Clinical Labs valuation hits $1.67bn ahead of IPO

Picture: Troy Snook

Crescent Capital is believed to be asking investors to pay between eight and 10 times earnings for the float of its Australian Clinical Labs business.

But the debate around is whether the price should be based on earnings stripping out the huge increase that came in testing due to the global pandemic in the past year, or will the earnings remain elevated as more virus testing is carried out in future years.

In research released on Friday, Goldman Sachs analysts said Australian Clinical Labs was expected to generate $178m of earnings before interest, tax, depreciation and amortisation this year.

The analysts said their valuation range including debt for the company was between $1.265bn and $1.67bn, equating to 7.1 to 9.4 times forecast annual earnings.

The healthcare group is being prepared for a float through Goldman Sachs and Bank of America after it was on the market last year amid bumper conditions for pathology service providers carrying out large amounts of testing during the global pandemic.

Australian Clinical Labs — the country’s third largest pathology network — is a roll up of various businesses, including operations from Healthscope and St John of God.

It also expects to generate $621m of revenue this year. This equates to forecast revenue growth of 4.3 per cent this year and 0.3 per cent of EBITDA growth.

DataRoom understands that the size of the IPO will be in the ballpark of $400m with the valuation close to $1bn.

Crescent Capital is believed to have reached a deal to buy SunDoctors and fold it into its Australian Clinical Labs business.

But the deal is understood to be contingent on the float going ahead.

For the 2021 financial year SunDoctors is forecast to generate $32.1m of revenue and $8.7m of EBITDA.