Quick Takes

Healius could pay a one-off special dividend of $300 million (or 25-30% yield)

Wed 20 Nov 24, 10:45am (AEDT)
pathology healthcare asx
Source: Shutterstock

Healius (ASX: HLS) shares took a 16% dip on Friday, 15 November after indicating that Pathology profitability for the first-half of FY25 would be "broadly in-line with the first-half of FY24" despite 5.9% revenue growth year-to-date.

Why it matters: Healius is set to sell its Lumus radiology business to pan-Asian buyout group Affinity Equity for approximately $900 million. The company plans to return the majority of proceeds (after repaying debt) via a special dividend. Citi analysts expect $300 million or 40 cents per share one-time special dividend. The lower the share price goes, the higher the potential special dividend yield. However, this comes against a backdrop of subdued business performance, with Healius' growth trailing industry benchmarks/peers.

By the numbers:

  • Big consensus miss: Healius is effectively guiding towards $4 million EBIT for the first-half of FY25 vs. $25 million consensus

  • Investing in growth: Healius explained the low profitability was due to "investment in growing revenue" which includes changes to opening hours, staffing etc. The company has been progressively losing market share over the years and says this trend has "stabilised in the last six months"

  • Debt free on the horizon: Healius is set to become debt-free for the first time in over a decade. The company's net debt/EBITDA will flip from 4.1x to a net cash position after the sale of Lumus

  • Special dividend: Prior to last week's selloff, Healius was trading around $1.60 vs. $1.30 now. This makes a substantial difference for Citi's assumed 40 cents per share special dividend (25% yield vs. now 30%)

  • Fundamentals are poor: Healius reported pathology revenue growth of 5.9% year-to-date to 15 November, underperforming peers ACL (6.0% volume growth YTD to 23 Oct) and Sonic Healthcare (~8% YTD to 31 Oct). Citi analysts cut their FY25-27 EBIT forecasts by 35% to 54%, accounting for the removal of Lumus Imaging and lower revenues/margin assumptions for the pathology division.

Share price performance: Healius experienced a brief ~50% share price resurgence between May and mid-October. However, the stock is down 20% year-to-date and down 28% in the last twelve months.

2024-11-20 10 28 25-Healius Ltd (ASX HLS) Share Price - Market Index
Healius 12-month price chart (Source: Market Index)

Analyst takeaways: Market sentiment remains cautious. The current average target price of $1.42 (as of 18 November) reflects ongoing skepticism about the company's strategic direction. Sell-side analysts have raised pointed concerns, questioning management's claims of market share stabilisation and highlighting potential stranded costs from the Lumus divestment that could pressure margins.

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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