UBS is concerned about the ongoing focus on test pricing and growth in outlays and what this means for healthcare budgets.
While Medicare has been effectively “ring-fenced” for diagnostic services over the past few years, whether this remains the case after the substantial fiscal expenditure on this pandemic is questionable.
The broker estimates, in 2020, the company will generate $233m in revenue from the pandemic testing in Australia, countering lost routine work.
However, routine work has a higher earnings margin and therefore the net impact on EBIT will be more significant. Sell rating and $23.10 target.
Sector: Health Care Equipment & Services.
Target price is $23.10.Current Price is $26.02. Difference: ($2.92) – (brackets indicate current price is over target). If SHL meets the UBS target it will return approximately -13% (excluding dividends, fees and charges – negative figures indicate an expected loss).
