Acquisition strategy and decent 1HFY18 Performance: Sonic Healthcare Limited’s (ASX: SHL) shares climbed up 5.33 per cent to$26.46 on July 12, 2018 after the positive market sentiments were seen to be backed by several synergistic acquisitions to propel its organic and inorganic growth ahead. Lately, the acquisition of Pathologie Trier in Germany has helped the stock.

Over the period, the group has made a solid base for future growth at the back strong culture, expanding leadership team globally, increased reputation by providing high-quality medical and diagnostic services to more than 100 Mn people annually. The company posted the financial result for the half year ended 31 December 2017 which was on track to achieve full-year FY18 guidance after 7 months trading. Revenue surged up by 8% on Year-on-Year basis and amounted to A$2.67 Mn in 1HFY18. EBIDTA grew by 9% to A$445 Mn in 1H FY18 as compared to prior corresponding period.  EBITDA margin expanded 20 bps to 16.6% in 1HFY18. Net profit increased by 16% to A$229 Mn in the first half compared to the prior corresponding period. However, the 1HFY18 growth was affected by fewer working days compared to the comparative period and the group had the impact of two hurricanes on the US business. Further, the group has reaffirmed its FY18 Underlying EBITDA guidance, which is expected to be approximately 6-8% despite regulatory changes in USA and Germany.

 
1HFY18 Financial Highlights (Source: Company Reports)

On the dividend front, the company is paying on an average dividend yield of 4% annually to its shareholder over the last 10 years. We expect that the company will continue to pay a dividend to shareholders in the future which is subjected to the profitability of the business. The stock currently pays out a dividend yield of 3.11% and has a market cap of A$10.67 Bn as of July 12, 2018. Meanwhile, the stock has surged 9.03% in the past three months while it has been up 10.47% in the last one year (as at July 11, 2018) and is trading close to all-time high levels. Hence, we maintain an “Expensive” recommendation on the stock at the current price of $ 26.46.

 
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