Date of Data Capture: 19/7/2018
Name: CAPITOL HEALTH LTD (CAJ)
Classification: Healthcare Services
Current Price: $0.32
Market Capitalisation: $250M
Forecast EBITDA Growth: 18.93%
Yield Estimate: 1.61%
Consensus Price Target: $0.37
# Covering Analysts: 3
Discount at Current Price: 15.63%
Price Target Trend: Increasing-Flat
Signal Timeframe: Monthly-Weekly-Daily
Trend Bias: Up-Flat / Medium-Short
Focus: Capital Growth
· CAJ has been a stock of mixed fortunes and large trends. Here we see good potential for the continuation of their long-term recovery with positive signalling combining well with good fundamentals and forecasting out to 2020.
Set up Notes:
· Good recent performance has pushed prices higher on expanding sales, margins, profits and earnings - stronger growth is expected ahead which is mirrored by rising price targets.
· Pricing has gone through a major boom-bust cycle, climbing 3500% from 2011-14 and then falling 90% to 2016, we see signs of extension to the long-term recovery uptrend running since 2017, with major resistance breaking last month.
· Support sits at 30c and 25c with resistance targets higher at 35c, 40c, 50c and beyond.
Growth Focus: CAPITOL HEALTH LTD (CAJ)
Our primary focus here is capital gain, we will select our stocks from the ASX Top 500 All Ordinaries Index.
When searching the market for investment prospects we are constantly scanning companies for signs of growth and health, accordingly it is fitting that we take a closer look at diagnostic imaging company Capitol Health Ltd (CAJ) to see if recent strength will lead them to a greater recovery.
Headquartered in Melbourne, Capital Health provides diagnostic imaging services throughout Victoria and Tasmania, providing a wide array of scanning services, ranging from X-rays to Doppler, ultrasounds and nuclear medicine. The company has an active acquisition strategy to boost organic growth, recently picking up nine radiology clinics in Western Australia. A counter note was seen in the failed (but well-targeted) takeover attempt of Integral Diagnostics Ltd (IDX) earlier in the year, and we expect this activity to continue as CAJ builds its presence interstate, within a growing sector that is already undergoing M&A consolidation.
Performance over the last few years has been steady rather than robust, but we are happy to increase our exposure to the healthcare market, backed to be one of the main beneficiaries of the ageing Boomer demographic. While CAJ carries decent forecasts for 2018 - with strongly positive consensus analyst sentiment - growth expectations become more aggressive with very strong earnings forecast out to 2020 on the back of improving margins and profits and sales. As the market tends to be forward looking, we should start to see pricing mirror these expectations and in the meantime the stock is currently discounted by over 15% compared to rising consensus target prices.
One aspect that could be causing investor caution might be Capital’s dramatic pricing history; a 90% fall from 2006 to 2010, leading to a 3500% rise from 2010 to 2015, following yet again by another 90% fall by late 2016. The current emerging uptrend could easily be seen as the continuation of the greater recovery uptrend seen since mid-2017 and this is significant with price breaking through important resistance and out of the year-long 25c to 30c trading range just last month.
In recent weeks we have seen pricing pushed back to test the old resistance ceiling at 30c for support, but this should be a buying opportunity as we see good positive momentum developing across multiple timeframes. With an active acquisition strategy in a robust marketplace, with plenty of growth opportunities available, backed by strong forecasting and an exciting technical setup, we think the potential of Capital Health should be clearly visible to all.