Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 24 years, explains what the movers and shakers have been doing in health and gives his ASX powerplays.
Themes of the week
After a real roller-coaster ride earlier this month driven by rising bond yields, the ASX healthcare space seems to have steadied itself.
The sector finished up 1.26 per cent for the week, while the All Ordinaries declined 0.78 per cent.
“We’ve sort of come back to life,” Scott Power says.
“A big contributor to that underperformance was CSL (ASX:CSL), and now a contributor to the outperformance.”
The blood products giant is valued at $117 billion, making it worth about much as all the other companies in the sector put together, so it has a big influence. Given how its stock has dipped, Morgans upgraded CSL to an “add” on March 10, when it was trading at $250.20; CSL finished the week at $253.95.
“That’s worked really well for us,” Power said.
This week Power favourite Micro-X (ASX:MX1) declined 4.2 per cent to 34c despite the miniature X-ray manufacturer in-sourcing technology for its mobile Improvised Explosive Device (IED) detection device.
Micro-X will repay a $5 million convertible loan made by its former partner, Thales, after they agreed to go their separate ways.
Micro-X is now in charge of the whole IED-detection project, “which is very good for them,” Power said.
Micro-X expects to be ready for customer demonstrations before the end of the year, with first sales to follow in 2022.
Morgans rates the Brisbane company a speculative buy with a target price of 60c.
Elsewhere in the sector, Volpara Health Technologies (ASX:VHT) on March 12 announced its largest contract to date, a $US400,000 deal by its new subsidiary CRA Health to provide breast cancer risk scores to a major Indiana-based company that runs an electronic health record system.
“I think it would be fair to assume, potentially, more contracts coming on that front,” Power said.
Volpara shares closed Friday at $1.31; Morgans has an “add” recommendation and a $1.92 price target on the Kiwi breast-density company.
Power’s pick for the week is enterprise imaging company Mach7 Technologies (ASX:M7T), whose shares were down for a fifth week straight. They fell 2.1 per cent to $1.195.
“Their share price over the last couple weeks has been weak, they’ve basically gone down from $1.50 down to a $1.20,” Power told Stockhead on Thursday.
“We think that’s a terrific buying opportunity. What the company’s pointing to is much stronger second half.
“We’re hearing through our sources that the American healthcare market is starting to open up again, so there are more contracts being signed. And the key driver for revenue is the execution of those contracts. So I think Mach7 looks really interesting.”
Morgans price target is $1.68 on the company, which makes a cloud-based imaging platform for hospitals to view and store diagnostic images such as radiology scans.
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Barry Stroman was a reporter for Zerg Watch, before becoming the lead editor. Barry has previously worked for Wired, MacWorld, PCWorld, and VentureBeat covering countless stories concerning all things related to tech and science. Barry studied at NYU.