Eddy Sunarto
On October 15, 2021 ScoPo’s Powerplays: All we want for Christmas is a market rally
Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 24 years, explains what the movers and shakers have been doing in health and gives his ASX powerplays.
Inflationary concerns continue to play on the broader market, but Power is still confident about a rally into Christmas.
The market is currently entering into a period of quarterly earnings and annual general meetings, which will give investors more information about the state companies going into year-end.
Power said smaller biotechs are valued like early stage tech stocks, so any potential rise in interest rates could have a major impact on their valuations.
“The valuations on these smaller biotech stocks might be independent of the broader market,” Power told *.
Highlights this week include Audeara (ASX:AUA), which made a move to strengthen its commercial relationship with Amplion Australia.
The new deal will see Amplion sell Audeara headphones in all of
its 300 sites across Australia.
Amplifon is one of the largest global audiology players with over 9,000 clinics across 26 countries, representing around 11% of the market.
“We view the ability for immediate sale, rather than order in, should help accelerate sales growth across this network,” Power said.
Audeara also signed a distribution deal recently with a US group Oaktree Products to offer its products to thousands of hearing professionals across the US.
This is the the second partnership in the US the company has signed, and expands on its reach in the US which already includes existing partner, Westone.
“Our valuation and price target on Audeara remains at 33c, and retain our Speculative Buy recommendation.”
The Audeara share price is up 12% this week to 14c at the time of writing.
Other ASX health stocks of note this week
Power says he likes the looks of Pro Medicus (ASXME), and has upgraded it from Reduce to Hold, with a 12-month price target of $54.61 vs the current price of $53.25.
PME has just announced the signing of US-based Novant Health on a seven-year $40m contract for PME’s workflow and viewer products.
The contract will add around $5.7m in annual recurring revenue once implemented, and importantly marks the first major contract for PME signed since February.
“We view PME as a highly impressive company with a strong and growing contracted revenue base, which should continue to grow into its high multiple over time,” Power said.
“In the absence of additional large contracts beyond our near-term assumptions, we continue to look for further market weakness and buying opportunities below $50.”
Volpara Health (ASX:VHT) is flat this week, but Power said he’s expecting a strong earnings quarter to be reported by the company.
In the last quarter, VHT delivered solid first quarter cashflow receipts of NZ$6.4m, despite it being a seasonally weak quarter.
“We maintain our Add recommendation, and believe that VHT is building a compelling technology stack, which will continue to focus on risk assessment and genetics for the early detection of breast cancer,” Power said.
Morgans has an Add recommendation on VHT, with a 12-month price target of $1.87 vs the current share price of $1.23.
Power says all eyes are on the publication of the PREVENT data, which is expected within this month.
The PREVENT trial was a randomised controlled trial involving 1,200 patients who are at risk of lymphoedema.
The trial was conducted over six years, and patients were followed up to three years with the primary aim to determine if subclinical detection of extracellular fluid accumulation reduces the risk of lymphoedema progression, relative to the rate when using tape measurements.
Power said that Morgans has a Speculative Buy recommendation on Impedimed with a 12-month price target of 20.6c vs the current price of 14c.
ME), and has upgraded it from Reduce to Hold, with a 12-month price target of $54.61 vs the current price of $53.25.
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