Diagnostics business SHL has struggled over recent years, but they showed some signs of improvement at their result in February. This is a solid business, but COVID was ultimately not kind to them. While it delivered a big short term sugar hit to revenue, SHL’s cost base also blew out which they have carried into a weaker sales environment i.e. they haven’t pivoted quick enough.
We now think they are in the early stages of a recovery underpinned by improving revenue in the US with the introduction of new software, coupled with a heavy focus on cost cutting in Australia.
- We like the risk/reward towards SHL as a recovery play, initially targeting $35, or ~20% higher.
MM is now cautiously bullish towards SHL
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