What’s the Buzz around Health Care Stock Pro Medicus?

What’s the Buzz around Health Care Stock Pro Medicus?

Incorporated in 1983 and listed on ASX in 2000, Pro Medicus Limited (ASX: PME) is a group within the health care domain that serves imaging centres, hospitals and other health care groups globally by offering radiology imaging software and services. Pro Medicus had bought Visage Imaging in January 2009 which has evolved as a worldwide provider of leading-edge enterprise imaging solutions, developing the best-of-breed enterprise imaging strategy. Visage 7 has an intelligent thin-client viewer that delivers remarkably fast, multi-dimensional images. The company offers top-line RIS, PACS and e-health solutions comprising of wide-ranging end-to-end offerings in the field of radiology.

Pro Medicus secured contract worth $9 million

Recently, on 4 November 2019, Pro Medicus declared to the market that it had signed 5-year contract with OSUWMC or The Ohio State University Wexler Medical Center worth $9 million. It was notified to the market that Visage Imaging, Inc., which is Pro Medicus wholly owned U.S. subsidiary, has signed this contract to implement Pro Medicus’ Visage 7 technology across all the radiology departments of OSUWMC’s spanning seven hospitals and outpatient clinics, as well as integrated to OSUWMC’s electronic health record. A large multi-disciplinary academic medical center located in Columbus, Ohio, OSUWMC employs around 1,700 physicians, 30,000 staff, supporting over 1,500 inpatient beds and would be integrated into its electronic health record

This contract is based on a transaction-based licensing mode with potential advantages. It is expected that the execution of this contract would begin in the second quarter of the financial year 2020 to complete in mid-2020.

But why Pro Medicus was being slammed earlier?

As per certain media sources, there has been a lot of buzz in the market as Pro Medicus peer company Canon bagged a $47.2 million deal to roll out a new medical imaging software for Western Australia Health. Consequently, Pro Medicus shares tumbled down by 22%, going under tremendous pressure in the last two weeks till 1 November 2019.

Highlights from the Annual Report for the Financial Year 2019

Financial Highlights

• For the financial year ended 30 June 2019, the company reported a remarkable 91.9% increase in net profit after tax (NPAT) to $19.13 million as compared to $9.96 million for the previous corresponding period.
• Operating Profit Before Interest and Income Tax was noted at $25.8 million representing and an increase of 69.8% when compared with $15.2 million for FY2018.
• Underlying after-tax profit was noted at $22.74 million for FY2019, which surged up 83.1%.
• Revenues generated from continuing operations amounted to $50.11 million for FY2019 with an increase of 47.9% on $33.87 million for FY2018.
• Total revenues recognised were valued at $50.3 million, up 48.4% for FY2019 as compared to $33.92 million for FY2018.
• Pro Medicus also reported a 51.6% increase in EBIT Margins for FY2019.
• As on 30 June 2019, the company held cash reserves of $32.32 million representing an increase of 28.0% and indicating a robust debt free balance sheet.
• Total assets as at 30 June 2019 were valued at $84.2 as compared to $61.04 million for 2018.
• Pro Medicus also reported shareholders’ funds as at 30 June 2019 to $49.2 million in comparison to $35.07 million for FY2018.
• Further, the company reported dividends of 10.5c per share fully franked, increase of 75.0%.
• Net Tangible Assets per Share at 30 June 2019 were noted at 24.0 cents for FY2019 compared with 10.0 cents for FY2018.
• Earnings per Share (EPS) reported at 18.5 cents for FY2019, reflecting a significant increase of 90.7% compared to 9.7 cents for FY2018.

Business Highlights

• The company experienced a strong growth in transaction revenue in its North American Business, where an increase of 43.5% was reported.
• Expanding its North American footprints, Pro Medicus had secured two key contracts (details given below in the article).
• Subsequently, five of top 20 hospitals in the United States have standardised on Pro Medicus Visage 7 technology and the implementation of this technology is either on or ahead of the scheduled time.
• It is anticipated that future revenue would grow to $180 million over the next five years.
• Moreover, it was reported that Pro Medicus Australian and European business segments continued performing well and remained strong contributors for its growth with further adoption of its Visage RIS in Australia, and a $3 million contract to a German government hospital in Europe.
• In terms of quantity and quality of future opportunities the company has a strong pipeline.

Pro Medicus Segment Wise Performance

Australia

• Under the Australian operations, the company has a focus on research and development of the Visage RIS and e-health products. The company is also engaged in sales and service/support functions of both Visage RIS and Visage 7 products.
• The advancing execution of Visage RIS fulfilling the five years long term contracts with I-MED Network Radiology and Healius (previously known as Primary Health Care) as well as winning new customers led to an increase in the Australian revenue by 30.2% when compared with the previous year.
• Regardless of growing competition, the company’s e-health offering, Promedicus.net, experienced modest growth all over the year.

North America

• Pro Medicus’ team in this region consists of sales, marketing, implementation and service/ support staff. This has also been a strong contributor to the overall performance of the company.
• Its North American revenue grew by 42.2% relative to the previous year, attributable to constant progress in transaction-based revenue resulting from an increasing volume of existing client’s transaction. In addition, the previously won contracts came on stream.

Europe

• For European operations, precisely in its Berlin office, the company has a focus on R&D of Visage Imaging products globally together with sales, marketing and service/support functions.
• Revenue from Pro Medicus’ European operational activities grew by 102.3% in comparison to previous year.
• In December 2018, the company extended its contract with a large German Government Hospital This agreement included some additional licenses for the current site. Moreover, the contract would also see Visage 7 and Visage 7 Open Archive to serve as the central components of a next-generation imaging infrastructure at two additional hospitals within the network.

Let’s have a look at how Pro Medicus’ Stock is performing on ASX. On 5 November 2019, PME stock was trading at $25.34, up 1.158% (at AEST 1:38 PM). The market capitalisation of the company stood at $2.6 billion with ~103.98 million outstanding shares. The 52 weeks high of the stock was noted at $38.39 with an average (year) volume of 449,649 and PE ratio of 135.41x. PME stock generated a significant return of 120.29% on year-to-date basis.

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