The Healius Ltd (ASX: HLS) share price surged more than 7% on Wednesday after the company released an investor update.
Healius, formerly known as Primary Health Care, is a leading healthcare business with services covering pathology and diagnostic imaging, day hospitals and affordable IVF treatments.
HLS share price chart
Healius’ investment update
The key message from Healius’ investment update was that performance was strong and volumes are improving.
Pathology had strong growth supported by COVID-19 testing volumes and a recovery in non-COVID revenues which are in line with the prior year.
Imaging experienced growth in revenue in October and November, buoyed by higher volumes and average fees.
Day Hospital revenue in October and November was higher than in the comparable months in 2019. Montserrat Day Hospitals, a wholly-owned subsidiary of Healius, is also delivering strong growth.
Healius’ Adora Fertility unit is also performing well, achieving record cycles in November.
Share buy-back & dividends
Healius reiterated the sale of its medical centres to BGH Capital for $483 million, with up to $200 million to be returned to shareholders via an on-market share buy-back in 2021. Healius added a caveat, saying that this remains subject to the Healius share price and market conditions.
Also announced during Healius’ investor update was a revised dividend payout ratio of 50-70% of reported net profit after tax (NPAT). Healius believes this will allow the company to continue to pay fully franked dividends.
Is the Healius share price a buy?
Overall, I think Healius is a quality business operating in the growing and defensive healthcare sector. Although growth in FY20 was fairly sluggish, Healius mentioned in its 2020 annual report a plan to accelerate growth by “utilising the Balance Sheet for selective and targeted inorganic growth in Day Hospitals and Imaging “. Provided Healius does not overpay on any acquistions and can realise synergies, I think Healius is well placed to grow earnings and dividends for many years to come.
From a dividend perspective, Healius trades on a current dividend yield of just 1.65% at the time of writing. I think Sonic Healthcare Limited (ASX: SHL) may be a better pick for dividends as it trades on a current dividend yield of 2.63%. See Patrick’s assessment of Sonic Healthcare here.