By Jenny Ruth
Friday 14th January 2011
|Text too small?|
Abano Healthcare is a company in transition, having sold its New Zealand audiology business and in the process of ramping up its New Zealand and Australian dental networks through acquisitions, says John Cairns, an analyst at Forsyth Barr.
"Bay International is in its formative stages and, bearing in mind the credentials of the joint-venture partner (Bay Audiology founder Peter Hutson), offers considerable growth prospects in developing audiology clinic networks in Australia and Asia," Cairns says.
"Unlike the dental growth strategy, which involves the purchase of existing profitable practices, the audiology growth strategy is focused largely around greenfields clinic openings involving limited upfront capex," he says.
These clinics invariably produce small operating losses over the first year or so until they have built a local market presence, Cairns says. Bay International now has 59 permanent stores and visiting clinic in Australia and 26 in Asia.
"We understand first-half revenue was around $18 million and produced a bottom-line loss of $2.8 million. The earnings potential of Bay International will only become apparent in three to five years, by which time the store network will be of sufficient scale to absorb start-up costs."
Cairns says his $6.57 a share valuation does not capture any upside from Bay International.
No comments yet
Abano mulls rebel shareholder request for meeting, affirms support for Janes
Hutson fails to respond to Abano buyout offer, takeover 'rife with insider elements'
Abano steps up pressure on bidders over audiology unit price
Abano shareholders clamour for discounted stock in share purchase plan
Hutson quits Abano board after urging from other directors
Abano board questions Hutson's conflict of interest in takeover bid
Abano continues to resist takeovers, rejects approach from Archer, Hutson
Abano seeks $18.5 mln in share purchase plan
Abano shares climb to 4-month high amid prospect of takeover bid
Abano faces takeover bid after rejecting unsolicited offer