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Covid-19 has outspread to countries like Israel, Italy, Austria, South Korea, Switzerland, Iran and Croatia. For a matter of fact, healthcare representatives have indicated that the new virus has the capacity to be a worldwide disease, which is sufficient to frighten the investors.
Coronavirus Death Toll Escalates
The spread of this deadly disease Covid-19 has interrupted business and day to day life in China and in many other countries. The death toll has increased to around 7 in Italy. On February 26, 2020, the number of people contaminated with coronavirus rose to 400 in Italy, according to media sources. Iran has reported 19 deaths so far and more than 100 cases of infection.
As per a recent report, by Nancy Messonnier, MD, Director, NCIRD, United States is expected to witness more cases of coronavirus impact. The country so far has 57 confirmed cases that consist of around 40 people who were tested positive for COVID-19 and had been deported from the Diamond Princess cruise ship.
Coronavirus has affected around 2,715 fatalities and afflicted above 78k people in China as of now. Whereas, worldwide, more than 80,000 people have been infected with this illness. Infections in South Korea have impeded approximately 1,000 people, along with the first alleged case lodged in Latin America. With no cure accessible till now, the threat of the outbreak remains a major concern.
On February 11, 2020, China’s National Health Commission’s declared that the number of new and confirmed cases declined to 2,478 from 3,062. Nevertheless, the very next day, 242 new deaths were registered, nearly double the previous day's toll. The number of confirmed new cases in Wuhan alone affected 14,840 as of February 12, 2020.
Source: World Health Organization
Why Consider Defensive Stock?
Wuhan and China have been witnessing rise in Covid-19 cases. Airlines are cancelling flights and schools have declared holiday for an unspecified time period. Although, factories are reviving, the profit is negligible presently, as the threat of virus spread are increasing panic on a global basis.
Furthermore, the spread of this virus has interrupted trade and multi-national businesses’ point of view. Many organisations have been compelled to find another way and shift their production & manufacturing to the United States and Mexico.
Therefore, amidst the existing anxieties and uncertainties due to the outbreak of Covid-19, investing in defensive stocks like healthcare can be helpful. Healthcare stocks offers steady returns irrespective of market circumstances. Demand for these products or services is constant regardless of market cycles as these tailors to basic human essentials.
3 Healthcare stocks to Consider
Healthcare companies are continuously trying to discover a remedy and control the outbreak. On the backdrop of the spread of Covid-19, healthcare stocks appear to be a sensible investment as the possible discovery of a remedy might lead towards the massive gains.
We have picked three healthcare companies, amid the current reporting season wherein the companies are publishing mixed earnings results and guidance, on the backdrop of coronavirus impact on their businesses.
Sonic Healthcare Limited (ASX: SHL)
Sonic Healthcare Limited is an ASX listed company and is headquartered in Sydney. The company is one the largest medical diagnostic companies, which provide laboratory, imaging and radiology services to medical practitioners that includes doctors, hospitals, community health services, and patients. Sonic Healthcare operates in Australia, New Zealand, the USA Germany, Switzerland, Belgium, the UK and Ireland.
Results for 1HFY2020 (period ended 31 December 2019)-
The company has recently released its results for the period ending 31 December 2019, wherein it reported revenues of $3,344 million, an increase of 15% on actual currency and 12% on constant currency, on a year over year basis. Organic revenue grew approximal 5% on constant currency. Net profit for the period increased 15% to $256 million. The increase was primarily due to organic growth, along with growth due to acquisition. The decent financial performance resulted in EPS to rise by 3.5% to 53.7 cents per share.
The company has also declared a partially franked interim dividend of 34 cents per share which is to be paid on 25 March 2020. The underlying EBITDA grew ~14% on actual currency and 11% on constant currency.
Outlook for FY2020-
The company is in a strong and a stable position and is expecting organic growth in coming years. For FY20, SHL expects EBITDA growth in the range of 6-8% on underlying FY2019 EBITDA of $1,052 million. Tax rate is expected to be ~25%. Capital expenditure expected to decrease in the financial year 2020. The company will continue to boost services and efficiencies and will mitigate risk through geographical expansion.
Stock Information-
On 2 March 2020, SHL stock was trading at $28.915, up by 0.399% (at AEDT 2:34 PM). With almost 475.05 million shares outstanding, the company’s market capitalisation stood at nearly $13.68 billion.
Ansell Limited (ASX: ANN)
Ansell Limited is engaged in the development of product innovation and technology in the industrial and medical markets. The company is a world-leading superior health and safety protection provider and is involved into improving human well-being. Ansell is operating in two primary business segments that are healthcare and industrial. The company employs more than 12,000 people worldwide and operates in Latin America/Caribbean, North America, Asia Pacific, and EMEA.
Ansell is involved in the activities to protect China from the outbreak of the deadly virus and ensure that the crisis have a minimal effect on the nation, by manufacturing Personal Protective Equipment. The company is working in partnership with Chinese authorities to manufacture and distribute protective clothing where it is required most in China.
Results for 1HFY2020 (period ended 31 December 2019)-
During the half year ended 31st December 2019, sales amounted to US$753.3 million, indicating a growth of 5.3% on constant currency basis and 3.9% normally. The company provided 2.4% organic revenue growth that is led by enhanced IGBU performance (which increased 1.3%) and continued HGBU momentum of 3.4%.
EBIT for the period came in at US$91.8 million, up 17.4% on constant currency basis and 4.8% on a reported basis. Operating cash flow for the period remained strong at US$47.8 million, with a cash conversion rate of 92.9%. Interim Dividend amounted to 21.75 US cents, up 4.8% year over year. The earnings per share of the company increase by 25.7% on a constant currency basis and came in at $50.1 cents per share.
What to Expect in FY2020?
While the first half faced pressure due to global economic uncertainty, the company expects global growth to somewhat stabilise in the second half period. Further, it anticipates the net financial effects on operations from the Coronavirus crisis to be minimal. EPS for FY20 is expected in the ambit of 112 US cents – 122 US cents, as compared to FY19 full year adjusted EPS of 111.5 US cents.
Stock information-
On 2 March 2020, ANN stock was trading flat at $29.600 (at AEDT 2:46 PM), with almost 130.21 million shares outstanding, the company’s market capitalisation stood at nearly $3.85 billion.
Alcidion Limited (ASX: ALC)
Alcidion Limited is an Australian health care sector player, which is working to transform the health care industry with smart, intelligent and intuitive technology solutions to meet the needs of allied healthcare and hospital worldwide. The company offers numerous software products which provide a distinctive contribution to the health care market at the macro level.
Results for 1HFY2020 (period ended 31 December 2019)-
For the first half of FY2020, the company reported revenue of ~ $8.2 million, which increased 12.3% on a year over year basis. The company unveiled Miya MEMRe, post the successful innovation Proof of Concept (PoC) at Murrumbidgee Local Health District (LHD). Net loss for the period stood at $1.8 million, mainly due to higher investments. Revenue of nearly $15.4 million is already set to be recognised in the FY20, compared to FY19’s complete year revenue standing at $16.9 million along with total sold revenue of approximately $37.2 million out to the FY2025. Alcidion’s cash reserve for the period stood at ~$17.2 million.
Outlook
As per the release, the company continues to expand its sold revenue pipeline for FY20 and beyond. Going forward, the company expects expenditure to rise in 2HFY20, as a result of higher investments made in sales and marketing, bolstering Group infrastructure in the UK and ANZ, and accelerating product development.
Stock information-
On 2 March 2020, ALC stock was trading flat at $0.135 (at AEDT 3:06 PM). With almost 990.69 million shares outstanding, the company’s market capitalisation stood at nearly $133.74 million.
