Daily ShareChat: Abano Healthcare

By Jenny Ruth

Wednesday 20th May 2009

Abano Healthcare's five core businesses aren't immune to the economic downturn but healthcare spending is relatively defensive, says Forsyth Barr analyst John Cairns.

He regards Abano's small upgrade of its earnings guidance in April as significant "as it highlights the credibility of the Abano forecasting framework."

Abano increased the midpoint of its expected operating earnings for the year ending May 31 from $30 million to $31.5 million and Cairns expects it to beat that with $31.8 million.

"Abano has an excellent record of releasing credible guidance numbers, providing reassurance that it has a robust functioning business model."

The company's growth strategy for its dental and audiology chains in Australia and New Zealand remains intact, he says. It has bought a total of 27 dental clinics so far this financial year and now has 18 clinics in Australia and 41 in New Zealand.

"These are all profitable, stand-alone businesses and will underwrite 2010 earnings momentum," he says.

Bay Audiology's recently launched marketing campaign targeting the 50-plus age group had received "overwhelming" response, resulting in a whole new untapped market.

Cairns estimates Abano's net debt at May 31 will be $81.1 million, well within its $130 million banking facilities, and interest cover of 3.9 times operating earnings.

BROKER CALL: Forsyth Barr rate Abano Healthcare (NZX: ABA ) as BUY.

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