Symbion Health (SYB) Shares Recommendation

Symbion Health (SYB) have a Sell Medium Risk shares recommendation and a 12 month total return of -1.1 percent according to stock analyst Citigroup Investment Research (CIR) who have initiated coverage. According to the analyst, Symbion will suffer from price deflation as PBS drugs switch from branded to generics, although the early impact will be offset by the government CSO payment of $173 million to the industry. At $3.69 the stock has exceeded CIR’s SOP valuation by 8.3%. Management is on target to deliver promised cost recoveries of $30-40m. However, CIR believe all positive scenarios are factored into the current share price and would take profits at this price level. Government policy is a critical determinant of this company's profitability in all key areas, underpinning revenues in pathology and DI. There is a risk of fee cuts in pathology in 2008 or 2009. The recent change to the PBS policy in December has accelerated the likelihood of rationalization among pharmacy distributors. The expansion of generic drugs over the next three years will deflate the revenue available to pharmaceutical distributors. Evidence in the USA suggests discounts of up to 70% on the generic drug compared to the branded product which would be very negative. While management are delivering on the cost line, CIR remain cautious in the absence of a track revenue of delivering revenue growth in these industries. The Pharmacy Distribution industry is set to rationalize in 2007. SYB is one of the three main distributors so will benefit from a reduction in industry capacity and/or a gain in customer pharmacies. A possible takeover offer for the company could be one of many scenarios to evolve as part of any rationalization. A previous Symbion Health (SYB) share recommendation.

Symbion Health Limited is listed on the Australian Stock Exchange (ASX) under stock code SYB. You can view their investor website here. SYB was listed on the ASX on 30 June, 1962. Symbion Health is principally involved in businesses in health-related consumer products and health services. Robert Cooke is the CEO of Symbion Health and Paul McClintock the Chairman. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade SYB. Check your charts and good luck with your share trading!