Health Care Stocks, News & Tips on the ASX

The Australian Health Care sector represents some of the country’s most successful companies, with fields ranging from pharmaceuticals, biotech, medical practices, pathology operators, and medical devices.

Many health care companies on the Australian Stock Exchange are leaders in their fields. It includes a whole host of dominating blue chip companies such as Cochlear, CSL, and Resmed.

On the small cap end of the market, you’ll find relatively new companies. They carry significantly more risk since there are inherent risks associated with researching, developing, and commercialising their product or service.

If you’re looking for more information, insider tips, professional analyses on up-to-date news on health care stocks, browse below for our Australian Stock Report resources.

  • Share to buy: Nanosonics (NAN)

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    December quarter sales were up 41% on the prior quarter, as North American direct sales gained momentum.

    The company's move into the US market seems to be paying off, with gross margins improving significantly.

    The next driver of share price could be publication of decontamination guidelines in the UK and Scotland favourable to Nanosonic products.

    Technically, the stock remains strong and has broken out to fresh all-time highs recently on rising volumes.

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  • Share to buy – Ramsay Healthcare (RHC)

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    Company Snapshot:

    • Market cap: $12.01 Billion
    • Recent share price: $59.9
    • Cash/debt: $315.86 million/$3.17B
    • Trailing P/E: 32.64

    Ramsay Healthcare is the largest private hospital operator in Australia and one of the top five hospital companies in the world. It has a presence in the UK, France, Indonesia and Malaysia. In Nov 2015, they inked a joint venture agreement with one of China's leading medical universities to build a number of new private hospitals in China's Pearl River Delta thus expanding its reach further.

    RHC has a strong competitive advantage, which it has leveraged to grow its business. Key features include;

    • Guaranteed demand given the growing ageing populations on a global scale 
    • Pricing power over its customers, insurers and governments, which often have no alternative but to use Ramsay’s services.
    • Buying and building hospitals is very expensive and this is a major deterrent to other companies looking to enter the market.
    • Ramsay has also proven to be very astute at building new beds at just the right pace to grow earnings without increasing supply beyond demand. 
    • Ramsay delivered solid growth in FY15 with revenues, core earnings per share and full year dividends increasing by 49.8%, 20% and 18.8% respectively.
    • Management has provided guidance of 12-14% earnings per share growth in FY16 barring any unforeseen circumstances.
     

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  • Share to buy – NIB Holdings Limited (NHF)

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    Company Snapshot:

    • Market cap: $1.48 Billion
    • Recent share price: $3.38
    • Cash/debt: $58.81 million/$63.89Million
    • Trailing P/E: 19.54

    NIB health funds is one of Australia’s largest health insurers, providing health and medical cover to more than 1.1 million Australian and New Zealand residents

    Private Health insurers are a segment of the market worth watching over the coming 12 months.

    Both Medibank Private and NIB have become increasingly vocal about the need to improve efficiencies in the healthcare system and to put a lid on the spiralling cost of care.

    With federal reviews into private health insurance and the Medicare Benefits Schedule, among other parts of the health system, there could be significant changes in fortune for the insurers who pay medical bills.

    Throughout 2015, NIB shares have been volatile after rising to nearly $3.90 in March before falling to a low of $3 in October.

    However, consistent profit and dividend growth has been a regular feature from NIB in recent years helping the company’s share price lift 10% for FY 15/16.

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  • NIB Holdings (NHF) Share To Buy

    NIB Limited Logo NHFNIB Holdings (NHF) is a health insurance company, providing health cover primarily to Australia and also to New Zealand following last year’s acquisition of Tower Medical. Established over 50 years ago, NHF is Australia’s only ASX-listed health insurer. The company offers a wide range of policies suitable for customers across the board, but its focus on the youth market has helped it to achieve the fastest growth among the major players in the sector. Recent results NHF is a company enjoying healthy growth. Since FY08, net premium revenue has risen at a compound annual rate of 11.2%. Return on equity was also a healthy 21.3% in FY13. One concerning aspect of the FY13 results was a fall in net profit margin from 5.9% to 5.1%. The group blamed higher claims costs without a commensurate increase in premium rates. The group was relatively sanguine about FY14, downplaying earning growth expectations amid higher marketing and branding costs. Nonetheless, the company negotiated a 6.5% increase in premium rates, effective April 1st 2013, which is expected to support profit margins in FY14. Medibank shapes longer-term outlook Following the Federal election, Prime Minister Tony Abbot’s government has begun the process of privatising Medibank as a way to streamline the government and cut costs. The government is awaiting results from a scoping study, expected in February 2014, before deciding when to float the insurer. Medibank has a ~30% share of the health insurance market, so a privatisation would shake things up for the industry. Bupa is the next biggest player with a 27% share, followed by HCF with 11% and then NHF with around 8%. A privatised Medibank means the potential for consolidation as the smaller companies look to stay competitive in a growth industry. NHF would be ripe for the picking in our view, given its strong fundamentals and attractiveness as a target for Medibank or Bupa. For all of our latest australian buy shares and trading ideas sign up for FREE 7 Day Trial and gain full access our research files.

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  • Sonic Health – Buy On Solid Results

    sonic healthcareSonic Healthcare Limited (SHL) listed as a buy share in the traders report on October 1st  is the world’s third-largest medical diagnostics company, offering laboratory medicine/pathology and radiology services to the medical community. The company is structured as a decentralised federation of individually led diagnostic practices, with the head office in Sydney, Australia. SHL employees over 25,000 in eight countries: Australia; New Zealand; the UK; Germany; Switzerland; Belgium; Ireland; and the USA. Key Points: FY13 Results:

    >> Revenues from ordinary activities came in at a record $3.48 billion, up 4.1% from last year
    >> Reported NPAT was up 6% to $335m for the year ended 30 June 2013
    >> The group paid 62 cents worth of dividends over the financial year, a 5% increase on FY12’s payout
    >> The pleasing aspect of the results was the company’s continuing ability to grow its business organically
    Healthy Balance Sheet:
    >> Interest bearing debt sits $1.74 billion, equating to gearing (Net debt/(Net debt + equity) of 37.3% which is well within bank covenant limit of 55%
    >> The groups interest cover (EBITA/Net interest expense) and debt cover (Net debt/EBITDA) sit at 8.6x and 2.4x, both figures well within bank convents
    >> The balance sheet is supported by a healthy free cash flow, which has averaged $283 million over the last five years
    Outlook SHL appear to be much more confident in its balance sheet with the company, last week announcing the acquisition of German lab business of Labco. The transaction should be earnings accretive in FY14, but we think a majority of the benefits will be more evident in FY15 when synergies are full realised. We think the group will continue to look for new acquisition, as pricing pressures in the sector drive further industry consolidation. Even without further acquisitions, the group has a solid record of organic growth and we see no reason why this will not continue. For all of our latest australian share market tips and trading ideas sign up for FREE 7 Day Trial and gain full access our research files.

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  • Roaring Resmed (RMD) Share To Buy

    resmedResmed (RMD) is a leading developer, manufacturer and distributor of medical equipment for treating, diagnosing, and managing sleep-disordered breathing and other respiratory disorders such as sleep apnoea. The company has developed number of products for the treatment of sleep-disordered breathing and sleep apnoea, including airflow generators, mask systems, diagnostic products and other accessories. Its major market is the US, which accounts for around 47% of overall revenue. FY Results FY13 revenue soared 11% to US$414.6 million, driving a 21% surge in net profit to US$307.1 million. A quarterly dividend of US$0.25 per a share was declared, up 47%. The group is experiencing growth in its core US market. Although sleep mask sales were up a modest 7% due to competitive pressures, device sales enjoyed a solid 16% increase. RMD implemented cost cuts to mitigate a 4% - 6% reduction in the price of its sleep devices. Outlook The significant depreciation in the Aussie dollar is expected to act as a tailwind over the coming year, helping to boost FY14 gross profit margin to 61% - 63%. Margins are expected to be further supported by manufacturing gains and an improved product mix. RMD’s Asian expansion is also likely to gather pace, with products being launched in India and China expected to translate into stronger top line growth. Resmed Inc was listed as a buy share for our members on August 20th. For all of our latest share tips and trading ideas sign up for FREE 7 Day Trial and gain full access our research files.

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  • Primary Health Care Primed For Gains

    primary health carePrimary Health Care (PRY) is one of Australia's leading listed healthcare companies, operating as a service company to medical and allied health professionals. PRY also boasts a network of medial and pathology centres across Australia, and is a leading provider of healthcare technology solutions to medical practitioners, medical practices and hospitals. The group’s revenue is divided into four main segments: > Medical Centres > Pathology > Imaging > Health Technology 1H13 Results PRY’s 1H13 results were a solid improvement when compared to the same period in FY12. The group’s revenue came in at $720 million, a 5% increase on the prior corresponding half. EBITDA for the 1H was $186.1 million, an 11.6% increase on 1H12. PRY was impressively able to increase its EBITDA margin by 150 basis points (bps) as a result of revenue gains, economies of scale and operating efficiencies. The group was also able to increase its interim dividend by 30% to 6.5 cents per share. Breaking it down A closer look at the recent results revealed all of the major divisions making positive contributions to 1H13 earnings. The Medical Centres division increased its EBITDA by 9% to 84.0 million, with the business expanding its margin by 80 bps to 55.4%. Pathology EBITDA grew by 13% to $69.5 million, with the margin up 100 bps to 17.0%. The Imaging division EBITDA was up 30% to $35.0 million, with the margin up a staggering 500 bps to 22.6%. Overall it was good to see that all divisions recorded not only EBITDA growth, but also growth in margins, indicating a business with a focus on cost controls. Looking ahead All PRY’s divisions performed well in first half, and we see this continuing in the second half. The group showed it was able grow its business organically, with better economies of scale and operating efficiencies driving expanding margins. With Australia’s ageing population, PRY should be able to grow its earnings at an organic level. The group has also lowered its borrowing costs from $56 million, to $40 million in the 1H13, which should also have flow on effects in the 2H. With think these factors, combined with growth from its Medical Centres division, will result in a solid full year result and further share price appreciation. For more share tips on not only the Primary Health Group, get our latest asx share market trading ideas by signing up for FREE 7 Day Trial and access all our research files.

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  • Positive Momentum Makes NIB (NHF) Stock To Watch

    NIB Limited Logo NHFNIB Holdings (NHF) is a health insurance company, providing affordable health cover to almost 880,000 people nationwide. Established over 50 years ago, with premium revenue of more than $1 billion in 2012, NHF is Australia’s fifth largest health fund and the only ASX-listed health insurer. The company offers a wide range of policies suitable for customers across the board, but its focus on the youth market has helped it to achieve the fastest growth amongst the major players in the sector. FY12 Results NHF’s FY12 results continued to show the growth that we have come to expect from the company, as the below demonstrates. Premium revenue over FY12 grew 11.5% to $1.12 billion. Net underwriting profit was $70.7 million, which was a 15% increase on the prior corresponding years. EPS was 14.8 cents per share, which was a jump of 8% on the prior years. Impressively, return on equity climbing 31.5% over 2012, to 21.7%. The group also has a healthy balance sheet, with no debt and operating cash flow increasing 52.4% to $134.6 million. Strategy for growth NHF has solid policy growth of 4.7%, which was well above the average industry growth rate of 3.7%. The company’s growth has been driven by its focus on people under the age of 40, but has been slowly expanding its base and looking to increase in the following areas:

    • Over 55s
    • Corporate market
    • Western Australian market
    • International workers and students
    We believe that increased investment on the above mentioned areas will be of benefit to NHF going forward. The company also has room for expansion, with no debt and $134.6 million in operating cash flow generated over FY 2012. Outlook NHF’s core health insurance business saw all of its key metrics improve in FY12, with policy subscriber growth complemented by a successful implementation of a price increase. We think the company is in a great financial position to grow its earnings either via acquisition or organic investment. Given the current falling interest rate environment we could see another movement back into income stocks such as NHF – with a current dividend yield of 5.5%. We think the NHF’s earnings growth potential and solid dividend yield will continue to deliver gains for its share price.

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  • CSL Limited (CSL) Helped By Weaker Dollar

    CSL Company Logo
    CSL Limited (CSL) develops, manufactures and markets human pharmaceutical and diagnostic products derived from human plasma. The company’s operations are concentrated in Australia, Germany, Switzerland and the US, although its reach extends to almost 27 countries with over 10,000 employees. CSL’s main operational businesses include CSL Behring (including CSL Plasma) and CSL Biotherapies. The company’s products include pediatric and adult vaccines, infection and pain medicine, skin disorder remedies, antivenoms, Albumin, anticoagulants and immunoglobulin’s (IG). FY12 results: As the above shows CSL has a solid history of growing its earnings. Total sales for FY12 were $4.4 billion, which was on a constant currency basis is a 12% jump on FY11. On a constant currency basis CSL’s FY12 NPAT was $983 million, a 14% increase on the previous year’s result. The balance sheet is also healthy with FY12 cash flow from operations was up 14% to $1.16 billion and $1.16 billion of cash on hand. Aussie dollar: Given the company earns a majority of its earnings in US dollars the falling Aussie dollar is a benefit to CSL. Several of the pillars that have been holding up the Aussie dollar are not looking as stable as they once were. One of these pillars being Chinese demand for Australian commodities is not as strong as it once was, and this in turn means less demand for our currency. Another fact hurting the Aussie dollar is the RBA moving to an easing bias, as characterised by this week’s interest rate cut. Buy-Back Another factor likely to underpin the company’s stock price is the undertaking of share-buybacks. The company is currently in the middle of an on-market share buy-back that it is 77% complete. What was interesting in the release of CSL’s FY12 results was the fact it flagged the potential for another on-market share buy-back. Given its strong cash flow, we think the company will be able to complete another buy-back without stretching its balance sheet. Outlook: CSL appears to be in solid shape as we move further into FY13. The company is expecting constant currency NPAT growth of 12% in FY13, which we think is achievable given its recent history of meeting or exceeding guidance. We also think that a weaker Aussie dollar and the likelihood of another share-buyback will underpin further share price gains. Our Recommendations: On the 5th of October 2012 we issued a recommendation to our clients of the  Traders Report to purchase CSL at $46.10. The stock has since moved to a price of $47.17 as of 11:30am October 11th. For further information on CSL as well as full access to our research files sign up for a FREE 7 Day trial today. Australian Stock Report provides general advice and must indicate that previous results are not a guarantee of future performance.

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  • Australian Pharmaceutical (API) Resilience In A Tough Economy

    Australian Pharmaceutical Industries Limited (API)Australian Pharmaceutical Industries Limited (API) is engaged in the distribution of pharmaceutical and healthcare products in Australia and New Zealand. The company is divided into three main segments; Pharmacy Distribution, Retail, and Manufacturing. Pharmacy Distribution distributes pharmaceutical and medical products to pharmacies. The division distributes to customers from its Distribution Centres throughout Australia. Through Retail, API sells various health, beauty and lifestyle products and operates retail store brands including Soul Pattinson, Priceline, Priceline Pharmacy and Pharmacist Advice. The Manufacturing business involves the ownership of rights in pharmaceutical medicines and consumer toiletries. Latest results API’s 1H12 results were a marked improvement on the same period in 2011. Underlying net profit was $11.8 million, up 10.3% from the prior corresponding half. Profit growth came despite revenue dropping 12.5% to $1.61 billion. Underlying operating margin increased from 1.5% to 1.8%, highlighting the effectiveness of cost cutting strategies the company has been implementing. Another aspect that impressed was the 3.1% growth in the group’s retail sales on the prior period. Comparable store sales also grew at a solid 2.8%. The retail growth is especially encouraging considering the tough trading environment in which several other retailers have been experiencing. Moving forward Approximately 75% of API’s earnings in the first half were from its wholesale business. The company is targeting an even split in earnings between its retail and wholesale divisions. The retail growth is expected to come from Priceline pharmacy. API has been working on infrastructure for several years and the company believes it has the ability to double the current number of Priceline stores. We believe the split will be beneficial for the group’s bottom line given the gross profit margin for its retail arm is 23%, compared to wholesale’s 7.6%. On September 24th, API announced that Priceline has expanded its store network to 350 stores. This decision reflects increased interest from pharmacists in joining Priceline, and highlights the growth potential of the Priceline chain. Outlook API has undertaken some significant structural changes that are starting to deliver benefits. Through increased operating margins the company was able to record an increase in profit despite a fall in revenue. We believe that given the tough consumer environment, companies that are able to achieve efficiency gains will be well placed to prosper when consumer sentiment improves, and API is a prime example of this.

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Nov 2014 - Nov 2016

Our short-term focused Trading Report returned 30.03%, outperforming the ASX/200 Accumulation Index by 6.45%*

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DISCLAIMER:
*Performance is derived from recommendations provided by Australian Stock Report’s Trading Report, opened on or after date of acquisition in Nov 2014
*Return figures are gross returns and do not take into account fees or brokerage costs.
*Returns are calculated based on a $50,000 hypothetical portfolio, risking 2% of the overall portfolio balance ($1,000) as a starting point for each trade.
*Due to slippage and gapping, losses can sometimes exceed $1,000 on an individual trade.
*Opening and closing prices for trades (and therefore the prices used for determining aggregate profit/loss) will be those published on the Australian Stock Report website and will be determined by the price at which they could realistically be executed in the market at the time the recommendation is published.
*ASX 200 Accumulation Index Return is calculated based upon the price of the index at the start of the session on the day the first ASX 200 trade was placed, i.e. 24.11.2015

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