Focus on Healthcare Player Ansell Amidst Coronavirus Fears

World Health Organization has declared coronavirus outbreak as “World Emergency”.

Alleged to have originated in a seafood food market in Wuhan, China, the deadly coronavirus continues to spread igniting global anxiety. While the United States Centers for Disease Control and Prevention confirms 5 cases of a SARS-like form of coronavirus in the country with the risk of spreading remains low, Wuhan Coronavirus death toll escalates to more than 200 with over more than 7,700 confirmed cases of infection across China as on Thursday 30 January 2020, consequently, forcing a lockdown in almost twenty cities.

Besides, Coronavirus cases have also been reported in countries including Japan, Nepal, Macau, Taiwan, Cambodia, Canada, Vietnam, Taiwan, the Philippines, South Korea, and Thailand, France, and Sri Lanka.

American and Canadian health officials have issued new and upgraded travel guidance recommending their citizens to avoid all non-essential travel to China.

With global health emergency, investors and market enthusiasts are on high alert while international markets jitters amid growing concerns about coronavirus outburst.

Global markets have also seen a steep drop amid virus fears when Chinese officials announced suspension of trading on the Shanghai and Shenzhen stock exchange on 23 January and agreed to resume trading on 3 February 2020.

The coronavirus has already caused a bit of a stir among travel, leisure and entertainment industry, significantly thrashing the retail and travel stocks, while the health care (drug and medical diagnostic companies), and e-commerce stocks are skyrocketing as these seemed to be clear beneficiaries of the illness. The Chinese government is also spending money in healthcare sector, including emergency services, vaccines and new hospitals. Reportedly, China has built a Coronavirus dedicated hospital within just 48 hours. Chinese healthcare stocks rose after the Wuhan virus outbreak.

The shares of American biotechnology companies Inovio Pharmaceuticals, Moderna Inc., and Novavax Inc. rose on Monday post the virus spread. CEPI (Coalition for Epidemic Preparedness Innovations) announced eleven-million-dollar funding to these drug companies for the development of new vaccine against the novel coronavirus strain (2019-nCoV). The University of Queensland in Australia has also received funding from CEPI and is developing vaccine for the deadly virus.

Ansell Limited tapping market opportunity

One AU healthcare player set to witness a rise in demand for its products is Ansell Limited (ASX: ANN). As the deadly infection is spreading at a rapid pace across the globe, the world is facing shortage of face masks across Asia, Australia, and main U.S. cities including New York, Chicago, and Toronto.

Ansell Limited (ASX: ANN) is a global leader in offering superior health and safety protection solutions for the betterment of human well-being and is continuously engaged in research, development and investing for the production and distribution of cutting edge product innovation and technology, sold under well-known brands. Ansell sells gloves, goggles, protective suits, ventilation suits, face masks.

The company manages three main businesses including Industrial, Healthcare and Life Sciences segments with operations in North America, Latin America/Caribbean, EMEA and Asia Pacific, and customers in over 100 countries globally.

Within the health care segment, the company operates a global business unit (HGBU) that manufactures and commercializes innovative solutions for an array of customers including hospitals, dental offices, veterinary clinics, pharmaceutical companies, chemical plants, laboratories etc. The HGBU portfolio include-

Ansell’s Strong Financial Performance for FY2019 ended 30 June is reflected by-

• Top-end boosted EPS guidance delivered with solid 9.3% growth despite dilutive impact from increase in tax rate.
• Organic Sales Growth of 1.9% which was dominated by HGBU (+4.0%) and counterbalanced by Industrial Global Business Unit (0.4%) resulting from a continued Europe market softness in the second half of FY2019.
• Rock-solid operational implementation, Transformation Program execution in progress, pricing & mix all added to growth of EBIT margin by 50bps in spite of higher raw materials.
• Reported solid growth in cash flow with adjusted free cash flow conversion adjusted 101.8%.
• The company also continued disciplined capital implementation.
• Share buybacks- $176.0 million
• Dividends- $62.1 million
• $75.5 million in M&A

Financial Summary for Ansell’s HGBU for FY2019

Ansell reported robust HGBU organic growth for the fiscal year 2019. Key highlights are-

Sales Growth and Expanded Footprints

• Recorded 4.0% overall organic sales growth.
• Delivered 3.4% growth in mature markets.
• Delivered 6.8% in emerging markets including Mexico, India, Korea, China, Russia.
• Strong performance in Single Use/Exam and Life Science, Surgical expansion.

New Product Sales

• The sales of new products- Microflex® High Chem, GAMMEX® PI Hybrid™, Microtouch® DENTA?GLOVE, Microflex® High Chem Clean, GAMMEX® PI Glove?in?Glove™ System, Microflex®, Ultimate Barrier 93?850, were up 8.6% reflecting strong growth and innovation leadership.

Enhanced Organic Growth

• Reported core life sciences growth of 11%. The ongoing sales are powered by recent acquisitions.
• Reported core industrial exam growth of 5.2%, backed by solid performance of TNT®, Microflex®, Global expansion and Triple layer HiChem®.
• Continued Globalizations of Ansell’s Growth Brands as depicted below.

Source: AGM Presentation

Ansell’s Transformation

In 2019, Ansell witnessed organisation transformation which included changes in its current corporate structure to a more efficient and focused in serving its 2 remaining strategic business units, and an improved manufacturing footprint.

Stock Information-

On the stock front, ANN’s shares are trading close to its 52 weeks high at $32.070 on 31 January 2020 (2:15 PM AEDT).

The market capitalization of the company stands at $4.18 billion with 130.21 million outstanding shares. The P/E ration was noted at 27.23x with $1.178 EPS. On a three months basis, the company recorded a positive return of ~16%.

In a nutshell, Ansell Limited is well placed with sound profitability, and a solid balance sheet & cash flow with a clear focus on its clients and markets including how further growth can be accomplished both organically & by acquisitions.

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