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Mid-Cap

One healthcare stock that plunged on profit downgrade

July 11, 2016 | Team Kalkine
One healthcare stock that plunged on profit downgrade

Primary Health Care Ltd


PRY Details
  • Profit estimate downgrade: Primary Health Care Ltd (ASX: PRY) stock fell 2.4% on July 11, 2016 after the company gave the weak trading update. After the balance sheet review and finalization of FY 2016, PRY expects to incur over $98 million in after?tax non?cash write offs. Out of these write?offs, $32 million is required to be accounted for prior periods and $66 million in the current year. Moreover, the impact on the profit after tax (NPAT) for FY2016 would be partially offset by $30 million of profit on sales of Medical Director and Transport Health, in addition to those items which were announced at the half year results for 2016. However, PRY had expected to meet the bottom end of its forecast range of $110 million to $115 million in case of normal trading conditions. But, they estimate to incur a write?off of about $4 million for the balance sheet review and a further adjustment of $2 million for the sale of Medical Director six weeks earlier than expected.  Accordingly, the group updated its underlying NPAT estimates to over $104 million for FY2016.
  • Recommendation: Given such pressure in the group’s bottom line performance, we give an “Expensive” recommendation on the stock at the current price of $3.73
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