Sonic Healthcare Update

Submitted by Craig Strzelecki on 3 May, 2007 - 19:22

Sonic Healthcare share trading update from sharemarket analyst Citigroup Investment Research: There have been three major deals in the pathology space this year: the acquisition of MDS Diagnostics in Canada, with 40% of the Canadian market; the acquisition of Ameripath by Quest Diagnostics in the USA, and the current non-binding offer for Symbion by Healthscope in Australia. What-if Analysis Reveal SHL Good Value: The analyst has developed a table of financial comparatives and extrapolated the resulting multiples, applying these to SHL. This exercise is a 'what-if' scenario, as valuations are affected by business mix within the pathology businesses, and also in the case of Symbion by the number of non-pathology/DI businesses. Global Market Acquirors Placing 49% Premium above Current SHL Multiple: A current average acquisition multiple, pre synergies, being offered for pathology businesses globally has been calculated at 17 times EV/EBITDA. Applying this multiple to SHL gives a value of $21.20 per share, a 49% percentage premium over the current share price. Victorian Market Shifts May Result in Positive Earnings Fallout for SHL: If ACCC requires HSP to sell-down pathology market share in Victoria in the event of a successful bid for SYB, this could be potentially excellent news for Sonic Healthcare. The analyst's estimate, post bid, of the pathology market share for HSP is 66%. If HSP had to sell, for example, the Gippsland acquisition this could increase throughput in SHL's labs by 10% or $45m. This equates to around $9m PBT. There may also be GP drift from HSP to SHL.

Sonic Healthcare Limited is listed on the Australian Stock Exchange (ASX) under stock code SHL. You can view their investor website here. SHL was listed on the ASX on 30 April, 1987. Find out the meaning of the recommendations in this primer. Barry S Patterson is the chairman of Sonic Healthcare and Dr Colin S Goldschmidt is the Managing Director. Sonic Healthcare provides pathology services. The company is a dedicated medical diagnostics company operating in Australia, New Zealand, Germany, the United Kingdom and the USA. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade SHL. Check your charts and good luck with your share trading!