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Your thoughts on Sigma Healthcare Ltd (ASX: SIG) and Fortescue Ltd (ASX: FMG)

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    Your thoughts on Sigma Healthcare Ltd (ASX: SIG) and Fortescue Ltd (ASX: FMG)

    Dear Esteemed Team, SIG has been hit, I am told , because they are trying to takeover yet another company. The annals of companies trying to do too much too soon with too much debt are filled with tragedy. Is this the case or is it a buying opportunity? Or is it too early to tell? One must not catch a falling knife. I have wanted to buy FMG for YEARS. It pays a handsome dividend and has achieved much. However, it gets it's money from virtually nothing else but iron ore which is both 'Yesterday's Porridge ' and soon to be faced with strong competition from Africa. My ample bum is still sore from buying shares at the top of a resource cycle and waiting YEARS for recovery which sometimes never happens. I do NOT want to walk down that road again. Your always wise counsel would be greatly appreciated. Keep on keeping on. Octagenarian

    Answer

    Hi Octagenarian,

    Sigma Healthcare (SIG) came under pressure following its FY26 result, covered here on the Thursday, falling close to 8% on the day. The headline result was broadly in line, with revenue of $10.83bn, normalised EBIT of $1.09bn, normalised EPS of 6.4c and statutory profit of $709.2m, while a 2c final dividend was declared.

    • However, EBIT and EPS were slightly below broader consensus expectations, which was enough to disappoint following the stock’s strong performance since the Chemist Warehouse merger.

    More importantly, the market was unsettled by limited clarity around the outlook for Chemist Warehouse Australia’s network sales, which is now central to the investment case following the merger. Management’s expectation for double-digit revenue and earnings growth in 1H FY27 provided some reassurance.

    • Overall, the weakness looks predominantly down to elevated expectations and uncertainty around Chemist Warehouse’s near-term sales trajectory rather than a material deterioration in the broader business.

    Sigma’s main recent M&A story was its brief pursuit of UK pharmacy giant Boots, valued at up to $10bn, before withdrawing in June after deciding the deal did not meet its strategic or capital-return hurdles. Instead, SIG is pursuing a lower-risk UK expansion through Greenlight Healthcare, acquiring interests in selected stores to roll out the Chemist Warehouse brand.

    • We maintain a neutral stance towards SIG.

    As you say FMG is an iron ore company, if the bulk commodity falls so will its earnings and dividend. However, we like the risk/reward towards FMG below $18, especially for income but for growth we continue to prefer copper facing companies.

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    Sigma Healthcare Ltd (SIG)
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