This business is the only ASX listed company operating exclusively in diagnostic imaging. Diagnostic imaging includes procedures such as radiography, mammography and ultrasound. This business currently conducts 700,000 procedures every year and employs over 450 employees across 52 clinics, with the aim of continuing to expand its business operations both organically and through strategic acquisitions.
First-half results were in line but Credit Suisse finds more positives have flowed. The broker believes the update, which showed improvement across organic growth and cash flow, serves as a first step in justifying a re-rating process that has some way to go.
In a consolidating market, Credit Suisse foresees material upside in both a stand-alone and merger scenario for the company. The broker expects only modest improvement in growth in the second half relative to a weak first half but believes the issues are transient, such as bottlenecks in Victoria.
Preliminary FY16 results reveal, after a number of significant one-off items, that the net loss will be $3.2m, lower than Morgans expected. Morgans adjusts forecasts, with revenue estimates raised by 3.9%.
Credit Suisse has analysed the impact of the MYEFO proposals regarding bulk billing, noting Capitol is largely a bulk-bill provider. Reductions in MRI subsidies lead the broker to calculate a potential 35-45% hit to Capitol revenues in FY17-18.