Nanosonics Limited (ASX: NAN)

NAN Details

Continued growth in trophon installed base in all core markets:Nanosonics, the healthcare company having products based on an infection prevention practice for safety of patients, released its first half year results for 2018. Sales were down by 4% on prior half and Gross Profit was $22.3 million that is 74% of sales. Total operating expenses amounted to $19.3 million for 1HFY2018 against $20.9 million of 2HFY2017. Income tax expenses amounted to $1.5 million in the reporting period; and on the other hand, the Group had delivered a tax benefit of $11.7 million in 1HFY17 which was mainly due to initial recognition of benefits associated with carried forward losses and R&D credits. Installed base grew by 1700 units in H1FY18 and total installed base in North America now amounts to 14,100 units. New guidelines from European Society of Radiology (ESR) became the mandate for high level disinfection for semi-critical ultrasound procedures.
 

Trophon’s Disinfection Technology Structure (Source: Company Reports)
 
NAN is now planning to expand its Trophon usage in existing markets by entering into new markets and also by introducing a new range of infection prevention solutions to the market. UK growth also showed some momentum and continued with Manged Equipment Services (MES) while installed base grew by 86% in the first half. Given the sales agreement with GE and probable new products to be introduced soon, we recommend to “Hold” the stock at the current market price of $2.58
 

NAN Daily Chart (Source: Thomson Reuters)
 

Japara Healthcare Limited (ASX: JHC)

JHC Details
Progress in line with strategy: Japara, provider of living arrangements and aged care facilities, reported H1FY18 total revenue of $182.5 million, which was up by 2.2% on H1FY17. Average underlying occupancy was weaker at 92.3% and was affected by severe influenza outbreaks that were experienced across Australia. Revenue was negatively impacted by this occupancy pressure and by the Federal Government’s funding cuts and freeze on ACFI indexation. EBITDA was $24.3 million and was down by 16.5% on H1FY17 which was primarily due to the aforementioned factors combined with higher wage cost. Net Profit after tax was $10.3 million and whereas in H1FY17 it was $14.6 million. The Company’s balance sheet is strong enough and well positioned to support future growth and the net bank debt was $24.4 million as at 31 December 2017.
 

Significant EBITDA movements (Source: Company Reports)
 
Management expects that second half EBITDA will exceed the first half and also confirmed that FY18 EBITDA outlook is in line with the previous guidance. EBITDA is expected to increase further in FY19 as the initiatives will gain further traction and occupancy will normalise and ACFI indexation will recommence. The Board declared an interim dividend of 4.0 cents per share which will be paid in April 2018 and it is 65% franked. It will be key to watch whether the pipeline of projects can offset the regulatory shortcomings. The stock edged lower owing to the weaker than expected results. We give an “Expensive” recommendation at the current price of $2.01
 

JHC Daily Chart (Source: Thomson Reuters)
 

Capitol Health Limited (ASX: CAJ)

CAJ Details
Acquisition a crucial part of existing growth strategy: Capitol, a leading provider of diagnostic imaging and related services, recently had issued a replacement bidder statement dated January 31, 2018 that was despatched to shareholders of Integral Diagnostics Limited (ASX: IDX) on February 14, 2018 and was issued in relation to its off-market takeover proposal to acquire all the ordinary shares in IDX. The Integral Board believed that the Capitol’s offer was opportunistic and doesn’t reflect the inherit value of the Company and that the 90% of the minimum acceptance condition cannot be satisfied, provided the holders of approximately 33% of the shares have already confirmed that they intend to reject the offer. On the other hand, IDX is expected to lodge a target statement with ASX with regards to the latest bidder statement.
 

CAGR Growth (Source: Company Reports)
 
Meanwhile, CAJ has expanded its network and has added one of the Tasmania’s major diagnostic imaging providers and acquired its Radiology Tasmania Group completely. The acquisition was another strategic step in relation to the existing growth strategy. Although, the earnings generated from the acquisition of Radiology Tasmania have not been included in the earnings guidance, the group has highlighted that earnings from Radiology Tasmania and I-Rd Radiology Sunshine combined are expected to contribute $4.1 million of EBITDA to Capitol on an annualised basis. We have a “Hold” recommendation on the stock at the current market price of $0.285
 

CAJ Daily Chart (Source: Thomson Reuters)
 

Ramsay Health Care Limited (ASX: RHC)

RHC Details

Delivering operational efficiencies: RHC, a leading hospital operator, recently disclosed that in Australia, it’s volume growth continued to be driven by an ageing population and majority of its funding arrangements were negotiated in FY17 with satisfactory outcomes. It recently announced that reforms to private health insurance will drive lower premium rises next year. Operational efficiency continued that drove margin improvements. In France, RHC faced challenges and is developing a positive relationship with the new Macron government. Ramsay GdS is investigating out-of-hospital business growth opportunities and acquired small patient transport business in Lyon in July 2017. In Asia, RHC was a strong performer and the focus was on cost control. During 2017, about $535 million worth of projects were completed and 500 beds were incorporated with 27 operating theatres and 3 private emergency centres. A strong growth in its Australian business is expected to continue and it anticipates an ongoing challenging environment in Europe in the near term.
 

Performance over years (Source: Company Reports)
 
Based on the operating conditions in each its core markets, a successful execution of its strategy will be continued, and the group targets an EPS growth of 8% to 10% for FY18, which is slightly below expectations while potential remains high. We recommend to “Buy” the stock at the current market price of $67.29
 

RHC Daily Chart (Source: Thomson Reuters)
 

ResMed Inc (ASX: RMD)

RMD Details

Strong revenue growth with dip in gross margin: RMD, a world-leading health care company, announced the results for its quarter ending 31 December 2017 and revenue for the quarter was $601.3 million, i.e., a 13 per cent increase as compared to the same period for the prior year. Second Quarter 2018 revenue for United States, Canada and Latin America excluding Brightree was $329.2 million that is a 12 per cent increase on pcp basis. Gross margin in the second quarter was 58.2 per cent that is lower than the prior year’s quarter gross margin of 58.3 per cent and this slip was mainly due to decline in average selling prices which were partially offset by manufacturing and procurement efficiencies. Income from the operations for the quarter was $146.0 million, a 51 per cent of rise as compared to the quarter ending December 31, 2016. Cash flow from operations for the quarter was $132.6 million as compared to net income of $9.5 million in the current quarter. It paid $49.9 million of dividends during the quarter. The Company also repurchased 100,000 shares at a cost of $8.5 million which was a part of its ongoing capital management program. However, the stock trades at higher level and looks “Expensive” at the current market price of $12.08
 

RMD Daily Chart (Source: Thomson Reuters)
 

CSL Limited (ASX: CSL)

CSL Details

Delivered outstanding results in first half: CSL, a developer of plasma therapies, recently announced its first half results for 2018 and reported that the revenue from continuing operations was up by 12.8% and amounted to US$4.1 billion as compared to same period in the prior year. Net Profit after tax for the period attributable to members was up by 34.9% and the Group’s total revenue was US$3,356 million that is an increase by 8% at constant currency when compared to prior comparable period. The Group acquired 80% of the equity of the Ruide from Humanwell and the initial purchase price was US$352 million and also acquired 100% of the equity of the Calimmune Inc for an upfront payment of $82m.  It also agreed to fund certain deal related liabilities of Calimmune which totalled to $8.6 million. It declared an interim dividend of US$0.79 per share unfranked which is expected to be paid on 13 April 2018. CSL has successfully launched Haegarda, a transformational therapy for patients with Hereditary Angioedema.
 

NPAT Performance Trend (Source: Company Reports)
 
CSL’s net profit after tax for FY 18 is now expected to be in the range of approximately $1,550 to $1,600 million at constant currency; and during the first half of 2018, the Group completed a US private placement which raised approximately US$700 million for general corporate purposes. The prices climbed up by 25.4% in six months and we believe that the stock is “Expensive” at the current market price of $163.33
 

CSL Daily Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.