SIG – Credit Suisse rates the stock as Underperform

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Sigma Healthcare has downgraded FY20 operating earnings (EBITDA) guidance to $46-47m. This comes as of result of reclaiming the FMCG portion of the Chemist Warehouse contract and given the necessity to reinvest in the business.

While recognising the reinvestment has a short-term impact, the downgrade to FY20 guidance was greater than Credit Suisse expected. The broker questions whether the full $100m in savings from Project Pivot can be achieved and sustained.

Underperform rating retained. Target is reduced to $0.53 from $0.55.

Sector: Health Care Equipment & Services.

Target price is $0.53.Current Price is $0.62. Difference: ($0.09) – (brackets indicate current price is over target). If SIG meets the Credit Suisse target it will return approximately -17% (excluding dividends, fees and charges – negative figures indicate an expected loss).

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