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Daily ShareChat: Abano Healthcare

By Jenny Ruth

Sunday 10th October 2010

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 Jenny Ruth

Abano Healthcare Group's immediate growth prospects depend on its dental division and the company maintaining New Zealand practice acquisitions at historic levels while lifting Australian acquisitions, both of which appear achievable, says Craigs Investment Partners.

The broker is forecasting Abano will lift net profit in the year ending May 31, 2011 by 31% to $4.6 million, mainly due to the dental division lifting earnings before interest, tax, depreciation and amortisation by 41% as the acquisition pace picks up and as interest costs drop 59%.

Abano has added 50 dental practices in New Zealand since 2005 and 29 in Australia since 2008.

Craigs expects little earnings contribution from Abano's plans to replicate its successful New Zealand Bay Audiology business, now sold, through its 50%-owned Bay International in Australia and Asia until 2013. It has 58 clinics in Australia and 11 opened across Malaysia, Singapore and Hong Kong since 2008.

However, "the longer-term potential in the under-serviced Asian audiology markets appears very promising," Craigs says.

It values the shares at $5.55 but sees little scope for outperformance over the next 12 months because the stock is trading at about 21.2 times 2011 earnings, a 57% premium to the New Zealand market's average price-to-earnings ratio.

Recommendation: Hold.

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