re: mia - accumulation phase
Knuckles, here is an overview of MIA.
Company Overview MIA is a healthcare service provider specialising in radiology. The original company was formed by a group of Victorian radiologists and has since expanded through acquisitions to encompass clinics in every state of Australia with the exception of WA. MIA entered the UK radiology market via the acquisition of Lodestone Patient Care Ltd, a UK based Medical Resonance Imaging Services provider. MIA has more recently expanded into the UK pathology market with the acquisition of Omnilabs.
Differentiating Factor MIA offers investors a high level of exposure to consolidation opportunities in the attractive and fragmented Australian radiology market and privatising UK radiology market.
Investment Opinion MIA is an opportunity to participate in the consolidation of the Australian and UK domestic radiology and pathology markets. The company has 20% share of the Australian national market. Acquisition of UK-based radiology service provider Lodestone Patient Care provides additional growth opportunities.
MIA has retained a focused radiology strategy, but some growing pains have been experienced with recent acquisitions in Australia and the UK (UK Pathology business Omnilabs). However the share price declines over the past year have factored in these difficulties. At current levels the stock has a low PER and is trading at a 23% discount to DCF, supporting our BUY recommendation.
Risks *Regulatory risk relating to changes in the Medicare agreement covering radiology, due for renegotiation June 2003 *Revenue cap risk relating to the rate of growth of episodes, which leads to reduced reimbursement at times of high demand growth. *Acquisition risk (both in terms of level of competition for assets driving up prices and in terms of integration of the new business with the existing businesses, once acquired). *Long distance management risk of the UK assets.
Strategic Direction MIA has a four pronged growth strategy: (1) Growth by merger or acquisition (2) Organic growth through improved profitability of existing operations (3) Identification of greenfield opportunities and (4) Tendering for outsourcing contracts with government and private parties.
Earnings Outlook *Current Australian government radiology agreement provides some revenue certainty *newly acquired Australian businesses need improvement *increased salaries threaten softer margins *potential structural changes in the service and funding of UK healthcare favours more private sector involvement, increasing the upside for earnings over the medium term *UK Pathology acquisition is expected to break even by the end of FY 2003.
Directors: D Mortimer , J Skrzynski, R Holliday-Smith, Dr P Wilson, Dr G Fon, Dr N Wilton, Dr M Lannan
