Life Healthcare (LHC) is an international healthcare provider. Its geographic footprint spans across southern Africa, the United Kingdom, and Europe. In southern Africa, the group operates a hospital division and a healthcare services division. The international segment includes Alliance Medical Group (AMG) and Life Molecular Imaging (LMI).
Fundamentally, we view Life Healthcare as a solid player within the healthcare space. We expect a post-Covid-19 pickup in elective surgeries to remain supportive of volumes and margins, which may translate into decent bottom-line growth over the medium term. The recent approval of Alzheimer drugs by the FDA in the US holds potential for its patented radioisotope tracer used in the diagnosis of the disease.
Technically, a price that appears to be in the upper range of a declining channel pattern makes the share attractive as an investment opportunity (see black parallel down sloping trendlines on the main chart).
The pattern is characterised by two parallel trendlines, one acting as resistance (upper trendline) and the other as support (lower trendline). The price oscillates between these two boundaries, generally moving in a downward direction. However, a price that frequently touches the upper boundary of the channel, suggests buying interest or a decrease in selling pressure. As such, a decisive close above the upper boundary of the declining channel is a strong bullish signal.
According to the RSI (Relative Strength Index), the stock will be overbought at ~R28. This classifies our profit target of R27 as realistic. We suggest a medium capital at-risk allocation to this trade. Increase exposure for a break above R22.
Share Information
| Share code | LHC |
|---|---|
| Industry | Health Care Equipment & Services |
| Market Capital (ZAR) | 29.88 billion |
| One year total return | -2.91% |
| Return year-to-date | 21.62% |
| Current price (ZAR) | 20.36 |
| 52 Week high (ZAR) | 21.79 |
| 52 Week low (ZAR) | 15.97 |
| Financial year end | September |
| Closing paragraph | Several technical indicators are pointing to renewed upside potential. Expect moderate to high volatility in the price. |
Consensus Expectations (Bloomberg)
| FY22 | FY23E | FY24E | FY25E | |
|---|---|---|---|---|
| Headline Earnings per Share (ZAR) | 1.05 | 1.00 | 1.29 | 1.57 |
| Growth (%) | -5.03 | 28.80 | 21.89 | |
| Dividend Per Share (ZAR) | 0.40 | 0.36 | 0.50 | 0.63 |
| Growth (%) | -9.75 | 37.95 | 26.10 | |
| Forward PE (times) | 20.36 | 15.81 | 12.97 | |
| Forward Dividend Yield (%) | 1.77 | 2.45 | 3.08 | |
| Closing paragraph | While earnings are expected to be under pressure over the near term, strong growth is expected in FY24 and FY25. The dividend yield is also expected to improve meaningfully. | |||
Buy/Sell Rationale
Technical Analysis:
Long-term fundamental view:
| Share Name and position |
APN - BUY (Continue to hold) |
INL - BUY (Continue to hold) |
DCP - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 182.66 | 105 | 24.12 |
| Current | 182.66 | 112.91 | 25.07 |
| Movement | 8.6% | 7.5% | 3.9% |
| Summary text |
A developing symmetrical triangle pattern remains of interest. Remains above its 200-day simple moving average and upside price momentum is supportive of the trade idea.
Our profit target is R222, with a trailing stop-loss of R174. Exit the trade around 27 December 2024 |
The price is noteworthy based on the RRG analysis, particularly due to its ability to stay above the 200-day simple moving average. Upside price momentum supports the idea.
Our profit target is R121, with a trailing stop-loss at R106.60. Exit the trade around 30 October 2023. |
The share continues to display early signs of a bullish divergence. The share remains below its 200-day simple moving average, indicating a counter-trend trade possibility.
Our profit target is R29, with a trailing stop-loss at R23.15. Exit the trade around 4 September 2023. |
| Share Name and position |
DSY - Buy (Continue to hold) |
VOD - BUY (Continue to hold) |
MTN - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 152.50 | 114.34 | 132.49 |
| Current | 154.52 | 113.27 | 129.50 |
| Movement | 1.3% | -0.9% | -2.3% |
| Summary text |
A developing symmetrical triangle pattern remains of interest. The stock remains just above its 200-day simple moving average. Upside price momentum has halted, which is a concern.
Take profit target set at R182. Trailing stop-loss at R138. Time to exit: 27 May 2024. |
The price appears to be in a value buying zone and remains of interest. The share remains below its 200-day simple moving average. Upside price momentum has halted, which is a concern.
Our profit target is R130, with a trailing stop-loss at R109. Exit the trade around 9 October 2023. |
May be entering stage 3 of an Elliot Wave pattern. Crossed above its 200-day simple moving average. Upside momentum supports the bullish bias.
Our profit target is R190, with a trailing stop-loss at R113. Exit the trade around 6 November 2023. |
