Stocks’ Details
 

Ansell Limited

Robust Demand for Hand and Body Protection Products: Ansell Limited (ASX: ANN) provides health and safety protection solutions, which enhances human well-being. The market capitalisation of the company stood at $3.5 Bn as on 1^st April 2020. On the operational front, the company is witnessing strong demand for AlphaTec® hand and body protection products which have been tested and certified to recognized standards for protection from infective agents. However, due to the increasing spread of COVID-19, the company expects delays and possible disruptions in transport and local distribution. The below picture provides an idea of statutory results for 1H FY20:


Highlights of Statutory Results (Source: Company Reports)

FPS Guidance for FY20: On the back of the forward order pipeline, the company expects earnings per share in the ambit of US112¢ to US122¢ for FY20.

Valuation Methodology: P/CF Multiple Based Relative Valuation

P/CF Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: As at 29^th February 2020, the company possessed a strong balance sheet position with cash and committed undrawn bank facilities of around $515 million. Current ratio of the company stood at 2.91x in 1H FY20 as compared to the industry median of 2.84x. This reflects that the company is in a decent position to address its short-term obligations against the broader industry. We have valued the stock using P/CF-based relative valuation approach, and for the purpose, we have taken peers such Sonic Healthcare Ltd (ASX: SHL), Ramsay Health Care Ltd (ASX: RHC), Resmed Inc (ASX: RMD) etc., and arrived at a target price, which is offering an upside of high-single digit (in percentage terms). Therefore, in light of decent liquidity position, balance sheet and decent outlook, we maintain a “Hold” rating on the stock at the current market price of $28.890 per share, up by 6.252% on 1^st April 2020.

Ramsay Health Care Limited

Capacity and Support to Government: Ramsay Health Care Limited (ASX: RHC) is a well-known hospital group, which owns and operates numerous healthcare facilities. The market capitalisation of RHC stood at $11.58 Bn as on 1^st April 2020. The company recently notified the market that it is capable of providing capacity and support in order to restrict the spread of COVID-19 to Government. As per the release by the Ministry of Health, all states and territories would complete private hospital COVID-19 partnership agreements in the upcoming days.

During 1H FY20, the company experienced decent performance from the businesses in the UK, Continental Europe and Asia, but this was partially offset by more challenging conditions in Australia. Moreover, it has continued the practice of investment in infrastructure and research in order to place the business for the future growth including digitalising and integrating its IT systems.


Key FY20 Dates (Source: Company Reports)

Suspension of Guidance: Considering the rising fear of COVID-19, the company has withdrawn its earnings guidance for the full-year 2020. However, growth in every aspect is a key focus for the company.

Valuation Methodology: P/E Multiple Based Relative Valuation

P/E Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Gross margin and EBITDA margin of the company stood at 74.9% and 16.7% in 1H FY20 as compared to the industry median of 36.7% and 10.8%, respectively. Net margin of RHC stood at 4.2% against 3.3% of the industry median, which reflects that the company has decent capabilities to convert its topline into the bottom line as compared to the peer group. We have valued the stock using P/E based relative valuation method, and for the purpose, we have taken peers such as CSL Ltd (ASX: CSL), Sonic Healthcare Ltd (ASX: SHL), Resmed Inc (ASX: RMD) etc., and arrived at a target price, which is offering an upside of lower double-digit (in percentage terms). Therefore, considering the decent growth in key margins and capabilities to convert its top-line into the bottom-line, we give a “Buy” recommendation on the stock at the current market price of $61.870 per share, up by 8.013% on 1^st April 2020.

Fisher & Paykel Healthcare Corporation Limited

Designated as Essential Service: Fisher & Paykel Healthcare Corporation Limited (ASX: FPH) is the manufacturer of medical devices and system, which are used in respiratory care, acute care, surgery etc. The market capitalisation of the company stood at $16.57 Bn as on 1^st April 2020.

Fisher & Paykel Healthcare recently confirmed its status as essential service provider and has assured that it will continue operations in its Auckland facilities. The company is continuing to focus on addressing the global demand for its respiratory products which are directly involved in treating patients with COVID-19.  The below picture gives an overview of the income statement for 1H FY20:


Income Statement (Source: Company Reports)

Revised Full-Year Guidance: The company has revised its guidance and now it expects full year operating revenue of around $1.24 billion and net profit after tax is anticipated in the vicinity of around $275 million to $280 million. FPH revised the guidance by assuming NZ:US exchange rate of around 61 cents and an NZ:EU exchange rate of around 55 cents.

Stock Recommendation: During 1H FY20, the company has paid $77.5 million in the form of a dividend, which reflects a rise of 22%. The stock of FPH is trading at a price to book multiple of 18.9x as compared to the industry median (Healthcare) of 1.9x on TTM basis.  As per ASX, the stock of FPH is trading closer to its 52-week higher levels of $31.470 and a premium P/E multiple of 74.04x against 0.9x of industry median (Healthcare) on TTM basis. Hence, considering the aforesaid facts and current trading levels, we have a watch stance on the stock at the current market price of $29.780 per share, up by 3.259% on 1^st April 2020.
 
 
Comparative Price Chart (Source: Thomson Reuters)

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