ResMed Inc
Acquiring MatrixCare: ResMed Inc (ASX: RMD), with a market capitalization of $20.96bn, has now entered into a First Amendment to Amended and Restated Credit Agreement; and this will enhance the size of senior unsecured revolving credit facility. The rise has been slated from $800 million to $1.6 billion in U.S. dollars while there is an uncommitted option for further rise in revolving credit facility by $300 million. The group has otherwise signed a definitive agreement for the acquisition of privately held MatrixCare, which is a leader in U.S. long-term post-acute care software, serving more than 15,000 providers across skilled nursing, life plan communities, senior living and private duty. The transaction is said to be worth a purchase price of $750 million, representing a valuation multiple of 25 times the expected calendar year 2018 pro forma EBITDA of $30 million. Under its agreement, MatrixCare will become the surviving company and a wholly owned subsidiary of ResMed operations. While ResMed is expected to have a good technological footprint across major care settings with this acquisition and it will be able to set up an integrated ecosystem of solutions, the news has garnered mixed views from investors.
Meanwhile, ResMed’s quarterly result for period ended 30 September 2018, demonstrated the revenue growth of 12% to $588.3m while net income increased by 23%. During the quarter, RMD also paid $52.8m in dividends. Looking at the fundamentals with improved financials, the stock is trading at a high P/E multiple (around 50x) and is on a higher side of trading levels. We maintain an “Expensive” recommendation at the current price of $ 14.960 and look for a better entry opportunity.
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1Q FY 19 Financial Performance in millions (Source: Company Reports)
CSL Limited
Positive prospects: Global specialty biotechnology company with a market capitalization of $86.56bn, CSL Limited (ASX: CSL), maintains a decent return on invested capital (25.9%) with an efficient capital management structure in place. It has delivered a 11% growth in the total operating revenue to US$7.9 billion in FY 18. On a constant currency basis, the company reported net profit after tax growth of 29% to US$1.7 billion. CSL has declared a final unfranked dividend of US 93 cents per share or approximately A$1.28 for the FY 18. The company’s shareholder numbers rose over 7% to now more than 158,000 shareholders. For FY 19, CSL’s net profit after tax is expected to be in the range of approximately $1,880 to $1,950 million indicating growth over FY18 of 10-14%. On the other hand, CSL is embarking on a major clinical trial with CSL112. The trial would evaluate the efficacy and safety of a novel protein infusion therapy for the reduction of early recurrent cardiovascular events following a heart attack. The phase III trial has started in April this year, that was slated to enroll over 17,000 patients from medical centers around the world.
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Delivering on Strategy (Source: Company Reports)
Meanwhile, CSL stock rose about 35.6% in this year to date but corrected over 5% (as on November 08, 2018) in the last three months.CSL has a high P/E ratio of about 36.850 x. While it has fallen down significantly, the stock still looks on a relatively higher side. We maintain an “Expensive” recommendation on the stock at the current price of $ 190.58.
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