Virtus Health

About the author:

Author name:

By Scott Power

Job title:

Senior Analyst

Date posted:

02 June 2014, 8:00 AM

Sectors Covered:

Healthcare, Life Sciences

Virtus Health (VRT) has acquired a 70% interest in Ireland's largest IVF producer, SIMS IVF for Euro 15.5m. The acquisition will be funded out of existing cash facilities and the price (on an EBITDA multiple of 7.9x) is fair.

SIMS IVF undertakes approximately 25% of Ireland's IVF services (over 1000 cycles), and generated Euro 12.4m in revenue and Euro 2.8m in EBITDA in 2013. A 70% share will contribute Euro 1.96m (A$2.9m) in EBITDA for FY15. VRT has the ability to buy the outstanding shares in 2017 and 2019.

Impact to forecasts and view

VRT estimate the acquisition will add 1.98 cents per share to normalised earnings. We had assumed FY14 earnings of 39.5cps, growing at 12% to 44.3cps in FY15. We will review our forecasts and make some minor upgrades. Management from VRT will present to our network on Thursday (June 5th).

The acquisition helps underpin our growth estimates and is in line with the company's strategy. We believe the market will be supportive of the acquisition. 

VRT will deliver sustainable and defensive earnings growth over the medium term. We retain our Add recommendation with a share price target of A$8.96.

More information

Morgans clients can access our detailed research on Virtus Health (VRT). If you are interested in finding out more, please contact your nearest Morgans office.

Disclaimer(s): Analyst owns shares.

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