Does Sonic Healthcare Limited’s past performance suggest a stronger future?
Team Veye | 14 Jun 2019 ASX - SHL
Sonic Healthcare Limited (ASX: SHL)
Sonic Healthcare Limited had on 20 Feb’19 presented their Financial Results for the half-year ended 31 December 2018
Summary
On track after seven months of trading to achieve full-year earnings guidance issued in August 2018 (3-5% underlying EBITDA growth, constant currency).
- Full-year earnings guidance upgraded to 6-8% underlying EBITDA growth (constant currency) to incorporate Aurora Diagnostic’s acquisition.
- Underlying EBITDA growth: 7% (to A$485 million) actual currency; 3.4% constant currency.
- Revenue growth of 9% to $2.9 billion.
- Solid organic revenue growth of ~4.5% (constant currency).
- Net profit growth of 7% to $223 million (growth adjusted for $20 million one-off tax gain in the previous year).
- Earnings per share growth of 5% to 51.9 cents (growth adjusted for one-off tax gain in the previous year).
- Cash generated from operations growth of 5% to $369 million (101% conversion of EBITDA to cash flow).
- Strong performance in US, Australian and Swiss laboratory operations.
- The strategic acquisition of Aurora Diagnostics (completed January 2019) to augment future growth, funded by well-supported A$928 million equity raising.
- Progressive dividend policy maintained (an increase of 1 cent (3.1%) to 33 cents for the FY 2019 Interim Dividend).
Outlook
- Company well set for ongoing strong growth
- Rich pipeline of acquisitions, joint ventures and contracts ahead
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(Chart Source: Trading View)
- A strong balance sheet with headroom for expansion
- Geographical diversification provides growth opportunities and risk mitigation
- Stable and dynamic global management teams
- Technology and innovation driving efficiencies
- Procurement and other synergy initiatives delivering ongoing benefits
- Respected brands, quality services, Medical Leadership culture (Data Source – Company Reports).
Veye’s Take
Sonic Healthcare Limited’s share price has risen 60% in the past 5 years as compared to the market return of 11%. It has grown 25% since Jan’19. It is a strong stock in a strong sector. The stock is nearing breakout with increasing volume and a bullish RSI. We give a “Hold” recommendation on “Sonic Healthcare Ltd” at the current price of $27.10
Disclaimer
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