Rudi's View | Jul 05 2018
In this week's Weekly Insights (this is Part Two):
-Oil Becomes The New Defensive
-Playing The Odds
-Rudi On TV
-Rudi On Tour
By Rudi Filapek-Vandyck, Editor FNArena
This will frustrate many a value-seeking investor, but analysts at Goldman Sachs initiated coverage on the Australian healthcare sector, issuing two Buy ratings, two Neutrals, and only one Sell. Price targets for the two Buy-rated stocks -CSL ((CSL)) and ResMed ((RMD))- suggest ongoing upside potential for respective share prices to the tune of 17-18%.
Yes, you read that correctly. Goldman Sachs has initiated with a price target of $231 for CSL and a target of $16.70 for ResMed.
Supporting the buoyant perspectives for both companies is an above-average return from capital invested, with CSL still the best equipped in a sector that remains high on demand and supply-constrained. ResMed, of course, remains a leading player in a market that remains in structural growth.
The price target for Cochlear ((COH)) is $200 with the current management team still largely unproven, points out Goldman Sachs, while Fisher & Paykel Healthcare's ((FPH)) target of $13.40 is actually below the current share price. For Ramsay Health Care, the analysts agree there remain many positives but the negatives from rising costs in private health insurance and related pressure are too much to ignore.
Ramsay Health Care's price target only sits at $49, suggesting the 18-month long de-rating of the private hospital operator still has a wee bit to go.
Within this context it remains equally remarkable that analysts at Morningstar, once upon a time known as Huntley's, stoically hold on to their fair value estimate of no less than $82 for Ramsay Health Care shares, which they declare "substantially undervalued".
Morningstar continues to forecast 8% growth (CAGR) for Ramsay's Australian hospital operations over the coming five years. Increasing utilisation by over-65s supports that forecast, with the analysts highlighting this older segment of the population will grow at around 3% per annum, ahead of the general population.
Rolling out pharmacies, group purchasing cost saving initiatives, plus a healthy balance sheet (allowing for additional acquisitions) are all seen as additional positives.