HIGHLIGHTS Signs five new customer contracts with a combined minimum value of A$45.0M Broad range of customers - multiple segments of the market New contracts are transaction-based with potential upside
The contracts will be fully Cloud deployed and are expected to be completed within the next 6 months:
A $9.5M, 5-year contract with Consulting Radiology, a private radiology group in Minnesota
A $11.5M, 7-year contract with Nationwide Children’s Hospital, a leading paediatric hospital in Columbus, Ohio
A $6.5M, 5-year contract with Nicklaus Childrens Hospital, a leading paediatric hospital in Miami, Florida
A $9M, 8-year contract with Moffitt Cancer Center, in Tampa, Florida
A $8.5M, 5-year contract with US Radiology Specialists, a partnership of physician owned radiology practices. The contracts bring the company’s minimum total contract value (TCV) for new sales this financial year to $245 million.
Return (inc div) 1yr: 93.91% 3yr: 37.59% pa 5yr: 39.48% pa
Latest pe ratio: 173% (the high pe puts many Investors off)
Thursday 2nd May 2024: PME have just made another all time high today - a intraday high of $112.59 before closing at $112.10.
PME, you've done it again!
And I still do not own any PME in my real money portfolios - just here on Strawman - where I paid between $20.16 and $27.87 per share back in the first half of 2020, and that position is showing a +50.92%p.a. return over the past 4 years despite me trimming the position all the way up. Just couldn't bring myself to pay up for them with real money, as they always look fully priced or expensive, however they just keep on rising regardless!
Yet another spectacular set of numbers from one of the best businesses on the ASX.
I know you shouldn't be fussy with price when it comes to great companies, but Pro Medicus is on a PE of 127..
That could represent value, but you'd need to see at least something like 25% average annual compound growth in NPAT for 10 years, and for shares to then trade at a PE of 35 in 2033. If that happened, you get a 10% average annual capital gain.
Over the last 5 years, the CAGR in EPS has been about 35%. So if you extrapolate that forward and apply a terminal PE of 35 (about what CSL trades on), then your average annual capital gain is something like 18%pa over 10 years. On these assumptions, the company would have a NPAT of $1.2b in 10 years -- and that's perhaps not too much of a stretch, especially with expansion into other areas.
So I'm not saying shares are definitely too expensive, just that a lot of optimism is built in..
(An I'm just bitter having sold down so much over the years. Idiot!)
Yet another record half.
All the details are here, but some highlights include:
- Revenue up 28% to $56.9m
- NPAT up 30% to $27.2m
- Cash up 4.4% to $94.5m
- 3 major contract wins for the half.
This is the strongest half year in the company's (already impressive) history.
The company has grown its top line from $14m in 2014 to well over >$100m for FY23 (pro-rata basis). But what's truly amazing is that they have done this:
- Without raising capital, and an essentially flat share count
- Sustaining insane NET margins (now at around 50%!!)
- Paying out dividends! (divs per share are up 10x since 2014)
- Gushing cash
- Sustaining growth investments
It's a masterclass in capital management, and how structural disruption and network effects can combine to deliver incredible and long-last growth.
The only problem? My estimate for the PE on a forward basis is somewhere around 120x. I've said many times before you shouldn't overthink valuation for high quality, fast growing businesses, but still...
I retain a very small position.
Another very solid result for PreMedicus.
For the FY21 year revenue was 19.5% stronger to just shy of $68m, with net profit up more than 33% to $30.9m as the business continues to scale well.
The top line has grown at an average pace of almost 20%pa for the last 5 years, while NPAT has grown at a stunning 37% per year (on average). Net margins are not only incredibly high, but have steadily improved (see attached chart) -- NPAT *NET* margin now sits at 46%.
It would have been much stronger than this if it werent for FX movements (revenue and NPAT would have been up 30% and 56%, respectively).
Not only that, but all this growth has been entirely self funded, with no new share issues being issued, or virtually any debt, over the last decade. In fact, PME has over $60m in cash at the bank.
It's even paid a consistent and fast growing dividend along the way. For FY21 it'll pay 15c per share all up, 5x more than it did in FY16.
A record number of new contracts were secured over the period, and the sales pipeline remains very "healthy" according to CEO Sam Hupert.
The Research collaboration agreements with with the Mayo Clinic and NYU Langone Health have yieled an FDA approved AI algo for breast density screening, and there's good growth potential there.
I regard this as one of the best businesses on the ASX. The only issue is price, which is rather "full"
On the latest numbers, shares are trading on a Price to Sales of 86 and a PE of 190.
I've had some very serious regret being too fussy on price in the past, but i'm not tempted to buy any more at these levels.
That being said, given the economics and growth runway, shares could be considered 'fair'. EG. assume 30% NPAT growth for 10 years and assume the business trades on a PE of 35 at that time, and you get a FY31 share price of ~$140. Discount that back by 10%pa to today and you get a valuation of $54 -- roughly where it sits now.
The only trouble here is that even if things go extraordinarily well (30% CAGR in net profit for a decade!), you get a market average rate of return. Anything short of that and you'd get an underperformance. So the phrase priced for perfection seems apt.
Of course, perhaps PME exceeds even this. But I find it prudent not to assume such lofty targets -- "margin of safety" being the other phrase that comes tro mind.
Results announcement here
