• Marcus Bogdan

Purchased Integral Diagnostics (IDX)




Integral Diagnostics (IDX) provides diagnostic imaging services in Australia and New Zealand. IDX derives ~90% of its revenue from Australia where it is the fourth largest diagnostic imaging company. The majority of the company’s revenue is funded by the Medicare Benefit Scheme (MBS), with patients paying out-of-pocket being the second largest revenue source.


Consistent with other healthcare service providers, IDX has been impacted by Covid lockdowns in Australia and New Zealand, whereby trading for FY22-to-date is ~5% below management expectations. However, we expect IDX’s revenue to recover materially once lockdown restrictions are eased, as patients return to normal healthcare testing and elective surgery lists recommence.


A strong sequential improvement in calendar 2022 should see IDX resume an annualized organic growth rate of +5-7%. Moreover, IDX’s recent acquisition of X-Ray Group is expected to be ~4% EPS accretive over FY22-FY25.


We believe IDX’s earnings profile is supported by an industry that has relatively secure volumes in diagnostic imaging, margins benefiting from a positive mix toward higher-acuity testing (CT & MRI), and the optionality of brownfield and M&A investment. Furthermore, IDX’s healthcare valuation is undemanding on an EV/EBITDA multiple of ~10 times 12 months forward. IDX’s balance sheet is conservatively leveraged at ~1.5 times net debt/EBITDA.