Virtus Health Ltd

Acquired Trianglen Fertility Clinic, Copenhagen: Virtus Health Ltd (ASX: VRT), Australia’s largest Assisted Reproductive Services provider of the quality fertility care and related specialized diagnostic and day hospital services, saw its stock price falling about 4% in one month as on August 08, 2018.
 
The company has recently acquired Trianglen Fertility Clinic, based in Copenhagen Denmark for a total consideration of up to DKK202million (AUD 43.0 million) as part of the company’s international growth strategy. The acquisition is on a cash free debt free basis and is 8.1 times multiple of forecast normalised EBITDA for the FY 18. Further, it is funded from existing VRT’s cash and debt resources, with earn out payable in cash and Virtus shares in Q1FY21 and the acquisition is projected to be EPS accretive in FY19. Moreover, with the acquisition of Trianglen, the company’s  presence is significantly enhanced in Denmark and the market share of VRT grew to approximately 15% of the Danish market. The Danish IVF market is an attractive market to VRT due to its sophistication, its regulatory environment and scientific excellence.
 
A little while ago, Virtus Health completed the acquisition of 90% of the ordinary share capital of Complete Fertility Limited, at the Princess Anne Hospital Southampton. This was done for a cash free debt free consideration of AUD 9.0 million. This move along with the above demonstrates group’s expansion efforts and UK becomes an important target market to add to its international growth strategy. The group is exploring accretive opportunities for business expansion in Europe and Asia. At domestic front, Australian segment revenue was in line with prior corresponding period in first half of 2018 and EBITDA was up 6.2% to $36.0 million. The group has been focusing on cost management and has seen volume improvements. The group aims to witness profit growth from diagnostics segment and aims to benefit from other areas such as organic growth and international acquisition overall.
 
A few months ago, director Sonia Petering further acquired 2,100 shares of the group at $5.79 per share, and the number of securities held after change amounted to 8,066. Further, Greg Couttas also acquired about 1,252 shares at $5.80 per share and enhanced the stake to have a total of 5,000 securities. Meanwhile, VRT is trading at a reasonable P/E of 14.97x. Therefore, based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $5.650, which tries to inch towards the 52-week high price but does witness volatility on an intermittent basis.

 
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