Promedicus made an Announcement on April 1 which seem to go unnoticed by the Strawman community. It is a profound announcement that impacts the share price for rest of 2021 to April 2022.
One of the reasons why the stock is going up is due to the company buying back shares. They were buying back shares from March 2020 to April 1st 2021.
Now, the new on-market share buy-back, permit Promedicus to acquire up to 10% of the ordinary shares on issue during the last 12 months. In simple terms, there are 104,211,574 shares on issue. Promedicus will by up to 10% of the issue or 10% * 104,211,574 = 10,421,157 shares.
If you do quick math, that would be $44 share price * 10,421,157 shares ~ $458M worth of shares will be bought back by the company in the next 12 months. So, there is a strong case for the share price to remain high as the company will buy back when it dips below what they feel is intrinsic value (which is subjective).
Weirdly Promedicus has got your back as shareholder. Same cannot be said for some of the other companies I own :D
19-Feb-2021: Sale of 1M shares each by founders
The Pro Medicus Board has been advised that co-founders Dr Sam Hupert and Mr Anthony Hall have sold 1 million shares each at the close of business on 18 February which is within the Company’s current trading window and represents less than 4% of their individual holdings.
Mr Peter Kempen Pro Medicus Chairman said “We announced in February 2018 that the Board had encouraged the founders to consider selling up to 3 million shares each, in order to improve the liquidity in the company’s shares. This latest transaction completes that process. The sale, to a number of local institutions, was done “at market” which reflects the very strong underlying demand for the company’s shares.”
Dr Hupert and Mr Hall re-affirmed that they do not intend to sell any further shares in PME in the foreseeable future. Mr Kempen added “Dr Hupert and Mr Hall remain actively engaged in the company and are committed to its future. This is evidenced by the fact that they remain the two key stake holders, with their combined holding post this recent sale being in excess of 52% of the shares on issue.”
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All good. As you were.
Goldman Sachs upgraded price target to 53.8:
"Buy - Pro Medicus Ltd. - (PME.AX)
Flagship contracts further validate technology advantage and underpin longer-dated growth profile; upgrade to Buy
17 February 2021 | 7:57PM AEDT
Whilst many healthcare IT projects continue to face uncertainties associated with Covid-19, the demand for PME's Visage 7 PACS technology has been robust, speaking to the strength of the solution, as well as the growing importance of an IT system that can improve efficiencies whilst healthcare imaging data continues to grow exponentially.
Through a highly challenging period, the cadence of PME's contract wins has actually increased, whilst the quality/breadth of the customer base has also strengthened. In the last 8 months alone, PME has signed 6 new contracts at an average minimum size of $24m, including a further 3 of the Top 10 hospitals in the country (against a trailing 3-year average of 5 and $15m respectively). The customer list includes many of the leading academic facilities in the US/World and, whilst this group is less price-sensitive than the broader market, the high adoption rates amongst this cohort provide clear vindication of PME's technology advantage. Furthermore, we believe the heightened rate of uptake underlines the increased value being ascribed by hospitals towards solutions that can provide additional flexibility/resilience; a theme we expect to persist.
Nearer term, we believe Visage 7 looks set for a robust period of transaction volumes as PME on-boards several large accounts, and as its existing customer base, which is disproportionately skewed to high-volume institutions, seek to process a period of elevated healthcare/imaging demand as operations continue to normalize (in line with our broader sector views and those of Global GS Research).
On our forecasts, PME currently trades on 60x NTM EV/EBITDA (noting we are +50-60% above EBITDA consensus in FY22-23 after incorporating the latest contract wins and tweaking the near-term run-rate). Whilst not cheap in absolute terms, our new estimates imply a +42% EBITDA CAGR (FY20-23E). In the context of ASX Healthcare, which trades at a 'multiple to growth' ratio of 2.9x, we do not see PME's ratio of 1.4x as demanding, particularly given its position as a technology leader in a market we believe is set for further technology upgrades, and a recurrent revenue model with inherent upside. We upgrade to Buy.
Continuing to bolster a stellar customer list
We believe the size and nature of PME's customer base provides strong validation of its technology advantage over the competition. Visage now has contracts with 5 of the Top 10 hospitals in the US (7 of the Top 20), a cohort which is generally well-funded and tends to seek high quality solutions. PME has now won each of the last six major tenders in which it has participated. Notably, the recent processes with flagship institutions (NYU Langone and UC Health) were highly competitive. Leading industry providers were invited to demonstrate their solution in onsite pilots and in both cases Visage received unanimous endorsement. In addition, there appears to be a positive network effect whereby leading KOLs are sharing positive experiences with one another, a feature which has been corroborated in our own conversations with the customer base.
Visage 7 contracts are invariably multi-year (usually 5-7), and written with minimum commitments such that each has 25%+ upside above the disclosed contract size provided the customer holds imaging volumes constant post implementation (in most cases, volumes tend to increase due to inherent efficiency gains)."
Interestingly their FY20-23 forecast growth rates are approximately in line with mine (from my valuation) for NPAT and below mine for Revenue and EBIT
Interview with Dr Sam Hupert, CEO Pro Medicus Ltd
~Half-year results - impact of COVID and appreciating AUD
~ Step up in transaction volumes
~ $31M – 7-year deal with leading Californian academic Health system
~ Other recent wins and pipeline
This new contract win is BIG, and comes only a month after the record $40m contract with Intermountain was announced.
Signed with 5 academic health systems, the 7-year deal is valued at AUD$31m, with further upside afforded by the transaction model and the option for affiliates to standardise on Visage platform (which seems very likely to me, at least to some extent).
Visage 7 will be implemented across 5 diagnostic imaging departments, the first time the entire imaging diagnostic system will be unified on a single platform.
PME has won 6 out of 6 major contracts in their industry in the last 7 months. All of which were competitive tenders. This is a very strong validation of the offering.
What a fantastic company. The hard part is the valuation, which seems rather rich despite the pace of growth and available market opportunity.
PME signs $31M – 7 year contract with a major University Health System in the United States
~ PME signs 7-year, A$31M deal with a major academic health systems comprising UCSF, UCLA, UCSD, UC Davis and UC Irvine
~Visage to replace multiple legacy PACS systems unifying all 5 academic campuses on a single diagnostic imaging platform
~ Visage 7 to be deployed in the public cloud
~ Further extends PME’s footprint in tier 1 academic health systems
~ Provides an option for affiliates to adopt the Visage platform
~ Transaction based model with potential upside
....The contract, based on a transactional licensing model, will see the company’s Visage 7 Viewer implemented across the five diagnostic imaging departments, the first time the entire system will be unified on a single diagnostic imaging platform.
PME receives FDA clearance for Breast Density Algorithm
• First Artificial Intelligence (AI) algorithm developed by PME
• Developed using PME’s unique end to end AI Accelerator solution
• FDA clearance is in addition to previously received CE (Europe) and TGA (Australia) approvals
• Paves the way for commercialisation in North America, Europe and Australia
• Opens up further research collabouration opportunities
ProMedicus has received FDA clearance for its AI breast density alogrithm, following approval from European and Australian regulators.
This was developed in-house using PME's AI Accelerator platform -- something that greatly speeds up algorithm development, and will provide a platform for 3rd parties to leverage PME's tech (and provide additional use-case and revenue in the future).
AI gets a lot of hype, but medical images are perfectly suited for this tech and one of the main areas of development. PME's visage product is perfectly suited for this, and another strong plank in the value proposition for potential customers.
This announcement doesnt change the earnings outlook for me (i'd already baked in potential for AI), but is a noteworthy milestone.
It is an incredible company. No doubts about it and there is more to come. Every big contract is getting higher ARR and longer duration.
The deal with Intermountain will be "one the biggest Cloud-deployed PACS installations in North America, if not the world", as the deal involves replacing the current legacy PACS with Visage.
"In terms of the pipeline, there have been a number of new opportunities, particularly over the past 6-8 months that supplement those already in the pipeline that are progressing through the cycle. So, whilst we have been very successful in converting end-stage opportunities such as Intermountain and the other deals we have announced over the past 6 months, our pipeline remains strong with a range of opportunities across various stages of the cycle and across multiple segments of the market."
This enough for me to declare Promedicus the winner in the PACS battle. They are 5 from 5 after competing intensively with many players. The larger the contract, the stronger the competition.
The revenues are also recurring. So it is a matter of building a spreadsheet with all contracts and adding the annual value of each contract on top like a Gantt Chart. Really hard to kill the business, as Promedicus is winning all the big contracts. The 2 latest contracts added ~ $10M more in ARR.
This implies $65M ARR valued at $4.2B. That is ~ 65x Price to sales, but that is a useless metric if Promedicus can maintain sales growth of 30% p.a. You are looking at $200M company by 2025. So sales are expected to triple, and top healthtech companies have maintained a premium in valuation. So you are looking at $12B valuation using spreadsheet maths, that's if you maintain a 60x price to sales. A better valuation method is required before the half-yearly, so watch this space :) Those are rough calculations to automatically rule out pricing metrics like EV/EBITDA and P/S as they do not make sense for companies that are growing rapidly.
14 January 2021
• PME signs 7-year, A$40M deal with Intermountain Healthcare
• Intermountain is the largest healthcare provider in the Intermountain West (Utah, Idaho, Nevada)
• Visage to replace legacy PACS and other specialty systems across their 24 hospitals and more than 200 clinics
• Contract includes the Visage 7 Viewer and Visage 7 Open Archive
• Visage 7 platform to be fully deployed in the public-cloud
• Extends PME’s leading position in large, regional health systems
• Transaction-based model with potential upside
Promedicus has signed a 5 year contract with Maryland/Columbia health system MedStar Health to replace their legacy PACS across 10 hospitals. It will involve the full suite of visage 7 modules.
The deal is worth A$18m, and is the usual transaction based model (which provides for further upside).
Aside from the size of the deal, it's also notable in that it was won through a competitive tender process, which validated the benefits of PME's cloud based system. It will also act as another important reference site for the all important US market.
Promedicus has announced a 7 year contract win with LMU Klinikum, a large university teaching hospital in Germany.
The contract will be worth $10m over the period. It's a material win, but perhaps not as significant as yesterday's 7%+ share price jump would suggest.
Beyond the immediate financial value of the deal, it's great to see PME able to penetrate this market, which the CEO says has been very difficult. And it's also an important reference site with LMU being a "thought leader" in this field, and training the next geneartion of specialists.
You can read the full announcement here
PME signs A$10M – 7 year contract with Munich based Ludwig-Maximilians-Universität (LMU Klinikum)
Leading health imaging company Pro Medicus Limited [ASX: PME] today announced its whollyowned German subsidiary, Visage Imaging GmbH, has signed a 7-year A$10million contract with Munich based Ludwig-Maximilians-Universität (LMU Klinikum) one of the largest university hospitals in Europe.
The contract will see the company’s Visage 7 technology implemented across all LMU Klinikum’s radiology and subspecialty imaging departments replacing existing legacy PACS systems with a single centralized instance of the Visage 7 Enterprise Imaging Platform. Visage is also used in the hospital’s state of the art operating theatre suite for HD video documentation and point-of-care Ultrasound archival and viewing.
LMU Faculty of Medicine is the largest medical training institution in southern Germany and regarded as one of the top academic hospitals in Europe.
The implementation is scheduled to commence in December 2020.
“We look forward to taking our partnership with Visage to the next level as we implement their technology across our radiology department,” said Dr Kurt Kruber, CIO of LMU Klinikum. “The Visage platform provides a highly scalable and reliable platform combined with sophisticated clinical features that will support us in both day-to-day patient care and advanced research.”
“We are very excited about this project,” said Dr Malte Westerhoff, Managing Director of Visage Imaging GmbH. “LMU Klinikum is a thought leader in making a digital strategy a core principle of their operations. We are confident that our technology and expertise can make a significant contribution to helping LMU Klinikum further enhance efficiency and achieve better patient outcomes.”
“Traditionally, large European teaching hospitals like LMU Klinikum have standardised on IT platforms from large, multinational imaging equipment (modality) vendors making this a difficult market to penetrate.” said Dr Hupert. “So this is a very significant milestone for us in this highly competitive market.”
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About Pro Medicus Limited: Pro Medicus Limited [ASX: PME] is a leading medical imaging IT provider. Founded in 1983, the company provides a full range of radiology IT software and services to hospitals, imaging centres and health care groups worldwide. In late January 2009, the company announced the purchase of Visage Imaging, which has become a global provider of leading edge enterprise imaging solutions, pioneering the best-of-breed, or Deconstructed PACS® enterprise imaging strategy. Visage 7 technology delivers amazingly fast, multi-dimensional images streamed via an intelligent thin-client viewer. The company offers a leading suite of RIS, PACS and e-health solutions constituting one of the most comprehensive end-to-end offerings in radiology. Pro Medicus has global offices in Melbourne, Berlin and San Diego. www.promed.com.au
No matter how good the company is, and Pro Medicus is a VERY good company, there can still sometimes be a disconnect between the market's expectations, and reality, and in this case the market obviously had higher expectations than what PME delivered for FY20, and so PME have been sold down by around -2% to -3% today. They're actually still closer to their $14.50 12-month low than they are to their $38.39 12-month high, but neither of those prices was reasonable. One was rediculously expensive and the other was very cheap. PME is another I'd like to buy into on a decent pullback. We're not there let, but if they drift below $20/share I'll be giving them some serious consideration.
Some big insider buys on market announced today (Anthony 41,00 shares and Sam 30,00 all above market price) have finally encouraged me to take a position, knowing that 1. Yes general sentiment in the market could likely bring this down further and 2. The current valuation (even after this huge sell off) is still on the high side. In the short term, new contracts might slow down and we all wait to hear of any news regarding the impact of the pandemic.
13 February 2020
PME has signed a 5 year, $6m (minimum) contract with Nines -- a tele-radiology Palo Alto based software company led by silicon valley veteran David Stavans.
The contract will allow Nines to further develop radiology products based on ProMedicus' Visage 7 platform. Nines has a focus on Machine Learning and AI in developing its cloud based solution.
Seems a good deal that essentially gives PME an entirely new channel. Nines success will be PME's success.
Promoedicus will be showcasing its AI Accelerator solution and breat density classification algorithm at the upcoming Radiologiocal Society of North America in December. (ASX announcement here)
A key aspect of their solution is that it enables integration of 3rd party algorithms through an open API -- which means it has the potential to be the platform for research and application in this fast growing area. I remain convinced that medical images are a perfect candidate for AI processes, and will soon be integral to almost all future diagnosis procedures.
With big name collaborators such as the American College of Radiology, and a fast growing list of industry leading customers, Promedicus is very well placed here.
This area of the business has potential to not only enhance the attractiveness of Promedicus' Visage system, but could open up a new customer set (researchers and developers) and build a potent network effect.
ProMedicus remains one of the most exciting businesses on the ASX, and I remain convinced that it will be a significantly bigger and more profitable company in the decade ahead.
The trouble is, that is well and truly being priced in by the market at present. I retain a modest holding, but am not looking to add at current levels.
CEO said they were "comfortably ahead of budget" in terms of financial expectations for the current financial year, with expectations for a stronger second half, and a growing sales pipeline.
Spoke to the founder sell-down earlier in the year, which was supposedly ancouraged by the board to improve liquidity. This amounted to 7% of their shareholdings and they continue to hold 54% of the company.
Spoke to using the buy-back to help mitigate added volatility of the share price. Personally I think that is a silly reason. You only buy back shares when (a) you have no better investment opportunities and (b) shares are trading a material discount to managements estimate of fair value. At the current price, I find the second part difficult to reconcile.
Promedicus also talked to their AI capabilities, announcing AI Accelerator which better enables AI developement on their platform. Medical images are perfect for AI, and I see this as an increasingly essential component of their offering.
Full AGM presentation is here