Citi assesses the potential value of the US market for pandemic testing at US$6bn the six months ending December 2020.
Assuming Sonic Healthcare has a market share of 5% this would increase first half revenue by up to 13% and operating earnings (EBITDA) by up to 31%.
Citi acknowledges there a number of caveats associated with the scenario but believes this shows testing for coronavirus could provide a significant cushion against a drop in base business. Buy rating and $32.50 target maintained.
Sector: Health Care Equipment & Services.
Target price is $32.50.Current Price is $27.13. Difference: $5.37 – (brackets indicate current price is over target). If SHL meets the Citi target it will return approximately 17% (excluding dividends, fees and charges – negative figures indicate an expected loss).
