3 Stocks in Health Care Domain - RHC, RMD, CSL

Stocks’ Details

Ramsay Health Care Limited

Acquisition of Capio to Support RHC in Long-term: In the annual general meeting of Ramsay Health Care Limited (ASX: RHC) for November 2018, the management of the company gave insights about the acquisition of Capio. As per the management, Ramsay’s decision to acquire integrated healthcare network of Capio happens to be in line with the strategy of RHC which focuses on enhancing businesses (out of the hospital as well as hospital). The acquisition would also support Ramsay Health Care in terms of improving the global portfolio with respect to the fresh and new markets.

In FY 2018, Ramsay Health Care generated EBIT amounting to $1.008 billion which reflects the growth of 6.8% on the YoY basis.


RHC’s FY 2018 Financial Highlights (Source: Company Reports)

Positive industry Fundamentals to Support RHC Moving Forward: In the annual report for FY 2018, the management of Ramsay Health Care Limited stated that industry fundamentals on a long-term basis happen to be strong. In the AGM presentation also, the management of the company stated that across the regions, there has been increase in the spending related to the health. Since the industry fundamentals would support the healthcare market, the management (as per the annual report of FY 2018), would enhance the operations so that the demand can be addressed.

The management of Ramsay Health Care Limited, in the annual report for FY 2018, also stated that the activities which are focused on growth which would support the earnings of the company over the long-term.

Stock Recommendation: Two technical indicators have been applied on the daily chart of Ramsay Health Care Limited by using the default values. As per the observation, the stock price has crossed the EMA (Exponential Moving Average) and is moving upwards which signifies that the bullish momentum is expected to be witnessed. As per MACD (Moving Average Convergence Divergence), there are expectations that the MACD line would cross the signal line and after crossover, it would move upwards.

As a result, we maintain our “Buy” rating on RHC at the current market price of A$54.820 per share.


RHC Daily Chart (Source: Thomson Reuters)
 

ResMed Inc.

Revenues of RMD Grew YoY in Q1 FY 2019: ResMed Inc. (ASX: RMD) ended Q1 FY 2019 by generating revenues of $588.3 million which implies the YoY growth of 12%. But, on a constant currency basis, the growth in the revenues in Q1 FY 2019 on the YoY basis was 13%. The robust momentum in the revenues was witnessed on the back of favourable momentum in the offerings. The top management of the company stated that in Q1 FY 2019, the company managed to improve the portfolio of the products. The company’s portfolio witnessed upgradation in the health solutions which are digital, and the portfolio also saw new masks.

 
RMD’s Financial and Operating Metrics (Source: Company Reports)

Respiratory Care, SDB Markets to Support RMD Moving Forward: As per the Form 10-K of ResMed Inc. ended on June 30, 2018, the respiratory care as well as SDB markets would witness favourable momentum moving forward. Some of the primary initiatives which would support RMD in tapping the growth opportunities related to respiratory care as well as SDB markets and in the business expansion consists of increasing the geographic presence, innovation related to respiratory care and SDB products as well as product development.

However, utilizing the management’s experience, entering in the new clinical applications space as well as working towards enhancing the clinical as well as public awareness are some other factors which could support the ResMed Inc. moving forward.

Stock Recommendation: On the daily chart of ResMed, exponential moving average or EMA has been applied and default values have been considered. As per the observation, the stock price is about to cross the EMA and after the crossover, there are expectations that there would be bearish momentum. However, the crossover has not yet occurred.

As a result, the investors need to closely watch the stock at the current market price of A$15.840 per share.


RMD Daily Chart (Source: Thomson Reuters)
 

CSL Limited

What Factors Supported CSL Behring: As per the annual report of FY 2018, CSL Limited’s (ASX: CSL) CSL Behring witnessed favourable momentum. Its sales stood at US$6.6 billion which implies the growth of 10% YoY on a constant currency basis. The positive momentum in the sales of Immunoglobulins in FY 2018 on the YoY basis primarily because of the heightened demand levels on a global basis.


CSL’s Financial Performance (Source: Company Reports)

The company had generated net profit after tax or NPAT amounting to $1.7 billion in FY 2018 which implies the YoY growth of 29%. However, on a constant currency basis, the growth happens to be 28% YoY. The management of the company reflected favourable views related to FY 2018 results and stated that 29% growth with respect to profits reflects a marginal rise from the May guidance. 

Investments to Support CSL’s Growth: In the AGM for FY 2018, the management of CSL Limited stated that they would be making deployments so that the growth initiatives can be well-supported.In the same presentation, it was mentioned that capital expenditure or CAPEX in FY 2019 is expected to be in the range of around $1.2-$1.3 billion.

However, in the 2018 AGM presentation, the company stated that plasma as well as recombinant products are expected to encounter robust demand in FY 2019.  

Stock Analysis: On the daily chart of CSL Limited, Moving Average Convergence Divergence or MACD has been applied and default values have been considered. As per the observation, the MACD line has crossed the signal line and is witnessing upward momentum. Therefore, the stock has been encountering the bullish momentum while it still trades at a higher level (given PE ratio and prevailing trading price). Hence, we maintain our “Expensive” rating on the stock at the current market price of A$183.740 per share.


 
CSL Daily Chart (Source: Thomson Reuters)
 

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