Analysts have started their assessments on what price Healius could achieve from a sale of its day surgery unit after confirming at its strategy day last week that the business was slated for a divestment.
Healius, which purchased Montserrat Day Hospitals for $138m in 2018, has hired investment bank Gresham for a sale of the unit, as revealed by DataRoom on May 18.
Credit Suisse analysts believe the division could sell for $172m.
This is based on assumptions that the business will contribute $8.7m of earnings before interest and tax in the 2022 financial year, which is 2 per cent of the group’s overall EBIT and 7 per cent in the 2024 financial year.
The price would equate to eight times its forecast earnings before interest, tax, depreciation and amortisation for the 2023 financial year.
Analysts at Ord Minnett said they believed Healius should be able to sell the hospitals for $200m or more.
The funds would likely go to acquisitions in the diagnostic imaging space, where Healius wants to expand.
Market sources believe more mergers and acquisitions could be on the agenda. Targets could include listed diagnostic imaging peers such as Integral Diagnostics or Capitol Health. The thinking is that Healius also wants to expand its pathology business after it made large profits there due to Covid-19 testing during the pandemic.
Credit Suisse analysts said day hospitals were not core to the Healius operations and provided limited synergies with the base business, particularly after the sale of its medical centres and IVF operations.
They believed capital proceeds potentially could be used to enter the US bioanalytic lab market via M&A.
Ord Minnett analysts said the sale appeared to be driven by conflicts of interest as the company sought to win hospital customers for its diagnostics business.
Funds raised from any sale were likely to be used to expand the group’s diagnostic operations and/or support the expansion of recently acquired Agilex Biolabs.
The Agilex acquisition has been a plank of management’s growth strategy, and a logical path for Agilex is expansion into phase two and three trials.
This would require the development or acquisition of a bioanalytical lab business in the US to support its clients’ trials.
The analysts said they believed Healius would pursue an acquisition this year.
The company also needs funds to invest into its new lab information system, which could add about $20m of EBIT and is more than two years away.
Goldman Sachs analysts said day centres continued to take share from the Healius conventional inpatient business and there were many data points and perspectives, domestically and from overseas, that suggested shorter-stay healthcare would continue to outperform through the endemic phases of the pandemic.
Healius indicated during its strategy day that it would be difficult to further scale the day hospitals business by itself.