Healius’ Pathology Business a Major Beneficiary of Pandemic in Early Fiscal 2021; FVE Increased 4%

Healius benefited substantially in first-half fiscal 2021 from its involvement in coronavirus testing in Australia. While Australian community transmission of the coronavirus has fallen to very low levels in early 2021, the pandemic remains highly dynamic. Therefore, the ultimate earnings benefit that Healius will derive from it remains difficult to forecast. Nonetheless, with demand for coronavirus tests proving far more buoyant in fiscal 2021 year to date than we’d previously anticipated, we increase our full-year fiscal 2021 EBIT forecast by a sizable 33% to AUD 223 million. Also contributing to our upwardly revised estimates is a marked improvement in the performance of the day hospitals segment—with Healius day hospitals and Adora Fertility achieving maiden profits during the first half, ahead of our prior expectations. Accounting for the anticipated spike in fiscal 2021 pathology earnings and the improved medium-term outlook for day hospitals, we lift our fair value estimate by 4% to AUD 3.85 per share. Shares in the no-moat stock screen as fairly valued.