Capitol Health Ltd (“CAJ”) – Healthcare upside!

[steve fleming]

Healthcare is quickly overtaking retail as the largest sector in the economy – and i am increasingly going heavy into profitable fast growing micro- cap healthcare plays, which provide, IMO, very attractive exposure to the increased health expenditure spend.

Have been buying CAJ /CAJO over the last couple of months since they reaffirmed their full year guidance at their November AGM. Guidance was again reaffirmed last Friday.

CAJ is Australia’s only listed pure-play diagnostic imaging company – it derives approximately 90% of its revenue from bulk billing. Currently 28 clinics with 7% VIC market share growing at +12% yoy.

Per a Mergermarket Report – “ The diagnostic imaging market is currently unsustainable and will see consolidation as larger players face pressure from market demand to move to a bulk billing model, while smaller players face financing pressure from government moves to reduce rebates for companies with older equipment. The diagnostic imaging market is currently dominated by Primary Health Care (ASX: PRY); Sonic Healthcare (ASX: SHL); and CVC-owned I-Med Network.

The mid-tier space includes Capitol Health (Victoria) and two similar-sized private businesses, one in Adelaide and one in Sydney, followed by numerous fragmented smaller players.

While it makes sense for Melbourne-headquartered Capitol Health to make small buys to concentrate the market, it could well become a takeover target itself, given its market positioning and size relative to the larger players, and is constantly on the radar of its peers. Its appeal lies in 98% of its revenue already coming from bulk billing as well as its modern equipment and single unified system.”

For a $12m market cap, IMO you are getting exceptional bang for your buck in terms of CAJ’s size/scale ($42m t/o), business maturity (ie restructuring phase is complete) and risk profile.

Forecast FY11 revenue of $41m
Forecast FY11 EBITDA of $4.8m
Market cap = $12mil
IBD (excluding equipment leases) = $2.8m
EV =$14.8m

SO EV/EBITDA is approximately 3 x

CAJ @ 4c - 303m on issue
CAJO @ 1c – 25m on issue

Finally – Patersons have a 7c target on CAJ (updated based on AGM guidance on 23/11/10) = 75% upside.

Patersons Chairman Michael Manford, and Patersons exec Aaron Constantine (Jasper Hill Resources = big bags on CEO/SLT) are also top 20 share holders / option holders in CAJ.

For me, i see these profitable micro-cap healthcare plays (such as CAJ, MLA, PGC etc) as very exciting.

2009 i saw an opportunity and went big on heaps of long-dated options that no one wanted.
2010 I saw an opportunity and took big exposures in heaps of back-door shells that no-one wanted.
I have had so many multi-baggers from these strategies I have given up counting.

2011 i am seeing a similar opportunity with these healthcare plays – with increased govt expenditure and aging population, industry consolidation, new technologies generating increasing referrals and revenues effectively government guaranteed, I think the time is right to be one step ahead of the market and get in while they are under the radar.


Anyway, just my thoughts, and quite possibly will be proved wrong....

[shasta]

Healthcare is quickly overtaking retail as the largest sector in the economy – and i am increasingly going heavy into profitable fast growing micro- cap healthcare plays, which provide, IMO, very attractive exposure to the increased health expenditure spend.

Have been buying CAJ /CAJO over the last couple of months since they reaffirmed their full year guidance at their November AGM. Guidance was again reaffirmed last Friday.

CAJ is Australia’s only listed pure-play diagnostic imaging company – it derives approximately 90% of its revenue from bulk billing. Currently 28 clinics with 7% VIC market share growing at +12% yoy.

Per a Mergermarket Report – “ The diagnostic imaging market is currently unsustainable and will see consolidation as larger players face pressure from market demand to move to a bulk billing model, while smaller players face financing pressure from government moves to reduce rebates for companies with older equipment. The diagnostic imaging market is currently dominated by Primary Health Care (ASX: PRY); Sonic Healthcare (ASX: SHL); and CVC-owned I-Med Network.

The mid-tier space includes Capitol Health (Victoria) and two similar-sized private businesses, one in Adelaide and one in Sydney, followed by numerous fragmented smaller players.

While it makes sense for Melbourne-headquartered Capitol Health to make small buys to concentrate the market, it could well become a takeover target itself, given its market positioning and size relative to the larger players, and is constantly on the radar of its peers. Its appeal lies in 98% of its revenue already coming from bulk billing as well as its modern equipment and single unified system.”

For a $12m market cap, IMO you are getting exceptional bang for your buck in terms of CAJ’s size/scale ($42m t/o), business maturity (ie restructuring phase is complete) and risk profile.

Forecast FY11 revenue of $41m
Forecast FY11 EBITDA of $4.8m
Market cap = $12mil
IBD (excluding equipment leases) = $2.8m
EV =$14.8m

SO EV/EBITDA is approximately 3 x

CAJ @ 4c - 303m on issue
CAJO @ 1c – 25m on issue

Finally – Patersons have a 7c target on CAJ (updated based on AGM guidance on 23/11/10) = 75% upside.

Patersons Chairman Michael Manford, and Patersons exec Aaron Constantine (Jasper Hill Resources = big bags on CEO/SLT) are also top 20 share holders / option holders in CAJ.

For me, i see these profitable micro-cap healthcare plays (such as CAJ, MLA, PGC etc) as very exciting.

2009 i saw an opportunity and went big on heaps of long-dated options that no one wanted.
2010 I saw an opportunity and took big exposures in heaps of back-door shells that no-one wanted.
I have had so many multi-baggers from these strategies I have given up counting.

2011 i am seeing a similar opportunity with these healthcare plays – with increased govt expenditure and aging population, industry consolidation, new technologies generating increasing referrals and revenues effectively government guaranteed, I think the time is right to be one step ahead of the market and get in while they are under the radar.


Anyway, just my thoughts, and quite possibly will be proved wrong....

Ive started compiling a healthcare watchlist, but its the filtering thru the better companies im finding the hard part.

I found MLA & picked it in the ASX comp & even though its up 300% its still is small cap ~$15m

[percy]

I brought a few CAJO at o.08 today.As I have PGC and PGCOA but do not have any MLA I expect MLA will be the bolter.
Confession time.In about 1995 after EBO in NZ had gone for a run,I sold a few and brought Aussie junior medical supply company PNX.,which shortly afterwards went belly up.!! So nice to be onto "profitable" ones.Thanks for the research,SF,shasta and KW.

[shasta]

I brought a few CAJO at o.08 today.As I have PGC and PGCOA but do not have any MLA I expect MLA will be the bolter.
Confession time.In about 1995 after EBO in NZ had gone for a run,I sold a few and brought Aussie junior medical supply company PNX.,which shortly afterwards went belly up.!! So nice to be onto "profitable" ones.Thanks for the research,SF,shasta and KW.

I'll post some of the healthcare stocks im following, once i work out the EV's etc, so we can filter the best ones out & give the heads up BEFORE they run

[steve fleming]

You had me at "profitable" :-)

Any others that you didnt mention Steve?

Hi KW

The following are also on my "profitable micro-cap medicals' watchlist (but maybe too small/illiquid for most)

Medtech Global Limited (MDG) – Market cap of $6m (Reported FY11 half year EBITDA of $640k), might start a thread on them
ITL Limited (ITD) – Market Cap of $8m (Reported FY11 half year EBITDA of $1.8m)


Am keen to see what Shasta comes up with, as am looking to increasingly reduce my resources exposure, infavour of other market opportunities.

[Sauce]

as am looking to increasingly reduce my resources exposure, infavour of other market opportunities.

Steve,
You are a smart man.
Regards,
Sauce

[shasta]

Hi KW

The following are also on my "profitable micro-cap medicals' watchlist (but maybe too small/illiquid for most)

Medtech Global Limited (MDG) – Market cap of $6m (Reported FY11 half year EBITDA of $640k), might start a thread on them
ITL Limited (ITD) – Market Cap of $8m (Reported FY11 half year EBITDA of $1.8m)


Am keen to see what Shasta comes up with, as am looking to increasingly reduce my resources exposure, infavour of other market opportunities.

Working on it!

I wanna digest what they actually do so i can offer a little more than just the EV figures

I got about 17 companies

[steve fleming]

Steve,
You are a smart man.
Regards,
Sauce

Haha....not sure that my wife agrees with that statement!

However, I do think that the easy money in resources has already been made over the past couple of years.

I am also getting pretty sick of the constant games and manipulation that takes place in alot of the smaller resource stocks.

I think that the shareholder base in industrials is generally alot more sophisticated, who don't partake in such games.

So have been moving funds out of resources into other industrial opportunities.

[steve fleming]

CAJ announced their half yearly tonight:

NPBT of $1.05m
Operating CF's of $2.9m(pre capex)

Plus a profit upgrade thrown in as well:

"Based on the anticipated trading pattern for the remainder of the financial year, the above results annualized will exceed previous market guidance of Operational Revenue of $41m+ and Net Profit Before Tax of $2.25m for FY11.

The Directors expect that previous market guidance may be exceeded by a factor of between 3- 4% for the full year if the current operating environment holds.

The company continues to self-fund investments in capital expenditure and pursue acquisitions that will add to shareholder value."

Interesting to note that the company emphasised that the intangibles are fully supported by future cashflows. Intangibles are valued at $20m, yet CAJ's m/c is $12m.

I am pretty impressed by the results - will see how the market reacts tomorrow.

[Lego_Man]

I am pretty impressed by the results - will see how the market reacts tomorrow.

Pretty well it looks like. Glad i got in yesterday @3.9c...

[buns]

Not huge volumes. My weeny $1700 pushed the options up 25%

Bit of a rookie still, but these I assume these minnows don’t get bought instantly on a profit upgrades like the majors. Major’s are usually pretty well at full value, hence when an up/downgrade is given that value changes and SP’s move. These ones either have an unknown fair value, or are already below/over hence shouldn’t move suddenly.

Instead the profit upgrade, makes a headline which introduces someone to the stock.

Anyway – happy to be in CAJ. I like the overall story in healthcare, but have also been given the thumbs up from some Med people close to imaging. Who believe there is no reason why these growth rates won’t slow down.

The others Flemmo mentions, are a tad to high risk for me.

[drillfix]

Pretty well it looks like. Glad i got in yesterday @3.9c...

I also grabed a small parcel at 3.9c today Lego


Although tell me, is this the Shasta or Steve Fleming revolution we are participating in ? or both? :P

[ronthepom]

I also grabed a small parcel at 3.9c today Lego


Although tell me, is this the Shasta or Steve Fleming revolution we are participating in ? or both? :P

Took a parcel myself drilly also options

[shasta]

I also grabed a small parcel at 3.9c today Lego


Although tell me, is this the Shasta or Steve Fleming revolution we are participating in ? or both? :P

Steves ;)

I'll start a separate thread on the 20 or so companies i have on watch in the healthcare sector, & ill leave it to the individual to follow them up

May as well put all the good oil out there for everyone...

Idea is to find stocks, before the market catches & Hot Copper goes all berserk over them & before Steve Flemming accummulates them :)

[drillfix]

Took a parcel myself drilly also options

Ahh Ron, both heads and options.

I see you a man that likes dinner and desert served at once :)

[drillfix]

Steves ;)

I'll start a separate thread on the 20 or so companies i have on watch in the healthcare sector, & ill leave it to the individual to follow them up

May as well put all the good oil out there for everyone...

Idea is to find stocks, before the market catches & Hot Copper goes all berserk over them & before Steve Flemming accummulates them :)


Shasta, can you add some fundamental ratings on them too, as some of us may not know what it means when comparing. Meaning the health care sector to me is not one of my strengths fundamentally, so any words of what to look for in them adding to any comparison would be helpful to folks, is what I am trying to say I guess.

Hope that makes sense and if possible or not too much work to add.

[shasta]

Shasta, can you add some fundamental ratings on them too, as some of us may not know what it means when comparing. Meaning the health care sector to me is not one of my strengths fundamentally, so any words of what to look for in them adding to any comparison would be helpful to folks, is what I am trying to say I guess.

Hope that makes sense and if possible or not too much work to add.

I'll put all the companies on 1 thread, & will provide some commentary on them during the weekend

So far, ive worked out all the EV's & got a description on what they actually do, but will look into there lastest financials to see which are profitable or not

I wouldnt say im up with the play enough to "rate" them, so would rather put some leads out there for others to follow up.

It's too much work to knock up separate threads with the same style guff i do for the resources low EV plays, but i'll try & filter out the better ones & will post how the short term chart looks (not that anyone should take ANY TA advice from me!)

It'll be a work in prgress, if we find something compelling, then perhaps we can start new threads & discussion ;)

[drillfix]

Excellent work there Shasta, IMO, I would make such a thread private initially for ST members only, as all the freebee readers will just come in, read it or skim it and then first foot everything to make all the ST members cough up, so is there anyway that you or a mod can make it be a little more under the umbrella so to speak, or dont feel its a good idea?

[ronthepom]

Ahh Ron, both heads and options.

I see you a man that likes dinner and desert served at once :)

Yeh in more ways than one haha

[shasta]

Excellent work there Shasta, IMO, I would make such a thread private initially for ST members only, as all the freebee readers will just come in, read it or skim it and then first foot everything to make all the ST members cough up, so is there anyway that you or a mod can make it be a little more under the umbrella so to speak, or dont feel its a good idea?

Often though about that, having Sharetrader only available to view via membership, but i dont own the site!

Don't know it would work functionally on the site to do that anyway

I might hold back some of the better plays now ;)

Until Sharetrader has a pay per view commission system!

(Jokes, im just a Narcissist who enjoys finding undervalued stocks & sharing the good oil, we are all here to make $)

I guess anyone can come & read what we picked in the comps too!

[ronthepom]

I'll put all the companies on 1 thread, & will provide some commentary on them during the weekend

So far, ive worked out all the EV's & got a description on what they actually do, but will look into there lastest financials to see which are profitable or not

I wouldnt say im up with the play enough to "rate" them, so would rather put some leads out there for others to follow up.

It's too much work to knock up separate threads with the same style guff i do for the resources low EV plays, but i'll try & filter out the better ones & will post how the short term chart looks (not that anyone should take ANY TA advice from me!)

It'll be a work in prgress, if we find something compelling, then perhaps we can start new threads & discussion ;)

Thanks for your trouble Shasta we all appreciate your efforts.

[drillfix]

Shasta, it sure would be possible. Just like how sometimes non members who view images may see the link and click on it, and it asks them Log In to view the pic or link.

This should also be done or possible with a thread permission controlled by a Mod or Admin.

Or perhaps you can make it a whitepaper or pdf of a file so it can only be viewed by registered ST members.

[yabster]

Hi Shasta - just wondering if PRR is on your list- Bio company that has a vaccine for Ovarian cancer- CVac, in trials in the states with approval from FDA and is to list on the NASDAQ. Has already run to 23 cents - but have seen a brokers report with a target of 60 cents. (see link below)

don't hold any- just looks interesting.

http://www.primabiomed.com.au/investor/analyst_reports_pdf/053110_Southern_Cross_Report.pdf

[shasta]

Hi Shasta - just wondering if PRR is on your list- Bio company that has a vaccine for Ovarian cancer- CVac, in trials in the states with approval from FDA and is to list on the NASDAQ. Has already run to 23 cents - but have seen a brokers report with a target of 60 cents. (see link below)

don't hold any- just looks interesting.

http://www.primabiomed.com.au/investor/analyst_reports_pdf/053110_Southern_Cross_Report.pdf

No it's not, but i'll add it in

cheers

[percy]

Often though about that, having Sharetrader only available to view via membership, but i dont own the site!

Don't know it would work functionally on the site to do that anyway

I might hold back some of the better plays now ;)

Until Sharetrader has a pay per view commission system!

(Jokes, im just a Narcissist who enjoys finding undervalued stocks & sharing the good oil, we are all here to make $)

I guess anyone can come & read what we picked in the comps too!

Hi Team,
Please do n't feel guilty not posting some gem,my mail box is open all hours for PMs.

[trackers]

Thanks for your trouble Shasta we all appreciate your efforts.

Yeah cheers Shasta appreciate it here too

[steve fleming]

What happened to the CAJ sell side this afternoon???

Is someone with spark or who has the ability to replay bid action able to find out what happened to all the bids from 4.0 to 4.7?? They have all disappeared?

Even the rest of the sell order at the close price of 4.5 - what happened to that??

Biggest ever volume day today for CAG, but i can't make sense of that action between 3.00 pm and 4.00pm? Has Pattersons finally let her off the chain?

Anyhelp much appreciated...drilly??

[drillfix]

What happened to the CAJ sell side this afternoon???

Is someone with spark or who has the ability to replay bid action able to find out what happened to all the bids from 4.0 to 4.7?? They have all disappeared?

Even the rest of the sell order at the close price of 4.5 - what happened to that??

Biggest ever volume day today for CAG, but i can't make sense of that action between 3.00 pm and 4.00pm? Has Pattersons finally let her off the chain?

Anyhelp much appreciated...drilly??


Hi Steve, yes I also noticed that too, as in sellers just completely all but vanished backup to 4.8c
(you are referring to CAJ or do you mean CAG?).

To answer your question about replay, yes NinjaTrader has a Record the ticks so to speak, but dont use ninja for trading ASX stocks (only sometimes) so I did not record it and hardly would ever record anything except some futures or forex where by I want to study my own trades or to use replay the tick data for strategic thinking etc.

Will this be the big move to what may be a next step up? who knows but this is my first day in this stock and I know little about it so but some odd behaviour I am not sure if that is a compliment or a signal of some sort.

Had a gut full of BOT control tactics the stock ECM, can only get in and not out unless you want to have a set exit, but thats another story.

[shasta]

Hi Team,
Please do n't feel guilty not posting some gem,my mail box is open all hours for PMs.

Of course Percy ;)

The narcissist in me is ALWAYS looking for the next stock...

Must say doing my usual research has picked up a few more healthcare plays, guess what im doing this weekend now!

[drillfix]

Shasta, ummm, I think you will be collating information on stocks??? lol :P

Hey, if you let me know what Fields/Rows/Columns you would need to create a Database, maybe I could try to knock one up so all you would need to do is enter them online and once.

That is if you want, could make a template based system with few variations for different types of stocks or levels, ie: explorer, blue chip, junior whatever.

[shasta]

Shasta, ummm, I think you will be collating information on stocks??? lol :P

Hey, if you let me know what Fields/Rows/Columns you would need to create a Database, maybe I could try to knock one up so all you would need to do is enter them online and once.

That is if you want, could make a template based system with few variations for different types of stocks or levels, ie: explorer, blue chip, junior whatever.

Lets see where this takes us, most of the ones im following have under $10m EV's, so should provide the kind of leverage Steve F looks for.

Ive got it in a basic spreadsheet form at the mo, so if this idea takes off i might send it to you re the database idea.

Lets see what spins out of the initial FA filter

[drillfix]

KW, a little in love? LOL was there not a rule somewhere about Not Falling in Love with stocks?

[percy]

I'm a little in love with Avita (AVH) because it's an extraordinary product. But TA and FA look ****e. Add it to your list because someday others will love it too. Hopefully not before I have bought some!

I have just read the company's presentation and thoroughly agree it's an extraordinary product. Have not read financials yet,but SP is above 60,90,120,and 180 day MA with 60day MA turning up.Well worth adding to the list.

[percy]

A bit of a ramble.
Thanks for the link KW. I recently sold out of ELX as they were not delivering . I thought the product was great.The health area in future is hard to work out.Good products get commoditsed,governments and insurance companies drive down costs,and decide what they will pay for ,and what they will not pay for.Drugs become even more expensive.A patient who has had a liver transplant may have trouble to get someone to pick up the bill for his on going drug bill, that may run into hundreds of thousands dollars a year. There is another type of patient who not a lot of people think about.Steve Jobs from Apple may be prepared to pay for his own drugs.
If there was a new drug that will/would keep him alive I am sure either he, or Apple shareholders would not mind paying millions of dollars a year for.So there is the patient who has the money to pay for what they want.I know EBO have a policy of following the patient.

[shasta]

Timely article on the risks of the Australian healthcare market.
http://www.theaustralian.com.au/business/wealth/profits-in-patients-not-all-health-stocks-are-a-sure-bet/story-e6frgac6-1226004683414

Great article thanks KW

I've been working on the healthcare list & ive dumped anything with a market cap over $15m, & any with more than around 300m shares on issue, there are alot of "promising companies" out there, but many are just pipe dreams, & cash hungry & i wouldn't touch them (they will probably all go on now & prove me wrong!)

Have found a few profitable & decent looking companies (ones Steve Fleming hasn't mentioned yet), but i'll bet he's sniffing around them

Will post the new thread & findings later on tomorrow, as i cull the lt down further

[Corporate]

Looking forward to your healthcare watchlist shasta. Many thanks in advance.

[Damo79]

Thanks all for drawing my attention to this stock. I spent last weekend reading what I could and decided it's worth an investment. I see it as a little unstable given the large portion of intangibles on the balanace sheet, but the upside seems much more likely than the downside. Continuing earnings easily justify the current valuation and I think introducing a small gap payment, as they're considering, could add on significant bottom line profit.

[steve fleming]

Finally – Patersons have a 7c target on CAJ (updated based on AGM guidance on 23/11/10) = 75% upside.



Following release of the half-yearly Patersons have updated their target price to 9c.

If their target is hit, this implies a 5c CAJO option price of 4c - a nice 300% upside from current 1c levels.

[percy]

Following release of the half-yearly Patersons have updated their target price to 9c.

If their target is hit, this implies a 5c CAJO option price of 4c - a nice 300% upside from current 1c levels.

steve ,
great stuff.!!!

[Corporate]

I've had a 5 minute read of the half year financial statements. The biggest thing that stands out is that this company is pretty tight on cash...big working capital deficit.

There's approximately $8m of expense for the 6 months (excluding employee entitlements and depreciation), $4.5m of this is sitting in trade and other payables! Positive operating cash flow is easily achieved if you don't pay your creditors.

[steve fleming]

I've had a 5 minute read of the half year financial statements. The biggest thing that stands out is that this company is pretty tight on cash...big working capital deficit.

There's approximately $8m of expense for the 6 months (excluding employee entitlements and depreciation), $4.5m of this is sitting in trade and other payables! Positive operating cash flow is easily achieved if you don't pay your creditors.

????

I think you have drawn completely the wrong analysis from your 5 min read, sorry!

The beauty about CAJ's business model is it is actually self-funding - the medicare rebate which accounts for over 90% of revenues is processed and paid almost immediately, (thus very little debtors) while trade payables consist pretty much of rent and accrued annual leave. Therefore, it is very unusual in that debtor balances are always going to be very small relative to creditors, giving the appearance of a working cap deficit.

Trade payables have only increased $700k over the previous period, ( and a portion of this will be accrued annual leave), which is hardly very material given you have operating cash outflows of $18m. They will get kicked out of their premises if they don't pay their rent, so, realistically, i don't think what you are suggesting is really happening.

[Corporate]

Are you sure?

Employee leave will be accrued as part of employee entitlements, not trade and other payables.

Occupancy expense was $1.3m for the 6 months ending 31 December 2010. A large part of this will be rent, of which I'd expect most to be paid in advance rather than in arrears.

Therefore very little of the $4.8m trade and other payables is likely to be rent, and none of it accrued annual leave.

I accept your point about the medicare rebate, which indicates that there is very little risk around the recovery of debtors.

I'm not suggesting that you can't, or won't make money out of this stock. I just suggest that caution could be warranted as cash looks tight.



????

I think you have drawn completely the wrong analysis from your 5 min read, sorry!

The beauty about CAJ's business model is it is actually self-funding - the medicare rebate which accounts for over 90% of revenues is processed and paid almost immediately, (thus very little debtors) while trade payables consist pretty much of rent and accrued annual leave. Therefore, it is very unusual in that debtor balances are always going to be very small relative to creditors, giving the appearance of a working cap deficit.

Trade payables have only increased $700k over the previous period, ( and a portion of this will be accrued annual leave), which is hardly very material given you have operating cash outflows of $18m. They will get kicked out of their premises if they don't pay their rent, so, realistically, i don't think what you are suggesting is really happening.

[steve fleming]

Are you sure?

Employee leave will be accrued as part of employee entitlements, not trade and other payables.

Occupancy expense was $1.3m for the 6 months ending 31 December 2010. A large part of this will be rent, of which I'd expect most to be paid in advance rather than in arrears.

Therefore very little of the $4.8m trade and other payables is likely to be rent, and none of it accrued annual leave.

I accept your point about the medicare rebate, which indicates that there is very little risk around the recovery of debtors.

I'm not suggesting that you can't, or won't make money out of this stock. I just suggest that caution could be warranted as cash looks tight.

I understood that annual leave is now to be classified as part of trade and payables while only long service leave is classified as an "employee provision"?...i forget the reason why, but thats how i understood classification of employee entitlements should be ( and in the FY10 Annual Report annual leave is definitely classified as part of trade and payables).

Anyway, lets agree to disagree - CAJ is pretty much a cash business (ie collect medicare rebates on providing service and pay out staff costs every week or fortnight....Working capital analysis is not as relevant as you are dealing with very minimal debtors and only odds and ends creditors (as by far their biggest expense (approx 2/3rds are wages).

To me, to acheive operating cash flow of $2.8m for the half (or $1.8m after capex) for a market cap of $12m they are doing OK!

[Entrep]

Was it someone from here who put their sell on the options from 1c to 0.9c and now down to 0.8c all today?

[steve fleming]

Was it someone from here who put their sell on the options from 1c to 0.9c and now down to 0.8c all today?

Well it definitelty wasn't me!! I was the buyer of that crossed 500k this afternoon....don't know who the other party selling was.

Puts me in the top 4 CAJO holders now

[Entrep]

Picked up some CAJO today. Hoping for a repeat of the performance and resilience of PGCOA.

[buns]

Nice timing - up bigtime today

3 Major clinics, and 2 small ones from local competitors IM Medical (ASX:IMI)

Some rough calcs, has this looking another good buy:

Cash $600k (payable overtime based on performance – this should be payable from retained earnings)
Shares $1.8m (45m of shares, 13% ownership/strong dilution/Knowledgeable industry investors..)

Total Consideration $2.4m

Revenue
FY11 guidance was $41m, and all signs point to CAJ exceeding this easily. Assuming $45m (conservative) for FY12 that is $6.75m from IMI.

Using a 20% gross margin, and no selling/support costs I get an EBITDA of about $1.3m.

More dirt to dig on this one though – IMI only bought this business a year ago…

[steve fleming]

Nice timing - up bigtime today

3 Major clinics, and 2 small ones from local competitors IM Medical (ASX:IMI)

Some rough calcs, has this looking another good buy:

Cash $600k (payable overtime based on performance – this should be payable from retained earnings)
Shares $1.8m (45m of shares, 13% ownership/strong dilution/Knowledgeable industry investors..)

Total Consideration $2.4m

Revenue
FY11 guidance was $41m, and all signs point to CAJ exceeding this easily. Assuming $45m (conservative) for FY12 that is $6.75m from IMI.

Using a 20% gross margin, and no selling/support costs I get an EBITDA of about $1.3m.

More dirt to dig on this one though – IMI only bought this business a year ago…

Buns, I agree that financially and strategically this acquisition makes a lot of sense.

I don't think your numbers are unreasonable, which implies a very low EBITDA acquisition mutiple and therefore significantly earnings accretive for CAJ.

What i find strange is the structuring of the transaction.

Why would CAJ want IMI as their major shareholder?? IMI is in big financial trouble and has long been considered one of the biggest dogs on the ASX.

Hopefully the shares are escrowed, otherwise the potential is for significant overhang and risk that IMI offloads to get cash.

I don't know why CAJ just didn't cash fund the purcashe - $1.8m could very easily be met from cash reserves or borrowings.....

little bit strange...will be interesting to get some explanation from the directors as to their reasoning for offering shares....

[buns]

True true

I quicky scanned IMI and realised they were a dog, thinking this is the only reason we could have got these clinics so cheap. But never thought of IMI selling out quickly to generate cash...

$1.8m is quite a bit to CAJ, it could choke their on going buying of clinics. Maybe they are closing in on something else in the short term?

With an ownership this high, I would expect someone from IMI to join the CAJ board. IMI have been in this business for a bit, and with these clinics being small operations possibly CAJ could prosper from if IMI's relationships, and in turn helping to buy more clinics.

Please share your response Flemo

[steve fleming]

True true

I quicky scanned IMI and realised they were a dog, thinking this is the only reason we could have got these clinics so cheap. But never thought of IMI selling out quickly to generate cash...

$1.8m is quite a bit to CAJ, it could choke their on going buying of clinics. Maybe they are closing in on something else in the short term?

With an ownership this high, I would expect someone from IMI to join the CAJ board. IMI have been in this business for a bit, and with these clinics being small operations possibly CAJ could prosper from if IMI's relationships, and in turn helping to buy more clinics.

Please share your response Flemo

Hi Buns,

I think Mark Scott, IMI director, and the founder of the IMI radiology group, looks like a logical appointment to the CAJ board, given his experience in the radiology industry.

He originally sold the imaging business to IMI for $3.3m so on that basis CAJ have now picked it up cheaply. IMI is, i would imagine is a distressed seller, while I-med, another logical buyer, and PE backed player is also over-leveraged and is having financial problems. So CAJ would be in a strong bargaining position. It may also be the case that CAJ bid for the Mar Scott Group assets at the time IMI purchased them, so now have the opportunity to pick them up cheaper.


Mark Scott is the largest shareholder in IMI, so he might be of the view that CAJ represents a strong long term investment and therefore is a worthwhile hold for IMI. IMI are currently undertaking a capital raise so that should alleviate any cash issues.

[steve fleming]

The following are some of Patersons’ comments on the CAJ/IMI transaction:

__________________________________________________ ______________

CAJ further expands earnings and market presence. CAJ is
looking to acquire three major and two minor clinics in the
Melbourne metropolitan region as well as a portfolio of teleradiology
clients. We estimate these clinics & clients will add
revenue of $6.0m and EBITDA of $0.9m. The implied consideration
for MSI is between $1.8m to $2.4m or 2-3x EBITDA. This compares
to the $2.6m paid by IMI for the MSI operations in August 2010.

Acquisition 17.0% EPS accretive. We estimate the acquisition is
17.0% EPS accretive to CAJ in FY12. However, we have not
upgraded our forecasts as we await clarity surrounding IMI’s
relisting to the ASX and hence completion of the deal.

IMI to become CAJ’s largest shareholder. Post completion of
the deal (needs IMI shareholder approval), CAJ will issue 45.56m
shares to IMI as consideration with a further $0.6m cash payable
based on performance benchmarks. IMI will thus have a 13.0%
shareholding in CAJ. We note that Dr Mark Scott, the founder and
current operator of MSI, holds a 57+% shareholding in IMI. Dr
Scott will become an employee of CAJ under normal contract terms.

__________________________________________________ ________________________

Patersons have a 9c target on CAJ ( prior to the impact of the IMI transaction) based on 6.5 times FY11e EBITDA.
CAJ currently trading on 4 x FY11e EBITDA.

Their DCF valuation of CAJ = 13 cents

CAJ currently at 5.3c

[Damo79]

There seems to be a campaign underway to increase the medicare rebate for radiology services. I heard something about it on the radio news this morning and just google this current article: http://www.heraldsun.com.au/news/breaking-news/scan-patients-lives-at-risk-radiologists/story-e6frf7jx-1226038185623

It seems this would be very good for CAJ's bottom line if it happens.

[buns]

IMI to become CAJ’s largest shareholder[/B]. Post completion of
the deal (needs IMI shareholder approval), CAJ currently at 5.3c

IMI has agreeded! Huge value to CAJ!

[buns]

There seems to be a campaign underway to increase the medicare rebate for radiology services. I heard something about it on the radio news this morning and just google this current article: http://www.heraldsun.com.au/news/breaking-news/scan-patients-lives-at-risk-radiologists/story-e6frf7jx-1226038185623

It seems this would be very good for CAJ's bottom line if it happens.

After getting depressed looking at the NZ budget, I checked out the Aussie one and found something right down this alley

"$717 million to expand access to diagnostic imaging services and make medicines more affordable"

I still don't really know what this means (what and when the impact will be), but it's definatly not a bad thing for CAJ!

[buns]

FYI

The other key healthcare spend was:

$2.2 billion for mental health including $1.5 billion for suicide prevention and depression initiatives.


$147 million for early intervention for eligible children with a disability.


$1.5 billion saving in health, including savings from a new pathology services agreement ($419 million over four years), cuts to type 2 diabetes prevention programs ($50 million over three years).

$1.8 billion over six years in critical regional health infrastructure.

$16.4 billion in additional hospital growth funding.

$717 million to expand access to diagnostic imaging services and make medicines more affordable.

$53 million to improve access to public dental services.

[Damo79]

In the past Capitol have been pretty consistent with giving "trading updates" and market guidance at least every quarter, but it's been pretty quiet on the announcement front lately. Hopefully this isn't a bad sign. If they meet, or hopefully exceed, the latest guidance then the current market cap is easily supported in my books. A poorer than expected result would be particularly bad since the lack of liquidity makes it just about impossible to exit. Here's hoping for a $43m + revenue and $2.5m + NPBT. Then I'll probably add if the share price remains at current levels.

[percy]

I hold a few CAJOs which expire/convert 30th April next year.At present there is no buying interest,although there are buyers for CAJ. I have noted from last years annoncements,that we have the following due before then.:
June trading update. August preliminary final report. January trading up. February half yearly report.
Enough time.? Time will tell.

[Damo79]

I wouldn't want to be a potential buyer or seller of CAJ right now. $10k worth either way would halve or double the share price...

[Entrep]

Will admit I am starting to get nervous about the options I hold in these guys. Exercise price of 5c means a long way to go and they expire April next year.

[percy]

Will admit I am starting to get nervous about the options I hold in these guys. Exercise price of 5c means a long way to go and they expire April next year.
With the heads drifting down the options are now " not looking too good." !!!!!!

[steve fleming]

With the heads drifting down the options are now " not looking too good." !!!!!!

The IMI acquisition has turned out to be a shocker for CAJ. I understand the need to scale up, but i don't think CAJ expected such a mess. Which is surprising as CAJ's management have generally been pretty astute.

As one of the larger CAJO option holders, this is looking more and more like a tax write-off now, unfortunately.

That said, there is no reason why it shouldn't be trading at a m/c of $15m (for CAJO to be in the money), i just can't see with current market sentiment how it is going to get there. I guess there is a chance Patterson's may start pumping it, as PAtterson's MD, Michael MAnford is a large option holder.

[steve fleming]

WTF???

The IMI re-cap is now complete and the family company of the CAJ managing director, Nick Conidi P/L, is the second largest IMI shareholder now??? Other CAJ shareholders (Pattersons clients/staff) are also now large IMI shareholders??

So I assume those new IMI shareholders receive the majority of the 45m CAJ shares to be distributed to IMI shareholders, which will in effect increases their existing CAJ shareholding.

This is a really bizarre way to carry out an asset sale, although, to be fair to CAJ, I understand from CAJ their original intention was for Mark Scott (who was previously IMI’s largest shareholder) to become a large shareholder of CAJ.

Now the big question is, will Patersons come to the party with a pump pre April 2012 to get CAJO into the money??

[Entrep]

Now the big question is, will Patersons come to the party with a pump pre April 2012 to get CAJO into the money??

Fingers and toes crossed - I have a large amount of options!

[steve fleming]

Fingers and toes crossed - I have a large amount of options!

yeah, i've got a mil plus of CAJO, so would be nice to see them in the money.

Paterson's have still got CAJ valued at 9c (following their fy11 results) so they have reason to get their clients into CAJ

Paterson's directors Manford and Constantine also have been increasing their CAJ stake over the last year and will further increase their holdings post the IMI transaction.

CAJ management have said to me they are very keen to get the options in the money, and my personal feeling is that Pateson's at least owe them a pump after screwing them around with IMI. Having the Pats directors onboard as large shareholders also helps in aligning interests etc.

So interesting times!

[percy]

Steve,
Thanks for your update.

[steve fleming]

CAJ today released details of a dividend re-investment plan, which will be voted on at another general meeting in december


This is strange because :

1) CAJ does not currently pay dividends
2) CAJ are already having an annual meeting next week

Therefore, is this a rather blunt signal to the market that CAJ intend to start paying dividends for the next half year??

[steve fleming]

Excellent AGM announcement!!

Revenues year to date up 17%
Profits year to date up 27%
IMI assets – massive turn around there

Going to start paying dividends as well

Some rough numbers re dividends:

NPBT to Oct =$1.4m
Lets be conservative and say $1.5m to Dec, and therefore $3m NPBT for FY12

So NPAT (tax at 30%) = $2.1m

70% payout = $1.5m dividend for FY12
Current market cap = $9.4m

So that puts CAJ potentially on a 15% dividend yield!

This will give, IMO, Pattersons’ sufficient ammo to starting pumping it.....

Pretty sure those CAJO will be in the money come April, providing no massive global financial meltdown between then and now.

[Entrep]

Great news agreed! Roll on the pump!

[Corporate]

I've managed to grab 270,000 CAJO @ 0.001. It is very much a punt and being short dated I'm well aware they may end up expiring worthless.

Anyone else still holding heads or options?

[Entrep]

Options here

[buns]

I've managed to grab 270,000 CAJO @ 0.001. It is very much a punt and being short dated I'm well aware they may end up expiring worthless.

Anyone else still holding heads or options?

I've never seen that many trade at .001 - only 170k went today - where did you get the rest?

None of my business really, but putting $370 NZD on a company to increase it's share price by about 40% in 4 months?

I would still shiver if it was an oiler or bio tech - however this one is a steady as it goes subscription business?? There is no logical why a small company like this can increase its value by 40% this quick, Unless something very very radical happens (guidance of profit tripling)..

It's a lot of money to bet someone is going to do something irrational.

It's one I use to like - now I'm a little embarrased I once had some of these options..

[Corporate]

I've never seen that many trade at .001 - only 170k went today - where did you get the rest?

None of my business really, but putting $370 NZD on a company to increase it's share price by about 40% in 4 months?

I would still shiver if it was an oiler or bio tech - however this one is a steady as it goes subscription business?? There is no logical why a small company like this can increase its value by 40% this quick, Unless something very very radical happens (guidance of profit tripling)..

It's a lot of money to bet someone is going to do something irrational.

It's one I use to like - now I'm a little embarrased I once had some of these options..

Hi Buns
I got 100,000 CAJO @ 0.001 on 23/11/2011 and 170,000 today for a total of 270,000. It is a very high risk punt. However, I subscribe to SF’s view and I can’t really add anything further but to reiterate...

Revenue up 17%
Profit up 27%
Dividend on the horizon in excess of 10% pa.

If the share price makes it to 6c my purchase will be worth 10x.

Cheers,
C


Edit, somehow I actually paid 0.002 for my first lot of 100,000... ops

[Corporate]

p.s. it look like someone has the same view with 750k sitting at 0.001.

[steve fleming]

I was the buyer of the 500k CAJ today (80k from a remaining order at 3c and 420k at 2.9c) and will keep buying


Basically, Patersons still have this at a 9c target

Patersons' MD is sitting there as a large CAJ and CAJO holder

Patersons were heavily mixed up in the IMI/CAJ transaction

They manipulate just about every other stock they are involved with, so Patersons should come to the party with CAJ

All it will take is a bit of promotion. Even if Patts don’t want to pump internally, just an email out to their retail client base as a spec buy should improve interest"/demand.


First step, get the IMI transaction out of the way
Then: Announce a strong half year result in February
Announce a dividend
Announce in a bit more detail the possibility of a takeover
Strong profit guidance


Then PROMOTE PROMOTE PROMOTE

Pump it in March in time for the April conversion


That would be my strategy anyway if i was CAJ!!!

Granted, its a bit harder to do with the market in the state it is, but CAJ has low liquidity, strong fundamentals and Management who want the CAJO to be converted. Perfect situation for a pump. Lets see how it plays out.....a potential downside is any offloading of CAJ by IMI shareholders....hopefullly though most of these have gone to strong hands

[percy]

Corporate and Steve Fleeming.
Great to see you both buying and having positive views.Just the wake up call I need.I still hold cajo and pgcoa,and have been selling stocks and sitting on too much cash.

[Corporate]

Corporate and Steve Fleeming.
Great to see you both buying and having positive views.Just the wake up call I need.I still hold cajo and pgcoa,and have been selling stocks and sitting on too much cash.

Great to hear Percy. People are just lemmings at the moment! The ASX is going one way and the DOW the other.

[steve fleming]

CAJ should be reporting this week.

So far the signs are looking good - CAJ has moved off 3c and has settled at 4c over the last week.

Need a dividend of 0.002c / 0.0025c to give it an annualised 10% pa yield...I'd be happy to convert my CAJO and keep holding on the basis of a 10% div, and wait for the inevitable take over from Primary or Sonic.

[buns]

As you know, I was once a fan. Now quite the opposite.

Just on that takeover comment:

I sometimes think (mostly hopeful) investors immediately consider takeovers when companies become cheap. But very rarely is a takeover successful because of price. Individual investors will struggle to get their head around this, however those who have worked through takeovers should understand.

Say Sonic could get CAJ at what we think is a 30% discount, let’s say $500k below ‘retail’. In 10 years’ time what is $500k to Sonic? It means nothing. However since the investors of CAJ have this short term frame of mind, and see it merely as a price vehicle they seem to think an acquirer would think the same – they don’t. Some individual investors ‘cigarette but’ invest (get a puff of smoke out and, throw it away and find another one), but this doesn’t work for large companies. Overtime the companies returns will mirror its ROE, for CAJ that is not pretty.

Sonic (most acquirers) is only going to recoup benefits from acquisition through operational and people synergies

Now what will CAJ add to Sonic? Nothing, its simply an Capex intensive business with a few people pushing the buttons. Sonic can probably buy these assets themselves cheaper, get the same people and put them in the same locations. These very assets are also very prone to changes in technology’s, so with time CAJ will essentially be changing and set its self-up from scratch again constantly.

If Sonic was to buy CAJ, it would most probably be a simple second hand purchase of the assets. Not profits, or the company.

[steve fleming]

Why would CAJ be taken over by SHL or PRY?

For the reasons set out on pages 18 and page 24 of the CAJ AGM presentation:

http://stocknessmonster.com/news-item?S=CAJ&E=ASX&N=567816

i.e. so as to acquire revenues (that CAJ appear to be successfully growing at their expense- 2yr CAGR of 61% vs -9% and 5%) at a price that is less than SHL or PRY are trading at, so is profit accretive. So as to satisfy the markets demands for top line and bottom line gowth.

Medicare will not licence any new MRI’s, other than those currently in existence - CAJ has some valuable licenses there.

Pattersons (and I understand Management) have noted SHL's and PRY's interest in CAJ. Consolidation is the nature of the game.

[Entrep]

Steve are you saying you'd convert your options just to get what I presume would be a very large position in CAJ at the 5c set price? Currently you can grab around 200K heads for between 4 - 5c. CAJO ex price is 5c. I have 600K CAJO I have been presuming I will let expire.

[steve fleming]

Steve are you saying you'd convert your options just to get what I presume would be a very large position in CAJ at the 5c set price? Currently you can grab around 200K heads for between 4 - 5c. CAJO ex price is 5c. I have 600K CAJO I have been presuming I will let expire.

Hi, if CAJ are in the money or have traded above 5c and are above 4.5 at expiry date, then I will be happy to convert my CAJ and continue to hold.

If it is yeilding 10% then i'd be happy to hold a substantial amount of CAJ as one of my core portfolio holds.

If CAJ is still trading around 4c in April, then i would be unlikely to convert and (assuming it announces a good half year + dividend) would buy more on market.

[Entrep]

Briefly went over 5c yesterday on the back of a good report and div announcement. Volume not great though

[steve fleming]

Briefly went over 5c yesterday on the back of a good report and div announcement. Volume not great though

Patersons have a 9c target on CAJ

Capitol Health Limited (CAJ) - BUY Maiden dividend declared
CAJ's 1H12 result confirmed the company's improving earnings profile and resulted in the declaration of a maiden fully franked dividend of 0.2 cps. Revenue growth of 20% and strong margin improvement led to NPAT growth of 74% (to $1.3m). Finalisation of the acquisition of the radiology operations of IM Medical Ltd (IMI) is progressing and, when complete, will verify CAJ's position as Victoria's 2nd largest diagnostic imaging provider by clinic network. We retain our BUY recommendation and increase our price target to $0.09.


1H12 result key points

Revenue up 18% to $25.5m
EBITDA up 29% to $2.9m
NPAT up 74% to $1.3m
Maiden fully franked dividend of 0.2 cps declared, DRP announced with 7.5% discount
Operating cash flow of $1.7m, impacted by negative working capital of $1.0m


Maiden dividend declared. We noted in our last report that we expected CAJ to commence dividends with the 1H12 result and guided towards FY12 dividends ranging from c0.3cps to c0.4cps. Declaration of an interim 0.2 cps fully franked dividend confirms this and we note on a FY basis, dividends could be towards the top end of this range.
IMI acquisition in final stages. We expect the purchase of the radiology operations of IMI to complete following approval for the sale of the radiology operations by IMI shareholders at a general meeting in November 2011. The sale process is progressing but does not have a specified completion date.
Forecasts higher by 25% and 16% respectively. We have upgraded our forecasts largely due to optimism surrounding EBITDA margins with a FY12 target of 11% (FY11 9%). Our EPS forecasts in FY12 & FY13 are 25% and 16% higher respectively. This implies EPS growth of 122% in FY12 and 27% in FY13.

[steve fleming]

Some nice commentary from the directors:

http://stocknessmonster.com/news-item?S=CAJ&E=ASX&N=581399

"The Directors are confident in the Company’s future prospects and believe it offers outstanding long-term investment potential.

Capitol Health is well positioned in its market and offers a defensive earnings profile which is
increasingly attractive in uncertain economic conditions.""

[Corporate]

Steve, thanks for the link. I wonder if they will get the options over the line...I certainly hope so.

[steve fleming]

Steve, thanks for the link. I wonder if they will get the options over the line...I certainly hope so.

Bid on CAJ is currently at 5.4c, so looks as though there is a good chance the 5c options will be in the money at the end of the next month.

Another excellent announcement / presentation out today:

""Unaudited NPAT up 89% ($1.48 million) for first 8 months of the financial year 2011/12 compared to previous corresponding period""

http://stocknessmonster.com/news-item?S=CAJ&E=ASX&N=581885

[percy]

Very impressive/positive presentation.
Funny old thing the sharemarket.A couple of months ago I thought I would convert my PGCOAs and let my CAJOs lapse.Today I am thinking I will convert my CAJOs,and undecidied what to do with my PGCOAs.!!!!
Next week don't know what I will be thinking.!!!!!!!

[Corporate]

Great announcement...$1.48m for 8 Months!

[Corporate]

Is anyone considering converting CAJO before 10 April to get the recently announced divided?

[soulman]

Steve are you saying you'd convert your options just to get what I presume would be a very large position in CAJ at the 5c set price? Currently you can grab around 200K heads for between 4 - 5c. CAJO ex price is 5c. I have 600K CAJO I have been presuming I will let expire.

Entrep, looks like you might have to raise at least $30K to get some or all your options converted judging by the action of CAJ lately. Still more than a month to go. I guess it would be a better decision comes late April when CAJ could be sitting on 6 to 7 cents.

[steve fleming]

Is anyone considering converting CAJO before 10 April to get the recently announced divided?

I am thinking about it....i am up for $75k (1.5m CAJO) so that would give me a $3k div, which beats keeping the cash in the bank.

I'll see how things play out between now and the end of the month.

[Entrep]

Me too, and like percy said it seems like CAJ is now looking stronger than PGC. I actually converted my PGCOA around 3 weeks ago and managed to sell just over 1/4 of my heads before today's crash. Still holding the rest and will see what happens there..

CAJ on the other hand, I had actually completely written off. Luckily I have the $30K I need to convert if needed (thanks to ESI, DGR and NWE mainly)!

I would need to check the rules, but I think they can take up to 10 business days to allot your heads once you send the exercise notice and pay the money. This means to get the dividend you would need to convert by 26/27 March to be safe.

[steve fleming]

OK, if you check out the linkedin account of CAJ MD john Conidi (http://au.linkedin.com/pub/john-conidi/19/b34/9b9?trk=pub-pbmap) 2 of the top 3 common profile views are: the Business Development Manager; and Strategy and Marketing Manager of I-MED Victoria.

If you check out the linkedin account of CAJ Operations Manager Nicole Smith (http://au.linkedin.com/pub/nicole-smith/8/6a0/634?trk=pub-pbmap) there are 2 other IMED Victoria contacts listed as common viewers.

Now, I may be completly off the mark, but if you have a business development manager and a strategy manager (IMED - Victoria) talking to a managing director and operations manager (CAJ), they are unlikely to be talking just about the weather.

I-MED of course is Australia’s largest private diagnostic company, and has recently been financially restructured and de-geared.

http://www.i-med.com.au/About-Us.aspx

will see if anything eventuates....

[Corporate]

Nice spot Steve!

[steve fleming]

So far at 12.30, 1.15m CAJ have traded.

this makes it the biggest volume day over the past 12 months.

Someone has been feeding out CAJ at 5.4 over the past few days, once this seller goes it may move higher

Anyway it is nice to see consolidation at a level above the 5c option exercise price.

So far 7 million CAJ have traded since the break out on 28/2/21012.

This represents over 2% of CAJ's issued capital ( bearing in mind CAJ is a very very illiquid stock!!) which suggests that there is now decent support at these levels.

Looking forward to sendign off my CAJO cheque next monday to meet the 10 April deadline

[Entrep]

With this and the Armour IPO I will be broke!

[percy]

With this and the Armour IPO I will be broke!

You are not alone.Hi from the Percy poor house.!!!!!

[soulman]

I like the fact my CAJO has been exercised to CAJ ordinary shares (just at closed today) but they have not yet cashed in the cheque.

Looking forward to the dividend.

[steve fleming]

So far at 12.30, 1.15m CAJ have traded.

this makes it the biggest volume day over the past 12 months.



The reason for the buying yesterday was another update from Patersons.

Patersons are starting to push this hard now...this is their second update on CAJ this month:

Note increase in forecasts and target price from $0.09 to $0.095
------------------------------------------------------------------------------------------------------------------------------

Capitol Health Limited (CAJ) - BUY IMI acquisition provides upside
CAJ announced it has completed the acquisition of the Radiology operations of IM Medical Limited (ASX: IMI). Consideration of c45.6m CAJ shares have been allotted to IMI. The CAJ shares will be distributed on a pro-rata basis to eligible IMI shareholders with a record date of 5 April 2012. We view the announcement positively and note that the acquisition further expands CAJ's market presence in Victoria. We retain our BUY recommendation and increase our price target to $0.095 (from $0.09).


IMI acquisition background. CAJ has acquired three major and two minor clinics in the Melbourne metropolitan region as well as a portfolio of tele-radiology clients. We note that CAJ has been operating these assets under a Management Agreement since 28 March 2011. We estimate these clinics & clients will generate revenue of $6.0m and EBITDA of $0.9m pro-rata on a stand-alone basis. The implied consideration is $2.3m or <3.0x EBITDA (with CAJ trading at $0.051).
CAJ on track with solid 1H12 and initiation of dividends. The 1H12 result confirmed the company's improving earnings profile with revenue growth of 20% and NPAT growth of 74%. Additionally, CAJ declared a maiden fully franked dividend which confirms management's increasing confidence in the business' cash flows.
Dividend of 0.2 cps payable (4% yield) 20 April 2012. The CAJ shares will be distributed to IMI shareholders by way of a return of capital on 11 April 2012 and represents a capital return of 0.291 cents per IMI share. IMI shareholders will thus be eligible to receive CAJ's dividend of 0.2 cents per share on 20 April 2012.
EPS forecasts upgraded by 3% in FY12 and 7% in FY13. We have upgraded our forecasts on the back of the acquisition and CAJ's recent investor presentation which showed continuing strong earnings growth. In the 8 months to February 2012, CAJ generated revenue of $34.1m and NPAT of $1.5m. We now expect EPS growth of 115% in FY12 and 33% in FY13.

[percy]

Steve,
Thank you for the update.Just love the EPS growth figures.

[steve fleming]

Someone has been feeding out CAJ at 5.4 over the past few days, once this seller goes it may move higher



There has been no trading on CAJ all day until at 3.18pm when $0.054 was taken out.

Literally less than 1 minute later the seller had reloaded another 200k at $0.054

How can you possibly be that quick at placing an order to ensure that you have a new order waiting at 5.4?

and who is do this constant 5.4 selling?

[drillfix]

There has been no trading on CAJ all day until at 3.18pm when $0.054 was taken out.

Literally less than 1 minute later the seller had reloaded another 200k at $0.054

How can you possibly be that quick at placing an order to ensure that you have a new order waiting at 5.4?


Steve,

Sounds like a distribution Algo / Order type, so more than likely automated and set with a timer also.

Have come across many variations of algo's both on the buy and the sell side on a few different stocks.

So they do exist and they are floating around on quite a few variations of stocks.

[steve fleming]

Steve,

Sounds like a distribution Algo / Order type, so more than likely automated and set with a timer also.

Have come across many variations of algo's both on the buy and the sell side on a few different stocks.

So they do exist and they are floating around on quite a few variations of stocks.

THanks for the explanation Drilly.

I think you are right and it must be some sort of Algo - unless someone is sitting at their computer with a sell order already to go at 5.4 to be executed as soon as 5.4 is wiped, I don't know how you could physically reload at 5.4 so quickly.

Would you have an algo set up for $5k / $10k parcels of shares though?

[drillfix]

Would you have an algo set up for $5k / $10k parcels of shares though?


It depends Steve, but Sure, why not, it depends on the trader and what platform, or even the stock that may trade awkwardly for some buyers/sellers whom want to be close to the bid/sell/last as possible.

Here is a pic of the Algo setup, which basically is to be configured to achieve whatever the goal is.

Check it out >> http://www.imageurlhost.com/images/du965ty6eamulrr8q8_ALGO.png


See all the parameters, basically all the settings or parameters combining the information to make up one order to achieve the one objective.

Just make one, and set and forget until its completed its mission.

[steve fleming]

It depends Steve, but Sure, why not, it depends on the trader and what platform.

Here is a pic of the Algo setup, which basically is to be configured to achieve whatever the goal is.

Check it out >> http://www.imageurlhost.com/images/du965ty6eamulrr8q8_ALGO.png


See all the parameters, basically all the settings or parameters combining the information to make up one order to achieve the one objective.

Just make one, and set and forget until its completed its mission.


Interesting! thanks Drilly!

[soulman]

That was me SF. Got that one out and then saw another 200K appear. Just buying some for more franking credits. There is a MAX of $5000 franking credits for people like me that don't hold to the 45 days rule of holding.

[drillfix]

That was me SF. Got that one out and then saw another 200K appear. Just buying some for more franking credits. There is a MAX of $5000 franking credits for people like me that don't hold to the 45 days rule of holding.

Ahhh of course.

So Steve if in doubt, just point to Souly, he is everywhere :P

[steve fleming]

That was me SF. Got that one out and then saw another 200K appear. Just buying some for more franking credits. There is a MAX of $5000 franking credits for people like me that don't hold to the 45 days rule of holding.


So you bought the 5.4c parcel Soulman?

Did you see how the next 200k at 5.4 popped up like a minute later?

[soulman]

Yep, very quick (less than a minute). I only bought it because I saw the 200K buy order at 5.3 pop up and decided to up the ante and just chase them instead of letting them come to me. Ex-div of $0.002 cents on 4th Apr.

Bot selling definitely like Drill say and obviously maybe from IMI execs trying to cash out a little bit for 5.4 cents.

[percy]

Yep, very quick (less than a minute). I only bought it because I saw the 200K buy order at 5.3 pop up and decided to up the ante and just chase them instead of letting them come to me. Ex-div of $0.002 cents on 4th Apr.

Bot selling definitely like Drill say and obviously maybe from IMI execs trying to cash out a little bit for 5.4 cents.

I do not have the paperwork in front of me as I took it into the broker today to convert my CAJOs before the 10th April to get the divie.?
10th or 4th.?
Gee Whiz you guys are real fast on the trigger.!!!

[steve fleming]

I do not have the paperwork in front of me as I took it into the broker today to convert my CAJOs before the 10th April to get the divie.?
10th or 4th.?
Gee Whiz you guys are real fast on the trigger.!!!

Percy - the record date is 12 April.

CAJ recommend that Computershare in Perth has the paperwork by the 10th to ensure that you will be on the register on the record date of 12th April.

http://stocknessmonster.com/news-item?S=CAJ&E=ASX&N=583309

Be aware that Easter may slow down the mail!!

For CAJ shareholders CAJ goes ex-dividend on 4 April.

[percy]

Thanks steve.My broker is going to send a cheque either today or tomorrow,so should hopefully I will be on the register before the record date.

[steve fleming]

I like the fact my CAJO has been exercised to CAJ ordinary shares (just at closed today) but they have not yet cashed in the cheque.

Looking forward to the dividend.

Hi Soulman,
Just out of interest, how long did it take for Computershare to process the exercising of your options. Did they do it the day they received the paperwork?
Do you live in Perth?

Cheers

[soulman]

SF, yes I do live in Perth and quite close to the city. My option form was exercised quite quickly and was coverted to the ordinary shares before the cheque was even deducted from my account. Like I say, very happy with it. Handy that the head office is in Perth.

I sent them out quickly because the ex date of the 4th Apr was my target date for the conversion, not the record date that was stated by management.

[steve fleming]

There has been no trading on CAJ all day until at 3.18pm when $0.054 was taken out.

Literally less than 1 minute later the seller had reloaded another 200k at $0.054

How can you possibly be that quick at placing an order to ensure that you have a new order waiting at 5.4?

and who is do this constant 5.4 selling?

Another 200k immediately reloaded at 5.4 just after a purchase of 200k at 5.4 at 2.13

[soulman]

Too many sellers for my liking either. Oh well, we shall see tomorrow. Definitely IMI stakeholder selling for some spending money or diversifying their asset.

[steve fleming]

There has been no trading on CAJ all day until at 3.18pm when $0.054 was taken out.

Literally less than 1 minute later the seller had reloaded another 200k at $0.054

How can you possibly be that quick at placing an order to ensure that you have a new order waiting at 5.4?

and who is do this constant 5.4 selling?

It is just clicked its IMI selling !- don't know why it took me so long to figure it out (5.4 seller now at 5.2 following ex div):

I wonder what happens if they don't sell them all???

http://stocknessmonster.com/news-item?S=IMI&E=ASX&N=371371



Accordingly, the entitlements to Capitol Health shares of:

those eligible shareholdersthat would have received less than $250 of Capitol Health shares

will be sold by IMI on their behalf as soon as practicable and the proceeds of sale (less costs and expenses of the sale) will be distributed

[steve fleming]

It is just clicked its IMI selling !- don't know why it took me so long to figure it out (5.4 seller now at 5.2 following ex div):

I wonder what happens if they don't sell them all???

http://stocknessmonster.com/news-item?S=IMI&E=ASX&N=371371



Accordingly, the entitlements to Capitol Health shares of:

those eligible shareholdersthat would have received less than $250 of Capitol Health shares

will be sold by IMI on their behalf as soon as practicable and the proceeds of sale (less costs and expenses of the sale) will be distributed


Looks like a decent chunk of the IMI overhang got let go on Friday....probably more to come over the next few days.

You would think low 4s would be the limit here - hopefully IMI holders aren't stupid enough to sell a share on a 10% FF'd yeild

[percy]

Well,my broker has paid my money over to convert my options,so I find myself "well positioned" for the upturn.!!!!!!!
Would expect it will not take too long for that 10% yield to attract support.Have my PGCOA money sitting at the ready,so may end up with more CAJ.?

[Joshuatree]

Gone pretty quiet here you guys.With the 5 c conversion and the issue to IMI where will the sp settle. Maybe the IMI overhang will be around for a while? Hope its all short term and the s/p follows patos lead. cheers

[percy]

Gone pretty quiet here you guys.With the 5 c conversion and the issue to IMI where will the sp settle. Maybe the IMI overhang will be around for a while? Hope its all short term and the s/p follows patos lead. cheers

Well I am sitting tight.Like the sector,like the outlook,and will love the divies.

[steve fleming]

Well I am sitting tight.Like the sector,like the outlook,and will love the divies.

yes, just have to get through the IMI overhang as`Josh says.

Good to see the MD take up 1.25mil shares in the DRP....he must be pretty optimistic about the company to forgo a $60k cash dividend.

[Joshuatree]

4c today where my first buy was set. "Sell in May..." . Ive got a feeling great BUYING on ASX stocks generally, ahead(maybe wishful thinking as I've been sitting on a pile of cash).

[steve fleming]

4c today where my first buy was set. "Sell in May..." . Ive got a feeling great BUYING on ASX stocks generally, ahead(maybe wishful thinking as I've been sitting on a pile of cash).

As long as the selling is just the IMI overhang (someone on hc reckoned there was 18m to get through) then I am OK.

However, it is related to an unfavourable development on radiology funding in next week's budget I'll be pretty annoyed.


Agree re buyin opps generally, also there is going to be selling pressure for tax losses coming up - normally illiquid stocks that have come off quite a bit get even further smashed in May/June.

[soulman]

Nice solid demand for CAJ stocks today. On decent volume the last few days.

[percy]

Nice solid demand for CAJ stocks today. On decent volume the last few days.

Nice to see.I brought 36896 at 4.1 on 16/5/12 to take my holding to 200,000.Am under water as I converted options at 5 cents.I decided I pefered CAJ to PGC,so have not converted my PGCOAs. Now I have taken my position will see what happens.

[percy]

The announcement 25/6/12 ; "MRI licence underpins growth potential " has certainly powered the SP nicely.CAJ 's five clinics providing MRI services have qualified for full or partial Medicare funding from 1st Nov 2012.This is great news as previously clients had to pay themselves.
Certainly does strengthen market positioning.

[h2so4]

How many shares are on issue now?

[slimwin]

CAJ.ASX - Capitol Health - Ordinary Fully Paid







Total Issue:
359,672,425


Market Capitalisation:
$19,422,311 (@5.4)


Earnings/Share:
0.5 cents


Price/Earnings Ratio:
10.8

[h2so4]

Thanks slimwin. I got confused with all those options about but I presume they have all been exercised by now.

[percy]

Buyer 6.1 cents seller 6.5cents.last sale 6.1 cents, very nice.!!!!!

[steve fleming]

Buyer 6.1 cents seller 6.5cents.last sale 6.1 cents, very nice.!!!!!

Yes, i hold 3 mil CAJ now after converting all my CAJO, and topping up in the low 4s, so nice to see it get to 6c so quickly.

Only problem is, the rise has been on very low volume. Any slightly disappointing update and she will be back to 4c pretty quickly.

The good thing is defensive high yeilding stocks are all the rage at the moment. The large healthcare stocks (Ramsey / primary ) have had a very strong couple of months.

Lots of talk about the major health stocks benefiting from a rapidly increasing healthcare spend, and lots of talk about Ramsey / Sonic / Primary looking for acquisitions to take advantage of their strong share prices.

[percy]

Announcement;
Most profitable year to date.
NPBT $2.9mil up123%.
Operating revenue $52 2mil up 14%
Final dividend payment 0.2cents.[ie.002cents]
MD Mr John Conidi "We are confident that the company will continue on a positive growth trajectory."

[stoploss]

[QUOTE=percy;378561]Announcement;
Most profitable year to date.
NPBT $2.9mil up123%.
Operating revenue $52 2mil up 14%
Final dividend payment 0.2cents.[ie.002cents]
MD Mr John Conidi "We are confident that the company will continue on a positive growth trajectory."

Got bashed down after the announcement yesterday, SPP @ 5.8 cps, max of $ 15000 worth.

[percy]

Should the funds raised be used for an acquisition rather than debt reduction,I think we will see the Share Price trajectory resume.

[steve fleming]

Should the funds raised be used for an acquisition rather than debt reduction,I think we will see the Share Price trajectory resume.

Probably shows a bit of management's capital market naivety here - announcing a SPP a couple of days after announcing their record result and talking up its strong balance sheet and cash flow generation.

I am sure Management's intentions are good - there are a large number of small IMI shareholders who have recently joined CAJ's registry. But any capital raising announcement should have been in conjuction with firm details of acquisitions, rather than the vague purpose mentioned in the announcment.

The SPP is unlikely to raise a huge amount of funds so dilution will be minimal.

OK idea, but the timing is a bit off. Still from all indications, CAJ is set up for strong growth, so the quality of the story will be the key ongoing driver, rather than the market's short term focus on the SPP.

[soulman]

The div yield currently at 6.7% FF. Sold when they announce their profit update for 6.4 and left an order in there for 6.1 so that got filled on Fri.

Will wait for the divy but that's another 6 weeks to go. CAJ will be stuck in this range for another 3 weeks.

[stoploss]

SPP is to raise $ 500,000 only and preference will be given to those with non marketable parcels ....looks like it might be onwards and upwards.

[mamos]

How many MRI's do they have now after the 5 purchased? How big a part of their business is it?

Of the 5 recently purchased 4 are partially licensed under Medicare and 1 is fully licensed as in a regional area.

Also the Federal Budget increased the bulkbilling incentive for MRI scans to 100% of the scheduled fee with effect from May 2012 which should improve earnings slightly was 95% previously and 85% pre May 2009.

[Joshuatree]

Good questions mamos.
Have applied for some placement @5.8c with .002c div. Be int to see if i get all or some of them; have no idea of the level of int from holders of small parcels.

[steve fleming]

Patersons update from last week:

Capitol Health Limited (CAJ) - BUY

Healthy progress

CAJ's FY12 result confirmed the company's improving earnings profile and resulted in maiden full year franked dividends of 0.4 cps. Revenue growth of 15% and strong margin improvement led to NPAT growth of 120% (to $2.1m). With a positive industry backdrop and MRI license grants, CAJ is well placed for additional revenue and earnings growth going forward. We retain our BUY recommendation and price target of $0.09.

FY12 result key points
Revenue up 15% to $52.2m (PSL $49.5m)
EBITDA up 44% to $5.6m (PSL $5.6m)
NPAT up 120% to $2.1m (PSL $2.2m)
Final fully franked dividend of 0.2 cps
Operating cash flow of $4.3m, impacted by –ve WC movements
Net debt improved to $3.9m from $6.2m
MRI license grant a positive. The Federal Government allocated CAJ five licenses for MRI services in June 2012. As a result, from 1 November 2012 CAJ will be eligible for Medicare benefits over MRI services. Previously, CAJ's patients were liable to cover the full cost of services. CAJ is thus better positioned to compete with larger players (MIA, Primary Healthcare and hospitals) in the MRI space.
Licence structure plays into hands of larger players, CAJ included. MRI licences are limited by the government and this additional allocation is the first of its kind. We estimate c45 MRI licenses were allocated in Victoria and we note that licenses cannot be transferred or sold. CAJ has been allocated one regional (full) and four metro (partial) MRI licenses. Smaller players that were not allocated MRI licenses may be pressured going forward with a potential market shift from CT scans to MRI.
Robust diagnostic imaging growth. The Victorian diagnostic imaging market continues to grow strongly with 6% growth in services and 10% growth in Medicare benefits paid over the past year

[Joshuatree]

Cheers Steve F.Very nice uplift today re 11.5 % to 6.8c cum div. I applied for max shares and think ive got them.

[percy]

Yes thanks Steve.
Good on you Joshuatree. A little surprised,but very pleased with the SP strength and the cum div..

[soulman]

Cheers Steve F.Very nice uplift today re 11.5 % to 6.8c cum div. I applied for max shares and think ive got them.

Well done JT. CAJ impressed me when I read their presentation on the weekend. Volume are very big the last 3 session. Nice solid stocks when compared to the big cap of PRY, SHL and RHC.

[steve fleming]

Volume are very big the last 3 session.

Interesting seeing who was buying CAJ over the last week or so (see stats below )

Macquarie Equities has been responsible for buying 4.5m CAJ shares in the week to last Friday.
This is 85% of the 5.3m odd traded - no one else comes remotey close (next largest is GSJBW with 500k)

So looks like Macquarie is buying for a small cap fund manager or some one else accumulating a stake.

Broker - Buy Volume - Sell Volume - Net Volume - Total Broker Volume
Macquarie Equities Ltd (http://ciqdotnet/company.aspx?companyId=32948427) - 4,500,000 – 0 - 4,500,000 - 4,500,000
Patersons Securities Ltd (http://ciqdotnet/company.aspx?companyId=25601383) - 175,000 - 2,835,000 - (2,660,000) - 3,010,000
Commonwealth Securities Ltd (http://ciqdotnet/company.aspx?companyId=7621268) - 263,797 - 2,110,769 - (1,846,972) - 2,374,566
Goldman Sachs JBWere Pty Ltd (http://ciqdotnet/company.aspx?companyId=891400) - 500,000 - 0 - 500,000 - 500,000
BBY Ltd (http://ciqdotnet/company.aspx?companyId=6907846) - 0 - 258,620 - (258,620) - 258,620
Third Party Platform Pty Ltd (http://ciqdotnet/company.aspx?companyId=47604799) - 0 - 172,425 - (172,425) - 172,425
Citigroup Global Markets Australia Pty Ltd (http://ciqdotnet/company.aspx?companyId=12722308) 0 - 50,000 - (50,000) - 50,000
Timberhill Australia Pty Ltd (Sydney) (http://ciqdotnet/company.aspx?companyId=99942888) 0 - 25,000 - (25,000) - 25,000
ETRADE Australia Securities Ltd (http://ciqdotnet/company.aspx?companyId=879064) 15,517 - 0 - 15,517 - 15,517
Taylor Collison Ltd (http://ciqdotnet/company.aspx?companyId=7872257) - 0 - 2,500 - (2,500) - 2,500

[NZSilver]

Should have bought more at 6cents when I first investigated this stock last month, but up 25% since I bought at 6cps last month, cheers for all the info fellas! Nice company to own shares in.

[soulman]

AGM presentation says CAJ off to a solid start of the year. Shares rockets again. Looks fairly valued but you never know the market. Gutted that I sold out earlier.

[percy]

I note today's announcements ;
Peter Hunt and Janette Hunt sold 7mil shares on 9/11/12 at 7.5cents.
Monaco Bond Pty Ltd sold 10 mil shares on 9/11/12 at 7.5 cents.
Nick Conidi Pty Ltd sold 6 mil shares on 9/11/12 at 7.5 cents.
I am surprised there are no buyers announcement .! ??

[percy]

Made a big mistake yesterday;thought I would ring John Conidi and find out what was going on with the 23m share deal?.He is overseas for 3 weeks.Ring PR firm in Sydney.They said ring the CFO.Back to the company.CFO not avaliable,you are best to ring the company secretary in Perth.Not avalible,leave your email address and he will email you. Yeah right;still waiting.
The receptonist Kelly was queit helpfull but the other person who answered the phone [whose first language was not English] was unhelpfull, and impossible to understand.
Out of 10 for investor relations I would give them a 1 as Kelly could speak English.

[percy]

I note today's announcements ;
Peter Hunt and Janette Hunt sold 7mil shares on 9/11/12 at 7.5cents.
Monaco Bond Pty Ltd sold 10 mil shares on 9/11/12 at 7.5 cents.
Nick Conidi Pty Ltd sold 6 mil shares on 9/11/12 at 7.5 cents.
I am surprised there are no buyers announcement .! ??

From today's Update from Managing Director;
"New institutional sharehoders valiadate investment potential".They now hold 10% of the company,from none a year ago.
Suppose this is where the 23m shares went.?
Good to see "strong momentum continues in financial year 2013 " with revenue up 13% and NPBT up 25%.

[steve fleming]

From today's Update from Managing Director;
"New institutional sharehoders valiadate investment potential".They now hold 10% of the company,from none a year ago.
Suppose this is where the 23m shares went.?
Good to see "strong momentum continues in financial year 2013 " with revenue up 13% and NPBT up 25%.

Closed at 10c today - so good to see the insiders leave money on the table for the institutions.

ABN Amro have also been buying CAJ up big on market – have bought 3% of CAJ over the last month (11.1m shares being approx. 50% of CAJ buy trades). All the big buying over the last couple of weeks to take CAJ to 10c has come from ABN. They don't show any sign of stopping their buying.

Selling has been pretty much all coming from the retails (Comsec and Patts) taking profits.

CAJ Trades – last month

Broker - Buy Volume Sell Volume Net Volume Total Broker Volume
Commonwealth Securities Ltd - 3,552,147 9,783,187 (6,231,040) 13,335,334
ABN Amro Morgans Ltd - 11,183,818 200,000 10,983,818 11,383,818
Patersons Securities Ltd - 478,000 4,690,778 (4,212,778) 5,168,778
ETRADE Australia Securities Ltd - 1,622,883 1,948,147 (325,264) 3,571,030
Citigroup Global Markets Australia Pty Ltd - 1,859,021 1,270,021 589,000 3,129,042
State One Stockbroking Ltd - 1,581,950 1,281,950 300,000 2,863,900
Australian Investment Exchange Ltd - 690,825 1,536,608 (845,783) 2,227,433
Macquarie Equities Ltd - 1,785,000 (1,785,000) 1,785,000
CMC Markets Stockbroking Ltd - 1,222,083 179,407 1,042,676 1,401,490
Third Party Platform Pty Ltd - 619,605 545,550 74,055 1,165,155
Argonaut Securities Pty Ltd - 1,000,000 (1,000,000) 1,000,000
National Online Trading Ltd - 688,006 308,000 380,006 996,006
Citi Smith Barney Pty Limited - 713,988 116,207 597,781 830,195
Timberhill Australia Pty Ltd (Sydney) - 386,666 217,000 169,666 603,666
UBS Securities Australia Ltd - 112,670 447,240 (334,570) 559,910
Penson Financial Services Australia Ltd - 493,200 0 493,200 493,200
Ord Minnett Limited - 100,000 0 100,000 100,000
Shaw Stockbroking Ltd - 12,500 0 12,500 12,500
CCZ Statton Equities Pty Ltd - 28,969,263 28,977,530 (8,267) 57,946,793 – Special Crossing

[Joshuatree]

Up 10% to 11c atp. One of my top performers for 2012, still own 75% of my original buys. Growth prospects for 2013 , i dont know but holding tight for now. cheers

[Dej]

Anyone still keen on this? Any potential left?

Disc: got a small holding - wondering what to do

[percy]

Anyone still keen on this? Any potential left?

Disc: got a small holding - wondering what to do

I am happy to hang on to my holding.Successful companies usually keep surprising on the upside.

[Dej]

I am happy to hang on to my holding.Successful companies usually keep surprising on the upside.

Thanks percy! Thats what I am leaning towards..

Christmas is over, no need for extra cash for presents, its better invested eh?

:p

[macduffy]

Thanks percy! Thats what I am leaning towards..

Christmas is over, no need for extra cash for presents, its better invested eh?

:p

Do you have any concerns about their financial strength? e.g. at last annual balance date, Net Assets/Equity of $24.4m was almost completely "represented" by Intangible Assets of $23.4m.

:ohmy:

[Dej]

Do you have any concerns about their financial strength? e.g. at last annual balance date, Net Assets/Equity of $24.4m was almost completely "represented" by Intangible Assets of $23.4m.

:ohmy:

Yes I realise this. Some companies are based heavily on goodwill, which is the bulk of CAJs intangible assets. I realise its a risk as it isnt actually 'there' as such, but I have invested accordingly!

Atleast they aren't writing down their goodwill, thats usually a sign of bad decisions and management.

Im pressuming by that comment your not a fan of Capitol Health, any investment tips then for the unwise?

:p

[percy]

Do you have any concerns about their financial strength? e.g. at last annual balance date, Net Assets/Equity of $24.4m was almost completely "represented" by Intangible Assets of $23.4m.

:ohmy:

I think this was covered on page 27 of annual report xxi Going Concern.
High Intangibles Assets are always a concern.Cash Flow is excellent and should be improving,as is profitablity,so while this is happening the company is getting stronger.

[macduffy]

I think this was covered on page 27 of annual report xxi Going Concern.
High Intangibles Assets are always a concern.Cash Flow is excellent and should be improving,as is profitablity,so while this is happening the company is getting stronger.

The discussion on p27 refers to the working capital deficiency, ie excess of Current Liabilities over Current Assets as at balance date - a somewhat different although related issue. The Intangibles - Goodwill in this instance - don't enter the working capital calculation but are a factor to consider when assessing the financial strength of the company.

Dej. I don't have a firm view on CAJ yet. I can see the potential but rather cautious on the financials at this stage. Open to persuasion!

And no, I don't have any tips as such. The forum doesn't allow them - but plenty of clues in the various posts!

Cheers

[percy]

The discussion on p27 refers to the working capital deficiency, ie excess of Current Liabilities over Current Assets as at balance date - a somewhat different although related issue. The Intangibles - Goodwill in this instance - don't enter the working capital calculation but are a factor to consider when assessing the financial strength of the company.

Dej. I don't have a firm view on CAJ yet. I can see the potential but rather cautious on the financials at this stage. Open to persuasion!

And no, I don't have any tips as such. The forum doesn't allow them - but plenty of clues in the various posts!

Cheers

I have an indirect investment in a NZ listed company with -66.3cents NTA that trades at $4.35, and has a market cap of $669,888 mil on a PE of 18.08 and has a dividend yield of 4.14%.
Another company that I own shares in has a NTA of -53.23 cents,a market cap of $1,918,459,140 and trades at $4.93cents per share.It is on a PE of 15.51 and dividend yield of 10.95%.
I seem to remember Lion Breweries and most newspapers all had negative shareholder's funds.So cash flow and profitability were the SP drivers.Maybe they are what are driving CAJ.?
The two companies I refered to are FRE and SKT.

[macduffy]

Fair point, percy.

Asset backing is certainly not the magic number for any particular investment but should be considered in the context of a company's circumstances.

On the other matter of working capital, I note that directors advise that the declaration of a maiden dividend causes all bank borrowings to be "promoted" into Current Liabilities. The decision to pay a dividend indicates the directors' confidence in the ongoing profitability of the company but we should anticipate an increase in the working capital deficiency in the current year.

[Dej]

I suppose the same goes for companies like Coke. Sure, they have a lot of assets in the factories its produced in and the land they stand on, but most of its worth is probably derived from its company logo and reputation.

Correct me if im wrong! :)

[percy]

I suppose the same goes for companies like Coke. Sure, they have a lot of assets in the factories its produced in and the land they stand on, but most of its worth is probably derived from its company logo and reputation.

Correct me if im wrong! :)

Don't forget the value of "The Secret Formula".! lol.

[Dej]

Don't forget the value of "The Secret Formula".! lol.

Minor addition ;)

[Dej]

Look at the amounts, seems odd amounts? Or is that just me, driven the price up 14% though (and not complaining). 200,000 shares bought by someone?






12
5,000
16:10



12
5,000
16:10



12
20,000
16:10



12
20,000
16:10



12
50,000
16:10



11.5
3,842
14:26



11.5
46,158
13:50



11.5
100,000
13:50




(Excuse the useless table)

[percy]

Look at the amounts, seems odd amounts? Or is that just me, driven the price up 14% though (and not complaining). 200,000 shares bought by someone?






12
5,000
16:10



12
5,000
16:10



12
20,000
16:10



12
20,000
16:10



12
50,000
16:10



11.5
3,842
14:26



11.5
46,158
13:50



11.5
100,000
13:50




(Excuse the useless table)

The buyers are linning up;
375,000 @ 11.5
938,659 @ 11.0
640,623 @ 10.5
4,459,100 @ 10.0
Sellers
440,323 @ 12cents
248,080 @ 12.5 cents
115,000 @ 13 cents
190,000 @ 15.5cents.
So a lot more on the buy side than sell side. Interesting.

[Dej]

The buyers are linning up;
375,000 @ 11.5
938,659 @ 11.0
640,623 @ 10.5
4,459,100 @ 10.0
Sellers
440,323 @ 12cents
248,080 @ 12.5 cents
115,000 @ 13 cents
190,000 @ 15.5cents.
So a lot more on the buy side than sell side. Interesting.

...Are we missing something?

[percy]

...Are we missing something?

No.
We are just sitting back and enjoying the ride.!!!!!!!!

[Dej]

No.
We are just sitting back and enjoying the ride.!!!!!!!!

I like the sound of that :cool:

[Dej]

Nice day today :)

[Joshuatree]

:eek2: Flaming Bootylicious day.:t_up:

[percy]

Well all of us CAJ holders have Steve Fleming to thank.!!!!!!
Finished at 14cents today.
I brought a few each of his picks in this year's sharetrader competition.!!!!!!!!

[Dej]

Anyone want to take a guess to where the price will settle??

:p

[percy]

Anyone want to take a guess to where the price will settle??

:p

Havig trouble with my "crystal ball",it did show 14cents,but thought it was at the end of the year.!!! So can't come up with any further prices.
I myself think the price will fluctuate and we must hold our selves at the ready for fluctuations. lol.

[steve fleming]

Havig trouble with my "crystal ball",it did show 14cents,but thought it was at the end of the year.!!! So can't come up with any further prices.
I myself think the price will fluctuate and we must hold our selves at the ready for fluctuations. lol.

14 cents has exceeded my expectations as well!!

Starting to look a litte pricey now, but, like so many of these small caps that have delivered impressive share price gains, a lot will depend on the half yearly results coming up over the next month or so.

[Dej]

Lets hope this bad boy hits 20 :eek2:

[NZSilver]

Hit 15 cps, but dropped back to 11cps over the last few days, lots of sellers. Did I miss something?

[percy]

Hit 15 cps, but dropped back to 11cps over the last few days, lots of sellers. Did I miss something?

Yes,the top.!! lol.

[Dej]

Yes,the top.!! lol.

Dont worry NZSilver, i missed it as well :t_down:

[Joshuatree]

Nevermind them NZsilver ; to keep the sharetrader community thriving one hopes they will learn to Give; Taking is just the first stage in evolving as a sentient being:). One director has sold re a million shares(still holds heaps) @ 9c. Price had got ahead of itself imo. Hope it heads back up, no other news out there that ive spotted. cheers JT

[NZSilver]

Yes,the top.!! lol.

To right haha!

Yep JT, might be worth grabing a few more if it goes lower

[percy]

To right haha!

Yep JT, might be worth grabing a few more if it goes lower

Glad you saw I was only having a bit of fun.!!!!
Yes maybe the SP just got ahead of itself.I sold a few at 14cents,and had sold a few at 8.4cents.I had a lot from converting my options.Never intended to convert them,but worked out the best way to stay ahead.I intend to hold what I have for the long term,as I like the company,and the sector they are in.

[enzed staffy]

Unlikely to go to 9c with another good result!!.

[Dej]

Unlikely to go to 9c with another good result!!.

9c seems a bit low anyways! lol

[NZSilver]

Net Profit up 13.8%, DIV $0.0025, revenue up 11.2%, also nice increase in NTA/Share. Overall good result!

[steve fleming]

Wow.

"Results for January 2013 (traditionally a slow month) maintain growth in revenue (12% yoy) and NPAT at $200k (Jan 2012; $100k loss) well ahead of historical seasonality, validating the Capitol model. "

$300k NPAT turnaround for January - benefits from the MRI services kicking in?

[NZSilver]

Yep I think you hit the nail on the head Steve. Also a nice upward movement in share price again.

[Dej]

16... :ohmy:

[Joshuatree]

"She was too young to fall in love.... and i was too young to know"

[NZSilver]

Trading Halt?

[percy]

capital raising and acquisition.

[Rza]

Hi guys!
First time poster. The capital raising and acquisition - is it good or bad?

[percy]

Hi guys!
First time poster. The capital raising and acquisition - is it good or bad?

Welcome aboard.
Usually they are good.

[steve fleming]

Just out on AFR:

Victorian diagnostics company Capitol Health has raised $7 million to fund an acquisition.Capitol Health went into a trading halt on Monday as the company went about marketing the offer.

It is understood broker CCZ Statton Equities sold Capitol’s 56 million shares in a placement to sophisticated and institutional investors.The shares were priced at 13¢ each or a 1¢ discount to the company’s last closing price.Allocations were made on Monday night and investors contacted on Tuesday morning.

The company reported that revenue was up 11 per cent to $28.5 million for the six months to December 31, and net profit was up 13 per cent to $1.4 million.The placement should open up Capitol Health’s shareholder register. As at December 31, institutional investors accounted for 10 per cent of the company’s ownership, while retail investors held 39 per cent.The deal is expected to be announced to the Australian Securities Exchange on Wednesday.

[percy]

The aim in one's investing life should be to crack that "sophisticated investor" class. As "Rich Dad, Poor Dad" pointed out, the Rich do things differently and its much much easier to make money, compared to the ordinary retail investor.

I would expect there would be a lot of "sophisticated investors" who would be envious of your success.Keep doing what works for you.
A friend on mine was one, and Macquaries put him into some real pups.
In NZ Feltex [went bust] Epic [pup] Postie Plus [trying hard for receivership].
In Aussie Badcock and Brown.

[macduffy]

True, percy, but it's not really the number of pups one "owns" (100% loss), but the number of multi baggers (100+% wins) , that really counts!

[percy]

True, percy, but it's not really the number of pups one "owns" (100% loss), but the number of multi baggers (100+% wins) , that really counts!

So very true.Don't think KW likes pups.Seems to go big on the multi baggers though.

[NZSilver]

Looking good, two new MRI contracts, forecasting nice EPS increase, 16.5cents on open.

[percy]

Looking good, two new MRI contracts, forecasting nice EPS increase, 16.5cents on open.

Yes going well.A good announcement.

[Dej]

16.5!!!!! I sold at 15 :t_down:

[Joshuatree]

I ve had a sell sitting @16.5c for a few weeks , got taken today , still holding the bulk free carried plus plus plus. :cool:

[Rza]

I ve had a sell sitting @16.5c for a few weeks , got taken today , still holding the bulk free carried plus plus plus. :cool:

So you're going to hold it Joshua?

I'm new to CAJ and Sharetrader! I got into CAJ because the future of the business looks good and the figures were ok. I plan to hold for the long term.

Am I off?

[percy]

So you're going to hold it Joshua?

I'm new to CAJ and Sharetrader! I got into CAJ because the future of the business looks good and the figures were ok. I plan to hold for the long term.

Am I off?
No, we are.!!! The future for CAJ is looking very good.Stay there ,you are doing well.!!!

[Joshuatree]

RZA , Im holding, sure but im free carried plus so my situ diff to yours risk/rewardwise. cheers JT

[Rza]

Thanks KW and Joshua!

KW, I got in at 13.5c too but I've been watching it since 3c.

I'm a pretty new investor but debt, ROC/E, EPS growth are pretty much what I look for after reading some Warren Buffett and Peter Lynch books. I've got a lot to learn!

CAJ's billing model seems to be something that will be quite resilient?

[karen1]

Exciting times ahead.

Have just listened to and read this link. http://www.brrmedia.com/event/110381

Found both to be very positive, sounding more and more like a well run company every time they come up on the radar. Great comments regarding future.

Percy, one of your famous quotes??

[Joshuatree]

Sheesh , the Yeast!!! 20.5c hit.

[percy]

Exciting times ahead.

Have just listened to and read this link. http://www.brrmedia.com/event/110381

Found both to be very positive, sounding more and more like a well run company every time they come up on the radar. Great comments regarding future.

Percy, one of your famous quotes??

Thanks for the link.
They are certainly "well positioned".

[Rza]

21.5c. Lovely!

[percy]

21.5c. Lovely!

In a sea of red today it was great to see CAJ in green.

[Rza]

In a sea of red today it was great to see CAJ in green.

For sure. The buy side is quite heavy and the sell side is weak. Always lovely to see...

[steve fleming]

from 4c to 22c in less than 12 months

the power of small caps with strong earnings growth and PE expansion!

[cloggs]

Gotta thank you for starting this thread Steve, I got in at 4 cts and still holding.

[steve fleming]

Budget night is always a bit of a risk for healthcare stocks – CAJ seem reasonably happy with the outcome.

“The Directors of Capitol Health Limited (Capitol) are pleased to advise that the outcome
from the Federal Budget for 2013/14, announced last night, has been very positive for the
Company and further validates the Company’s strategic focus towards MRI services.”

“Capitol is the largest diagnostic imaging (DI) provider for non-hospital based community
facilities in Victoria and, importantly, holds the largest number of community accessible,
Medicare-eligible, MRI’s across this geographic area.
With GP’s responsible for approximately 70% of all DI referrals, Capitol is positioned at the
forefront to benefit from the Budget’s extension of MRI availability. Furthermore, it reaffirms
the significant growth potential for MRI services in Capitol.”

[steve fleming]

Another instituion joins the CAJ register.....Pengana Emerging Companies Fund

(from today’s Under the Radar fortnightly report)
-------------------------
Pengana Emerging Companies Fund
THIS DUO HAS ONE OF THE BEST TRACK RECORDS IN THE BUSINESS, HAVING RETURNED 14.3% A YEAR OVER THE PAST 9 YEARS. FIND OUT HOW THEY ARE PLANNING FOR THIS TO CONTINUE.
SMALL CAPS PENGANA HAS BEEN BUYING

The most recent buying activity in the 60 strong portfolio has been Victorian based radiology specialist Capitol Health (CAJ)

[stoploss]

Another instituion joins the CAJ register.....Pengana Emerging Companies Fund

(from today’s Under the Radar fortnightly report)
-------------------------
Pengana Emerging Companies Fund
THIS DUO HAS ONE OF THE BEST TRACK RECORDS IN THE BUSINESS, HAVING RETURNED 14.3% A YEAR OVER THE PAST 9 YEARS. FIND OUT HOW THEY ARE PLANNING FOR THIS TO CONTINUE.
SMALL CAPS PENGANA HAS BEEN BUYING

The most recent buying activity in the 60 strong portfolio has been Victorian based radiology specialist Capitol Health (CAJ)

Thanks for the updates Steve, this has/continues to be a huge winner. If you PM me an address I think I owe you a nice bottle of wine, or whatever your tipple is. :)

[steve fleming]

Another instituion joins the CAJ register.....Pengana Emerging Companies Fund

(from today’s Under the Radar fortnightly report)
-------------------------
Pengana Emerging Companies Fund
THIS DUO HAS ONE OF THE BEST TRACK RECORDS IN THE BUSINESS, HAVING RETURNED 14.3% A YEAR OVER THE PAST 9 YEARS. FIND OUT HOW THEY ARE PLANNING FOR THIS TO CONTINUE.
SMALL CAPS PENGANA HAS BEEN BUYING

The most recent buying activity in the 60 strong portfolio has been Victorian based radiology specialist Capitol Health (CAJ)

And another institution on the register.

NAB entities paying up to 24c.

[RHen]

Relatively new to the share market, I myself an MRI radiographer have seen firsthand the growing demand for diagnostic imaging
services throughout Australia. Further Government funding coupled with the nations ageing population is seeing a dramatic increase in profits for radiology departments across the country. With these advantageous points in mind as well
as the rapid rise in share price of CAJ, How far do we think this stock will go???

[Joshuatree]

Seems to have a great future with a lot of enthusiasm for the co and support for the s/p. My situ; im free carried and riding the trend. A great sector to be in atp .

[steve fleming]

Relatively new to the share market, I myself an MRI radiographer have seen firsthand the growing demand for diagnostic imaging
services throughout Australia. Further Government funding coupled with the nations ageing population is seeing a dramatic increase in profits for radiology departments across the country. With these advantageous points in mind as well
as the rapid rise in share price of CAJ, How far do we think this stock will go???

Good question.

A couple of things. Any assessment of CAJ on the basis of FY12 or FY13 earnings/multiples is difficult given:

1) In May 2013 CAJ announced the acquisition of MDI had completed - this is expected to increase EPS by more than 25%
2) the strong industry dynamics, in particular the shift to MRI where CAJ is well positioned.

For me, hard to assess CAJ on a fundamental basis until there is some guidance on FY14 earnings.

In the meantime:

1) there is strong and increasing institutional support
2) the company has a truly defensive earnings profile
3) CAJ has held its own on two very bad down days on the ASX
4) the sector's fundamentals are very very strong (subject to any government intervention)

Ultimately, as JT said, the trend is your friend, so ride it until it changes.

[RHen]

Good question.

A couple of things. Any assessment of CAJ on the basis of FY12 or FY13 earnings/multiples is difficult given:

1) In May 2013 CAJ announced the acquisition of MDI had completed - this is expected to increase EPS by more than 25%
2) the strong industry dynamics, in particular the shift to MRI where CAJ is well positioned.

For me, hard to assess CAJ on a fundamental basis until there is some guidance on FY14 earnings.

In the meantime:

1) there is strong and increasing institutional support
2) the company has a truly defensive earnings profile
3) CAJ has held its own on two very bad down days on the ASX
4) the sector's fundamentals are very very strong (subject to any government intervention)

Ultimately, as JT said, the trend is your friend, so ride it until it changes.


I only jumped on board last week after being told about the company from a work colleague. I just hope I havn't missed the boat and CAJ shows continual growth!

[steve fleming]

I only jumped on board last week after being told about the company from a work colleague. I just hope I havn't missed the boat and CAJ shows continual growth!

CCZ Statton Equities has a 27c target on CAJ

They have been a net purchaser of approx 10m shares in CAJ in May

[steve fleming]

CCZ Statton Equities has a 27c target on CAJ

They have been a net purchaser of approx 10m shares in CAJ in May

This report (dated 29 May 2013) is now available on the CAJ website

http://www.capitolhealth.com.au/attachments/article/118/30th%20May,%202013%20-%20CCZ%20Equities%20Research.pdf

Pretty impressive depth and perceptive analysis - I'd imagine institutions would treat it quite seriously

Really highlights the tight supply and increasing demand (4 hour waits at hospitals for MRIs) and as a result expect CAJ to benefit from sustained price and volume increases.

Plenty of other areas to improve efficiencies and machine utilisation (ie "There is potential for larger clinic opening hours to be extended beyond 9-5:30, as far as 8:00-19:30in some to capture unfilled MRI demand. ")

[NZSilver]

Hit 24 cents again today, plenty of shares up for sale though. Any thoughts on when we will hear a trading update?

[stoploss]

Hit 24 cents again today, plenty of shares up for sale though. Any thoughts on when we will hear a trading update?
Hi NZS, the result last year was out in August so might be waiting till then.

[NZSilver]

Cheers stoploss.

Nice upward movement today, will probably drop back - but nice to see.

[stoploss]

Cheers stoploss.

Nice upward movement today, will probably drop back - but nice to see.

Seems everytime it pushes higher like this comes back 2 to 3 cents, finds a base and goes again....the volume today looked like another institution having a go, hopefully Steve will update us again.

[Joshuatree]

Australian Small Cap Investigator has a buy up to 27c on CAJ atm.May have helped.

[stoploss]

Australian Small Cap Investigator has a buy up to 27c on CAJ atm.May have helped.

Someones keen 5.75 mio just crossed @ 27

[NZSilver]

Yeh I see that - nealry 9million now - what does S3XT mean? Anyway, good to see more upward movement - maybe crack the 27cent mark

[stoploss]

Yeh I see that - nealry 9million now - what does S3XT mean? Anyway, good to see more upward movement - maybe crack the 27cent mark
I think the S3 is 3 day settlement, XT cross, hopefully someone will put us right if I am wrong

[rocketship]

Cheers stoploss.

Nice upward movement today, will probably drop back - but nice to see.

Another good movement today and cracking the 30 cent mark. With the volume over the last couple days, it will be interesting to see if the share price can remain in the thirties...

[stoploss]

There is a big sell order in at 30c - who is cashing out? That you Steve?

Hi KW at the end of day there was just 250 K odd left on the 30 offer, there have been parcels of 2 mio going through the last few days . I know to every trade there is a buyer and a seller .However bear in mind the price is increasing with the volume.. so looks more like to me that someone/ or a fund/funds are buying in. If there was volume selling it would be forcing the s/p down, not happening here ............

[steve fleming]

There is a big sell order in at 30c - who is cashing out? That you Steve?

No not mine, I've sold some on the way up, but still holding a fair chunk which, given this big momentum , will ride it for as long as i can.

You'd have to think there would be some decent resistance at these levels though.

I always though that CAJ would be a great takeover target, more so now they control so many MRI licenses...maybe that is how this is going to play out,

[NZSilver]

Nice update

http://www.asx.com.au/asxpdf/20130718/pdf/42h3kyhpxzknmg.pdf

NPAT up 80%
Revenues up 19.5%
Margin increase to 8.5%
Div increase 20% (0.3cents)

[percy]

Nice update

http://www.asx.com.au/asxpdf/20130718/pdf/42h3kyhpxzknmg.pdf

NPAT up 80%
Revenues up 19.5%
Margin increase to 8.5%
Div increase 20% (0.3cents)

Excellent result with a very positive outlook.

[steve fleming]

Nice update

http://www.asx.com.au/asxpdf/20130718/pdf/42h3kyhpxzknmg.pdf

NPAT up 80%
Revenues up 19.5%
Margin increase to 8.5%
Div increase 20% (0.3cents)

Easily bet consensus revenue and NPT estimates, hence the big kick up today.

Looks like the MDI acquisition will make a very big difference in FY14, in terms of margins/profit (only 2 months contribution in FY13 as acquisition completed in May)

[steve fleming]

I was the buyer of the 500k CAJ today (80k from a remaining order at 3c and 420k at 2.9c) and will keep buying



At 33c this is now a 10 bagger from those 3c purchases just over 18 months ago.

If you do your research and back yourself there is plenty of money to be made on the ASX

[Snow Leopard]

At 33c this is now a 10 bagger from those 3c purchases just over 18 months ago.

If you do your research and back yourself there is plenty of money to be made on the ASX

Great stuff and a nice little profit.

Best Wishes
Paper Tiger

[percy]

At 33c this is now a 10 bagger from those 3c purchases just over 18 months ago.

If you do your research and back yourself there is plenty of money to be made on the ASX

Well done,and many thanks.
And just over 18 months.
Fantastic.!

[NZSilver]

Totes amazeballs as the young ones like to say :-) Got any more on the horizon that you could clue us in on?

Agreed....

[steve fleming]

Capitol Health (CAJ:AU), an Australian diagnostic imaging company, will continue to seek diagnostic imaging buys to secure government licensed magnetic resonance imaging (MRI) machines, said MD John Conidi. It has seven of these following its AUD 8m (USD 7.3m) purchase of specialist diagnostic imaging companyMDI Group this March and is keen to secure more, he said.


The company is positioning to benefit from the increase in demand for MRIs expected in line with the government’s diagnostic imaging reform, which, from 1 November 2013, will see general practitioners (GPs) being able to refer patients for Medicare-eligible MRI scans. There are 300 MRI government licenced machines, 25-30 of which are in Victoria, Conidi explained.
Capitol Health will continue to look for acquisition opportunities in Victoria as well as to expand its footprint nationally, Conidi said, noting that licences cannot be transferred so the only way to get them is to acquire clinics with licensed machines.


Capitol Health will consider acquiring both small single-radiologist clinics and larger three- to 12-radiologist groups, he said, noting that there are a number of mid-sized groups like Canberra Imaging Group and Southern Radiology. Capitol Health could spend up to AUD 8m or more on an acquisition and a key criterion would be that staff are willing to stay on, he added.


Australia’s diagnostic imaging market is currently dominated by Primary Health Care (PRY:AU), Sonic Healthcare (SHL:AU); and I-Med, which is undergoing a restructure led by private equity firm Allegro Funds. Capitol Health is the only ASX-listed pureplay diagnostic imaging company and the second largest provider of these services in Victoria, Conidi said.
According to Capitol Health’s preliminary full-year 2013 financial results revenue is up 20% to AUD 62.6m, on the back of the MDI acquisition, and net profit is up 80% to AUD 5.3m. The company’s share price has risen more than 400% over the past year from 5c to around 30c, giving it a current market cap of AUD 130m.



by Louise Weihart in Sydney

http://www.mergermarket.com

[Joshuatree]

Cheers for that Steve. Prob my best performer in recent selective memory (thats not long:). Still have half and plan to follow and not sell any more for some time . Chickenballs as my daughter says!.

[percy]

Cheers for that Steve. Prob my best performer in recent selective memory (thats not long:). Still have half and plan to follow and not sell any more for some time . Chickenballs as my daughter says!.

Yes I too would like to thank you Steve.
Chickenballs ?!!!!

[steve fleming]

I always though that CAJ would be a great takeover target, more so now they control so many MRI licenses...maybe that is how this is going to play out,



Capitol Health (CAJ:AU), an Australian diagnostic imaging company, could start attracting takeover attention as it seeks to increase its ownership of magnetic resonance imaging (MRI) machines, said MD John Conidi. He is also the company’s largest single shareholder with 7%.


Although Capitol Health has not yet had any approaches, Conidi said its profile could be raised on the back of its strategy to acquire companies with government-licensed MRI machines. He explained that there is expected to be a substantial increase in demand for MRIs following diagnostic imaging reform, which, from 1 November 2013, will see Australian GPs being able to refer patients for Medicare-eligible MRI scans.


An Australian industry analyst agreed noting that Capitol Health is the only ASX-listed pure play diagnostic imaging company, making it a strong standalone player in a market with government guaranteed revenue. The analyst added that Capitol Health is already generating cash and is well run having had the same management team in place for five years.


Citing as an example Virgin Healthcare of the UK, which is reportedly looking at expanding into Australia, Conidi suggested Capitol Health could be particularly attractive to overseas healthcare companies looking to get into the Australian diagnostic imaging market. Capitol Health could be on radar of buyers as it increases MRI machine ownership, the MD said.


A UK-based industry banker agreed that, if Virgin Healthcare was looking to expand into Australia, acquiring Capitol Health would make sense as it would tie in with Virgin Healthcare's approach to ancillary services domestically.


The Australian industry analyst added that Capitol Health’s presence on the Victoria diagnostic imaging market could also make it attractive to local diagnostics companies like Sonic (SHL:AU), for example, which does not have a strong presence in Victoria. The other main Australian diagnostic imaging companies arePrimary Health Care (PRY:AU) and Allegro Funds-owned I-Med.




by Louise Weihart in Sydney

http://www.mergermarket.com (http://www.mergermarket.com/)

[stoploss]

I'd rather the MD got on with the job of building a bigger and better company and delivering shareholder returns, than spruiking for a takeover. If he wants to retire and cash out, then let him. The rest of us would prefer a company that will continue growing for the next few decades. So annoys me when people build businesses, list them, and then think that a takeover is the next achievement.

(I'm still grumpy I got compulsory acquired out of Montana and Frucor)

KW, being lifted out of Montana might not have been the worst thing ..... Some pretty hard times for the industry here since...probably only Delegats and Palliser Estate that pay a dividend these days.....

[stoploss]

Investor update out,

http://www.asx.com.au/asxpdf/20130828/pdf/42hz7fv39n7wqr.pdf

[Joshuatree]

CAJ 35.5c today. Theres no stopping this Effervescent Imager.

[percy]

CAJ 35.5c today. Theres no stopping this Effervescent Imager.

Fantastic!!!

[Joshuatree]

Nearly a ten bagger on my original purchase @ 4c. The gift that just keeps on giving.