On Monday, JPMorgan adjusted its stance on Healius Limited (HLS:AU) (OTC: PHCRF), upgrading the stock from Underweight to Neutral and increasing the price target to AUD1.65, up from the previous AUD1.00. The revision follows Healius' sale of its imaging business, which garnered approximately $800 million. These funds are expected to be allocated towards debt reduction and shareholder distributions.
The analyst from JPMorgan anticipates that Healius will issue a fully franked special dividend of about 50 cents, equating to around $365 million. Additionally, a more conservative buyback strategy is foreseen, as the company is not expected to take on significant additional debt in the near term. Despite a strong start to the fiscal year 2025, concerns remain regarding the pathology business, which faces rising wage and occupancy costs while prices remain static.
The analyst's decision to upgrade the stock reflects the potential for the anticipated special dividend to provide short-term support for Healius' share price. The firm's discounted cash flow (DCF) valuation has increased to $1.50. However, a 10% premium was added to the price target, bringing it to $1.65, to account for the attractiveness of the substantial fully franked dividend that is likely to appeal to shareholders.
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