Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Reporting Season – SHL and NIB
Sonic Healthcare Limited (ASX:SHL.) – The global healthcare provider delivered a solid profit result which was a touch above expectations. Net profit rose 149 per cent from the prior year to $1.3 billion in FY21, above an expected $1.285bn. However shares closed the day down 2.76%.
Revenue was up 28 per cent from the prior year to $8.8 billion and earnings before interest, taxes, depreciation and amortisation was up 81 per cent from the prior year to $2.6 billion. A final dividend of 55 cents was declared, an increase of 4 cents.
Sonic Healthcare played a vital role in combating the pandemic and was able to provide its usual essential healthcare services helping some 138 million patients in total. Throughout its laboratories, the company was able to conduct 30 million Covid-19 tests globally.
It was a strong performance by the business unit, driven by Medical Leadership culture and the heroic efforts of 38,000 global staff. Sonic became Australia’s largest non-government Covid-19 vaccination provider. From this there is significant revenue and earnings contribution from COVID testing in FY 2021. Volumes were lower in H2 vs H1 FY 2021, but this is now increasing with spread of Delta variant.
Sonic is not providing earnings guidance for FY22 due to Covid-19 related unpredictability. Ord Minnett has a Hold recommendation with a target price of $40. The broker agrees that Sonic’s headline profit figure beat expectations, except the 91c dividend which came in lower than they had expected. Ords then goes on to say that ‘reported profits’ fell short of market consensus and the company gave no guidance. The broker was disappointed that no ‘special’ dividend was announced. The broker believed a 20c dividend should have been on the cards given Sonic’s cash pile. For that reason, Ords is a Hold for the moment.
Nib Holdings (ASX:NHF) – Shares were hit hard, falling 11% on its profit result despite a bumper profit as fewer customers lodged claims. Total net profit after tax rose 84.5% to $160.5 million which was a touch below an expected $167.69 million. Its return on invested capital (ROIC) was 19.1%, similar to the pre-pandemic levels.
Underlying operating profit (UOP) was up 39.5% to $204.9 million which was above an expected $. The group underlying revenue increased 2.9% to $2.6 billion, million. Group claims expense went up 2.5% to $2 billion and the total group expenses fell 8.8% to $362.1 million.
Policy holders in Nib’s Australian health insurance business was up by 4.2 per cent, and its New Zealand business was up by 5 per cent. However, its international student, travel insurance and work cover operations suffered total losses of $19.5 million due to Covid border closures. Nib saying its international arm would return back to pre-pandemic levels in due course.
Because NIB’s core business is doing so well, the company will rebate more than 600,000 customers part of their policy premium because of fewer customers lodging claims. These lower claims are due to the closure of optional and non-urgent surgery because of the COVID-19 restrictions.
The company says it is looking past Covid-19 and its focus is on data-led personalised health and genetic group-based cohort care.
Broker Citi says NIB Holdings annual results were a ‘miss’ on expectations. The FY underlying operating profit of A$204.9m came in at the lower end of its forecast range of A$200m-A$225m. The broker was disappointed with this set of results together with the absence of a FY22 forecast and expectations of slowing policyholder growth.
