Morgans downgrades Sigma Healthcare rating
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The news: Stockbroker Morgans has lowered its rating on Sigma Healthcare to 'hold' from 'add' after it adjusted Sigma's FY25 forecasts due to a delay in approvals for the company’s merger with Chemist Warehouse.
The numbers: Morgans analysts marginally lifted Sigma’s 12-month price target to $1.14 from $1.07 previously, following a strong full-year result.
However, this is still below Sigma’s current trading price of $1.23 a share.
The context: Sigma on Thursday reported that its full-year profit more than doubled to $4.51 million, following cost reductions and divestment of non-core assets.
The company said it expects the competition regulator’s decision on the $8.8 billion merger proposal in the second half of 2024.
Morgans said while the Australian Competition and Consumer Commission is likely to approve the deal, a decision is not expected before the end of 2024.
As a result, the analysts removed a six-month contribution from Chemist Warehouse in their FY25 estimates, reducing the company’s earnings for that year.
What they said: “After rolling our model forward and including Chemist Warehouse from 31 January 2025 our target price has increased to $1.14,” the analysts said in a note.
The source: Morgans research
