By Jenny Ruth
Friday 8th April 2011
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Abano Healthcare's profit guidance has led him to cut his forecasts, says John Cairns, an analyst at Forsyth Barr.
The company says earnings before interest, tax, depreciation and amortisation (EBITDA) for the year ending May 31 are likely to be between $17 million and $18 million including an equity-accounted loss from Bay International.
Cairns says he has downgraded his EBITDA forecast, excluding Bay International, by 2% to $20.1 million and has lowered his valuation of the stock from $6.58 to $6.29.
"Dental revenue and EBITDA performance has been impacted by delays in the settlement of acquisitions which are now expected to take place over the next three months," Cairns says.
"As a consequence, the acquisition cost will be incurred in full-year 2011 without the benefit of a full year contribution of earnings," he says.
The company's decision to maintain its full-year 2011 dividend at 21 cents per share is a sign of the company's confidence in the underlying performance of its business units, he says.
The earnings potential of Bay International, to which he attributes negligible value currently, will only become apparent over the next three to four years, by which time the store network will be of sufficient scale to absorb start-up costs, Cairns says.
Recommendation: Accumulate (from Buy).
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