Bell Potter PME continues to go from strength to strength in the...

Bell Potter

PME continues to go from strength to strength in the US and Australia with 7 contract
wins announced over the last year, generating a minimum of $146m in revenues over
the next 5 to 8 years. Following a review of the timing of implementations, we upgrade
our revenue and earnings targets for FY22/FY23.
Despite encouraging progress with new business wins, we estimate PME’s share of
market at 3% to 5% (in the market for radiology image viewing), hence there remains a
vast horizon of potential new business opportunity, all of which may reasonably be
expected to come to market over the next 2 decades. Increasingly we expect new
business will come from second and third tier healthcare systems operating below the
pre-eminent Institutional level healthcare systems (i.e. Northwestern, UCLA, Yale).
The contract wins announced to the market over the LTM included three such deals
(Medstar, Intermountain & Vermont). While these clients maintain a lower profile, their
average deal size remains highly attractive business. The Intermountain Healthcare
deal (January 2021) was one of the largest deals in PME’s history ($40m over 7 years,
covering 24 hospitals and 200 outpatient clinics).
The fundamentals for PME’s record new business wins in 2021 remain firmly in place
and most likely strengthening. In recent weeks the FDA approved a new product from
Lantheus (LNTH) for metastatic prostate cancer imaging while Novartis reported 4 a
month extension in overall survival (in the same indication) with its new radionuclide
therapy. While these have no direct corporate relationship to PME, all the nuclear
medicine applications rely heavily on PET/CT imaging for patient diagnosis and
monitoring. The increased use of this technology and specifically the enormous file
sizes (i.e. >4GB) they generate are the underlying drivers of PME’s success.
Investment view: Maintain Hold, PT raised to $49.00
We have a positive view of the company, although maintain our Hold rating based on
valuation. FY22/FY23 EPS raised by 22% and 14% respectively