Healthcare

Pro Medicus lands 5th major US contract

Thu 02 Jun 22, 10:57am (AEST)
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Key Points

  • An increasing number of Visage clients to opt for a fully cloud-based solution
  • The company’s pipeline remains strong and spans a growing number of market segments
  • Consensus on ProMedicus is Moderate buy

Pro Medicus (ASX: PME) was down -1.04% (along with the broader market) at the open today after the health imaging tech giant announced a $28m contract with yet another US services provider.

Pro Medicus' subsidiary Visage Imaging will provide its imaging services for the next 7 years to Allina Health, a not-for-profit health care operator of 11 hospitals and 90-plus clinics throughout Minnesota and Wisconsin.

Planning for the rollout will commence immediately and will be based on Visage’s proven cloud native implementation process with initial go-lives targeted for the second half of the calendar year.

Shift to the cloud

Commenting on today’s announcement, Dr Sam Hupert, CEO of Pro Medicus notes an increasing number of Visage clients are opting for a fully cloud-based solution, a trend that has taken a major foothold in the North American healthcare IT market.

"This is our fifth major contract in the North American integrated delivery network (IDN) space in 18 months, underpinning the strong momentum we continue to build in this important segment of the market,” said Hupert.

“IDN’s are growing because of the trend towards value-based medicine coupled with industry consolidation. Our Visage 7 platform is ideally suited to meet their needs with its unparalleled speed, scalability, and proven cloud capability.”

What is ProMedicus

To the uninitiated, ProMedicus is a large-cap health care stock (sitting just outside the S&P/ASX100) which provides a full range of medical imaging software and services to hospitals, imaging centres and health care groups worldwide.

In January 2009, the company acquired Visage Imaging transforming it into a global provider of leading-edge medical imaging solutions.

Strategic advantage

Hupert used today’s announcement to remind the market that the company’s pipeline remains strong and spans a growing number of market segments, including academic institutions, the IDN space, independent radiology groups, and the for-profit sector.

“Our proven cloud-engineered technology provides us with a very significant strategic advantage with the last six of our major contracts being cloud-based.”

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ProMedicus share price over 12 months.

What brokers think

In the last year the ProMedicus share price has fallen -10.53%, and year-to-date, the share price has bounced lower from $63.50 to $41.29 at the close yesterday.

While ProMedicus is regarded by most brokers as a higher quality growth stock with strong margins and cash on the balance sheet, the company’s strong half year result – with net profit up 52.7% and revenue up by 40% - was for the most part overlooked by the market.

What’s clearly as issue for some brokers is current valuations.

Consensus on ProMedicus is Moderate buy.

Based on Morningstar’s fair value of $44.27 the stock appears to be undervalued.

Based on the two brokers that cover ProMedicus (as reported on by FN Arena) the stock is trading with 23.80% upside to a target price of $51.10.

Goldman Sachs believes the company’s existing book of business is well placed to navigate macro weakness. However, with share trading at 38x 12mf sales, the broker believes the continued pipeline conversion remains critical and rates the stock a Sell.

While new contract wins are expected by the market, Citi notes another $10m a year in new contracts is required within three months to meet the broker’s FY22 forecast.

The broker retains a Neutral rating and believes the current company valuation is elevated.

The target of $46 is maintained.

Written By

Mark Story

Editor

Mark is an investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics and a diploma in journalism. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content. Email Mark at [email protected].

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