Selling Resmed (RMD) and increasing Newscorp (NWS) & Healius (HLS)
Recent changes to the Blended Australian Equities Portfolio
Sold Resmed (RMD)
We have sold our position in Resmed following a 40%+ uplift in its share price over 2019. RMD is currently trading on a forward price earnings ratio (PER) of c.33 times, with its current premium well above its five-year average. On PER to growth basis, RMD is expensive relative to domestic healthcare companies. While RMD’s operational performance has delivered strong growth and market share gains in its masks division, there is a medium-term risk that prices will be negatively impacted by the recommencement of competitive bidding in 2021. Changes to U.S reimbursement levels remains a key risk for industry participants.
Increasing Healius Ltd (HLS)
Healius (HLS) remains well positioned to be a beneficiary of a greater focus on preventative and primary healthcare. The implementation of the $448.5m 2019-20 Federal Budget measure, will be the first stage of a Primary Health Care 10-year plan. Tangible signs of improving operational and industry trends coupled with undemanding valuation metrics (c.10 times EV/EBITDA) has provided support in adding to the position in HLS.
Increasing News Corporation (NWS) We have added to our position in News Corporation (NWS). The potential sale of its US Coupons/Inserts business is an important first step in unlocking value across its portfolio. Trends to monetise and value premium content in its News business through recent agreements with Apple and Facebook provide an important source for new revenue streams. Moreover, there are nascent signs that the decline in its Subscription Video Services (Foxtel) are embarking on the right strategy by offering new differentiated products, particularly in sports. Latency exists with News Corporation’s net cash position combined with its undemanding sum-of-the-parts valuation.