HLS – Credit Suisse rates the stock as Neutral

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Healius has withdrawn FY20 guidance. The company is currently completing around 2500 tests for coronavirus per day but this is not enough to offset the volume drop from fewer GP attendances and the deferral of elective pathology & radiology work.

The company is also experiencing rising consumable costs associated with increased demand for personal protective equipment. Credit Suisse estimates a -15% decline in pathology sales in the fourth quarter.

The broker retains a Neutral rating and lowers the target to $2.47 from $3.35.

Credit Suisse suggests the potential divestment of the medical centres would provide flexibility for the capital position but the company is unlikely to complete a transaction in the next six months. No dividend is assumed in the second half or first half of FY21.

Sector: Health Care Equipment & Services.

Target price is $2.47.Current Price is $2.25. Difference: $0.22 – (brackets indicate current price is over target). If HLS meets the Credit Suisse target it will return approximately 9% (excluding dividends, fees and charges – negative figures indicate an expected loss).

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