDT
  • Team Kalkine
Healthcare Stars – CSL, RHC, SHL

Global Healthcare sector is under spotlight amidst havoc created by China’s coronavirus outbreak with several players tapping the market opportunity to look into cure and prevention of the same.

Incorporating wide range of health services and facilities, healthcare sector in Australia has the market size of ~$152 billion and is employing 785,850 people.

As per the surveys taken, hospitals are the largest subdivision which derives revenue for the healthcare sector in Australia. Apart from hospitals, general physicians, clinical experts and orthodontists also represents a major revenue stream for the subdivision.

Ministry of Health, Department of Health & Human Services Victoria, Queensland Health and Department of Health of Western Australia are the players which hold the largest market share in the health services in Australia.

The growing population with increasing old aged habitants and flourishing private health care sector is expected to be the key driver for the growth in the healthcare sector in the near future. Moreover, the growth in the healthcare revenues are also likely to boost the sales of the health insurance companies.

The foundation of the health care outlook is dependent on the rising health care expenses, complex health and technology ecosystems and alternative models for revenue. While there will be uncertainties, rising frequency of the chronic diseases and the growing unmet medical needs are navigating the drivers for the strategic change for 2020 and the years beyond.

However, it is important to know if the stakeholders are ready to take the shift and lock the delivery of future in the health care sector. Generally, the demographic and economic changes threatens the quality of the healthcare demanded of the citizens. The adoption of new technology and platforms which integrates data aid in offering the new solutions to tackle the traditional challenges and further helping to take the informed and proactive decisions.

Not to forget, the financial challenges have dominated the global health care to contrasting degrees. But the Government has moved the needle and has adopted the universal health care coverage and has introduced pricing controls on pharmaceuticals and medical technology devices.

Let us see how the healthcare sector stocks are performing!

CSL Limited (ASX: CSL)

CSL Limited (ASX: CSL) is engaged in development, manufacturing and marketing of pharmaceutical and diagnostic products, cell culture media and human plasma fractions. As on 7 February 2020, the market capitalization of the company stands at $145.52 billion.

The company has recently announced that it will release its interim results for FY20 on 12 February 2020.

Strong Financial Position: In the recently held presentation with JP Morgan, the management stated the company has a strong financial position with revenues of approximately ~$8.5 billion in over 100 countries. The company also has a robust Net debt/EBITDA multiple of 1.4x and a credit rating of A3/A.

In the recently held AGM, the management of the company stated that net profit after Tax went up by 17%, ahead of the company’s guidance for FY19. Owing to the strong financial performance, the company declared higher dividends.

Stock Performance: The stock of CSL is trading at $320.01, down by 0.19% on 7 February 2020 (3:46 PM AEDT). As per ASX, the stock of CSL gave a return of ~47.5% in the past 6 months and a return of 15.83% in the past one month. In terms of valuation, the stock is trading at a P/E multiple of 53.080x and is offering a dividend yield of 0.83%.

Ramsay Health Care Limited (ASX: RHC)

Ramsay Health Care Limited (ASX: RHC) is a global hospital group holding and managing a broad range of healthcare facilities across Australia, Malaysia, UK, France and Indonesia.

In the recently held Annual General Meeting, the top management of the company stated that the company has the differentiated business based on scale, Diversified portfolio, Industry leading quality and Deep and experienced leadership. The company has recently appointed Mr. Martyn Roberts as Group Chief Financial Officer.

Decent Financial Performance: During FY19, revenue of the company went up by 24.4% on previous year and stood at $11.4 billion. In the same time span, net profit after tax was $590.9 million, up by 2.0% on previous year. Owing to the decent financial performance, full year dividends (fully franked) went up by 5.2% and stood at 151.5 cents.

As on 7 February 2020, the market capitalisation of the company stands at $16.06 billion.

Growth Opportunities: The company anticipates stronger volume growth in FY20 and is targeting Core EPS growth on a like-for-like basis of 2% to 4%. It also expects that the changes in operating model will contribute positively to earnings in coming years.

Stock Performance: The stock of RHC is currently trading at $79.260, down by 0.24% on 7 February 2020 (3:46 PM AEDT). As per ASX, the stock of RHC gave a return of 10.33% on the YTD basis and a return of 12.98% in the past three months. In terms of valuation, the stock is trading at a P/E multiple of 29.99x and is earning a dividend yield of 1.91%.

Sonic Healthcare Limited (ASX: SHL)

Sonic Healthcare Limited (ASX: SHL) is one of the global leading medical diagnostics players which provides radiology and lab solutions to hospitals , community health services, medical practitioners as well as patients. As on 7 February 2020, the market capitalization of the company stands at $14.82 billion.

Financial Update: In the recently held AGM, the top management of the company stated that FY 2019 result was in line with the guidance. During FY19, the company witnessed a revenue growth of 11.6% to $6.2 billion and EBITDA went up by 13.3% to $1.1 billion. The strong financial performance enabled the board to declare the final dividend of $0.51 per share, up by 4.1% on the previous year. This took the full-year dividend to $0.84, representing an increase of 3.7%.

What to Expect from SHL Going Forward: SHL is well positioned for ongoing strong growth. The company has given the guidance for FY20 EBITDA and expects a growth of 6-8% on underlying FY 2019 EBITDA of $1,052 million. The company also expects a lower capital expenditure.

Stock Performance: The stock of SHL is currently trading at $31.225, down by 0.335% on 7 February 2020 (3:46 PM AEDT). As per ASX, the stock of SHL gave a return of 16.12% in the past 6 months and a return of 7.26% in the last one month. In terms of valuation, the stock is trading at a P/E multiple of 25. and is earning a dividend yield of 2.68%.


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