2 Healthcare Stocks - COH, RHC

Cochlear Limited

COH Announces Investment in Nyxoah: Cochlear Limited (ASX: COH) had earlier made an announcement that they have deployed €13 million (A$21 million) in Nyxoah S.A. The release stated that Cochlear happens to monitor the market for novel technologies as well as implantable devices that in long term might leverage or enhance its core technology. Moreover, this investment in Nyxoah happens to form part of the innovation fund of Cochlear. The company posted net profit amounting to $245.8 million in FY 2018 implying the rise of 10% on the YoY basis and this was within the guidance range of $240 million-$250 million.


FY18 P&L Statement (Source: Company Reports)

The key personnel of the company had stated that the company’s deployments towards sales and marketing activities happen to build awareness of as well as access to the implantable solutions and have been supporting the market growth momentum.Moreover, the company happens to possess decent position with regards to the margins as its net margin in FY 2018 was 18.5% which implies the improvement of 0.7% on the YoY basis reflecting the company’s capability to convert the top line into the bottom line. Its operating margin in FY 2018 was 25.5% reflecting YoY improvement of 0.3%.

What to Expect from COH Moving Forward: There are expectations that Cochlear Limited would be delivering reported net profit amounting to $265 million-$275 million in FY 2019 which would be a rise of 8%-12% on FY 2018. The management of the company had stated that, in FY 2019, growth would be aided by deployments which have been made towards the product development as well as market growth initiatives. Moreover, the company’s balance sheet as well as free cash flow generation happens to be robust and it is also targeting a dividend payout ratio of approximately 70% of the net profit.   
Stock Recommendation: On the monthly chart of COH, Exponential Moving Average or EMA has been applied and default values were used for the purposes. After careful observation, it was noticed that the stock price has crossed the EMA and had trended in the upward direction which suggests the bullish momentum. Also, Moving Average Convergence Divergence or MACD has been applied on the monthly chart and default values were used.It was noticed that MACD line has crossed the signal line and had trended downwards after the crossover which reflects bearishness.

Considering the above-mentioned factors, we advise market players to keep a close watch on the stock at the current market price of A$197.000 per share (up 1.39% on 14 February 2019) and wait for the better entry level.
 

Ramsay Health Care Limited 

Decent Performance Supported RHC’s Australia Segment: Ramsay Health Care Limited (ASX: RHC) had stated that the Australian hospitals demonstrated decent performance in FY18 even though there were industry headwinds which reflects the strength as well as a diversity of the portfolio. With regards to the same segment, the company stated that industry has been impacted by affordability as well as negative focus towards private health insurance. The operational efficiencies have made a contribution towards the robust operating result.


Australian Hospital Financial Performance (Source: Company Reports)

Ramsay Health Care Limited is in a decent position when it comes to its key margins. The company’s net margin stood at 4.5% in FY 2018 which is higher than the industry median of 3.2% which demonstrates that the company’s increased strength to convert the top line into the bottom line as compared to the broader industry. The company’s EBITDA margin stood at 13.5% in FY 2018 which is higher than the industry median of 13.4%.

What to Expect From RHC Moving Forward: Ramsay Health Care had stated that long term industry fundamentals have been driving the healthcare demand.  Moreover, it stated that a robust balance sheet provides sufficient scope for the expansion purposes.

With regards to the Australia segment, the company stated that it would be maintaining the focus towards the innovationas well as cost optimization strategies.

Stock Recommendation: On the monthly chart of RHC, Moving Average Convergence Divergence or MACD has been applied and default values were used for the purposes. There is an expectation that the MACD line might cross the signal line. If the crossover occurs, it would signify the bullish momentum.

Moreover, the company might be supported by a better net margin as compared to the industry median. Based on the above-mentioned factors, we maintain our “Buy” rating on the company’s stock at the current market price of A$57.740 per share (down 1.468% on 14 February 2019).
 

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