Zenitas Healthcare Ltd

Acquisition of Australian Home Care Services & Beleura: Zenitas Healthcare Ltd.’s (ASX: ZNT) stock rose 1.45% on May 09, 2018. The company has entered into binding agreements to acquire 100% of the shares in Australian Home Care Services (AHCS), which is a leading home care provider in Victoria and New South Wales; and Beleura Health Solutions (Beleura), an operator of two Allied Health clinics on the Mornington Peninsula in Victoria. These acquisitions are complimentary to ZNT’s existing network and in line with the growth strategy, which is expected to deliver quality Allied Health, Home Care and General Practitioner services across Australia. Along with this, ZNT has agreed a $1m sponsorship deal over five years with MSL with the objective of raising awareness and providing support for individuals suffering from Multiple Sclerosis and other neurological conditions. ZNT’s acquisition of 80% of the shares of Beleura, which is an operator of two Allied Health multi-modality clinics with 25 clinicians, was priced at $2.4m plus transaction costs for 80% of the business. The completion of both transactions is subject to the satisfaction of customary conditions precedent and expected to be completed in June 2018. Additionally, ZNT had reaffirmed the market guidance for FY18 EBITDA of $13-13.5m prior to announced acquisitions. Post announced acquisitions, ZNT is expected to have a FY18 gross revenue (pre clinician contractor payments) base of $170m and EBITDA of $19.0m on a proforma basis. Meanwhile, ZNT stock has fallen 13.45% in three months as on May 08, 2018 and is trading at a low P/E. However, we look for more catalysts for future growth and give an “Expensive” recommendation on the stock at the current price of $ 1.045.
 

Paragon Care Ltd

Reaffirmed the FY 18 Guidance: Paragon Care Ltd.’s (ASX: PGC) stock has moved up by 3.45% on May 09, 2018. The company has settled 7 out of the 9 acquisitions while few are under binding contracts awaiting settlement. These 7 acquisitions will equate to approximately $70m of revenue and $11m of EBITDA on a full year basis. On a combined basis (i.e. PGC base business and the 9 acquisitions), the company is expected to deliver an approximate pro-forma FY18 revenue of approximately $220 million and EBITDA (before synergies) of around $32m. However, once all acquisitions are settled they are expected to deliver 20% plus EPS accretion on a pro-forma FY18 basis. Overall, PGC has reaffirmed the FY 18 guidance, and expects to meet its earning guidance of $18m to $19m EBITDA (excluding the impact of the 9 acquisitions and associated acquisitions costs). Meanwhile, PGC stock has risen 4.32% in one month as on May 08, 2018 and is trading at a P/E of 12.88x. Based on the foregoing, we give a “Speculative Buy” recommendation on the stock at the current price of $ 0.750.

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