Medica Share Discussion Threads

[discodave45] 24/1/2021 18:23

Thanks Adam.2019 eps growth was about 9% and has been declining rapidly yoy. Appreciate earnings will be a lot higher for next FY but its priced in already IMO (PE dropping from 37 to about 18 if all goes well).Will keep watching and all the best.

[cockerhoop] 24/1/2021 18:01

Adam, Dave

My understanding from the Interims was that guidance had been withdrawn so unless you've seen a recent note (I can't see one on Research Tree) it may not be current.

Whilst the elective work has been delayed I'd imagine the vast majority has not been lost, it just resides in a large backlog that will need to be addressed once the new normal arrives. You could perhaps even make the argument that scans sent to MGP could increase as NHS tries to reduce the backlog with insufficient internal expertise.

[adamb1978] 24/1/2021 16:50

Hi Dave

The challenge with looking at 2020 for MGP is that it was badly impacted by covid. That's going to have a huge impact on EPS and therefore the FY20 multiple will look high.

Obviously if you believe that the covid-impacted FY20 represents the new-norm for MGP then it might be an appropriate basis for valuation, but in my view it will recover back to where it was pre-covid and continue the similar growth of pre-covid.

Therefore, combined with the fact that you buy shares based on the future performance and cashflows, in my view FY20 results are largely irrelevant for valuing MGP.

To answer your question, the broker forecasts which I see for them for FY20 show 3.6p EPS.
Cheers,

Adam

[discodave45] 24/1/2021 14:07

Ps isn't that rating based on TTM of 4.36p?Any broker forecasts available?

[discodave45] 24/1/2021 13:51

HiJust rechecked and eps FY20 could be 3.3p (worst case 2.5p): rev £36.8m, op profit 14% margin £5.1m, as per H1 tax, etc then eps 3.3p, so PE 37.Even if 27 it seems a lot is already baked in on a rapid recovery.

[ali47fish] 24/1/2021 13:17

disco i dont kow how you get to 50 for valuation-ft has 27

[discodave45] 24/1/2021 10:48

Hi Adam,Thanks for your views on MGP, have been looking at similar growth potential for this sector and had a cursory look at MGP. However I felt it was priced about right even for the anticipated recovery in FY21 (PE 15), for FY20 it's siting on a rating of 50 (if my eps calc of about 2.5p is correct).All the best though as who knows how MGP will do in the next few years but not for me on valuation, good luck.

[adamb1978] 23/1/2021 11:29

Agreed Apad. I have space to add more before my holding gets to a 'full' position in my portfolio and like you, am happy to wait to see whether covid causes any market fluctuations in markets generally, or impatient holders selling

[apad] 23/1/2021 10:58

Hi Adam,

Your numbers seem reasonable.

The big variable seems to me to be the rate at which normal service is resumed in hospitals and whether the budgets are there to outsource routine processes.
Returning to normal could be a longer journey than we would hope for.

I am also assuming that their consultants will be still on tap, so to speak.

I am looking to increase my holding, but am not in a hurry. I like this company being off the radar and I like their approach to licensing software.

apad

[adamb1978] 23/1/2021 10:36

Belatedly gone through the MGP figures and updated my expectations - day job prevents me from doing so properly during the week.

Trading statement on the whole was reassuring with the Nighthawk business holding up well 2021. Based on their comments, I reckon that that business accounted for say £24m of the £37m revenues, with Elective the remainder. Of that £24m from Nighthawk, I think about £14m was in H2.

For 2021, if you assume covid means that H1 is similar H2 2020 for elective, but then a recovery back to normal in H2 FY21, I think you have about £18m revenues from Elective. For Nighthawk, similar growth rates to recent years makes me assume around £28m - £30m. Then there's the RoI acquisition which was doing around £10m run-rate on acquisition, and so assuming covid impacted H1, I assume £3m in H1 and £5m in H2.

Overall that gets me to c.£56m revenues for the year, and then assuming flat gross margins and continued opex growth, I get 8.3p EPS. These inputs take EBIT margins for 2021 to around the midpoint of 2019 and 2020, which feels about right.

Long-term (FY23) I think EPS of 14-16p is do-able and they've historically traded on 15x-20x. Therefore the 121p current price looks attractive to me given I look for 20%-30% p.a. return.

Its a high ROCE business which has typically grown turnover at 15%-20% - a nice combination!

Adam

[leopoldalcox] 21/1/2021 09:45

Good margins, held up despite decreased activity as a result of the tech focused model

[adamb1978] 21/1/2021 08:26

Good trading statement this morning - actually better than I expected with turnover and margins holding up better despite the pandemic. Nighthawk probably came in around £13m - £13.5m in H2 with the elective surgery business doing the remainder of turnover.

Looking forward, where can turnover get to this year? Well:
Nighthawk: double H2 Fy20 and then grow at the c.15% historical growth rate gets you to c.£30m
Assume the elective part gets back to the £24m pre covid in H2, but the current low levels in H1. So 24/2 + 6 = £18m
Then there's £10m from the RoI acquisition - need to base this off the run-rate levels in the acquisition announcement

Therefore I think they might do around £58m revenue this year vs market forecasts of £54m

Very happy to continue to hold, and think the risk is relatively limited from here

[phurley] 16/1/2021 00:49

None of the above - Good contacts

[stun12] 15/1/2021 09:05

My understanding was that Nighthawk was always on the lookout to increase the count of radiologists - this has been reported by MGP and also by a family member who used to work there. I'd be surprised if Medica did anything but pull in its haunches again briefly, rather than change a business model which appears to work well for both the hospitals and the radiologists, neither of which want to be on the premises too much at the moment. Elective surgery has once again been downgraded, but there is still emergency work and critical care to keep them going.

[adamb1978] 15/1/2021 08:58

phurley
Can you expand on where you get your info from and/or what your relationship with MGP is? You seem to either be working for them or trading with them or something similar?
THanks
Adam

[lancasterbomber] 07/1/2021 16:15

Nearly back on profit with this o!

[scooper72] 09/12/2020 00:01

Enjoyed that. Thanks. V down to earth.

[thewheeliedealer] 08/12/2020 21:21

Hi all,

My mate Peter @Conkers3 and myself did a ‘Twin Petes Investing’ Podcast a few days ago and part of our discussion includes MGP which I think looks quite interesting and it is one I have been considering because I am in buying mode at the moment. We also chatted about loads of other Stocks and Ideas for research. We discussed the outlook for Markets and the most likely roadmap for the next couple of months, and as usual a fair bit of educational stuff with regards to Investing.

Anyway, if you use Apple, Audioboom, Overcast or Spotify you can find it under the 'Conkers Corner' Channel (you want Podcast TPI 37) and you can find it on Soundcloud at the link below. It is also now on Youtube.

I hope you enjoy it and find it useful, we try to keep them light and they are totally unscripted.

Cheers, WD
@wheeliedealer

[boonkoh] 22/11/2020 16:05

£3bn extra funding for the NHS announced, the greatest extra winter funding ever given in the last 10 years. To enable more "checks, scans, operations" to clear the backlog.Good for Medica next year!

[boonkoh] 19/11/2020 18:14

Not a real 16% but nevertheless a good rise, especially at the end of the day. Small trades driving the increase, looks like maybe an overhang of shares has been cleared?

[lancasterbomber] 19/11/2020 16:45

Up 16.1% today

[18bt] 18/11/2020 11:34

APAD, I think we are broadly on the same page and I was being inexact about "educate the AI". I agree that AI is largely used as a synonym for large scale pattern analysis. There's an interesting parallel with MGP and Intelligent Ultrasound (MED) which I also own shares in (via an EIS scheme). I broadly think that both have the opportunity to make the medical processes in the different markets they serve more accurate and more efficient with tech which already exists today.

[simon gordon] 18/11/2020 11:30

Apad,

Cheers!

[apad] 18/11/2020 11:24

"educate the AI with human knowledge"

18BT
This sort of statement has been used to promote software for years.
It isn't possible because human brains don't work like computers by a store and retrieve mechanism.
Remembering recreates, it doesn't access a store.

I ran an AI research group back in its heyday. Rules and Prolog and suchlike stuff.
The movement ran out of steam. It couldn't even model the British Nationality Act because there was an inbuilt prejudice in its execution.
If you cannot model the law with a series of rules there is a fundamental lesson. Lawyers have still not been made redundant!

The term AI tends to be used for large data and pattern analysis these days, but is still advertised as 'Intelligence'. It doesn't mean big data doesn't have value, it does mean that it is not a substitute for thinking.

It is worth reflecting that computers still can't play Go.
youtu.be/WXuK6gekU1Y

Excuse my indulgence in wandering down memory lane.

apad