I didn't read too much into the recent price action, Dec was the second lowest volume month for 2018 for Hills from what I can see and the price was reasonably flat, apart from the quietest week of the year between Christmas and NY. I won't be basing my investment decision off price action during that period.
More importantly, the action today (after the main break) saw the shares on offer at 17.5cents wiped and now the bidders might have to step up to 18.5cents or higher if they want to keep accumulating.
I agree with JamWolf, the market isn't excited by the Hills business, so it will only start paying attention when the financials confirm what management have been saying and can't be ignored. The market loves growth and has had trouble gauging performance of Hills while they had have declining revenues due to exiting certain areas or reducing vendors they distribute.
It is worth re-reading the recent AGM speeches, as there is a lot of detail in these about the individual businesses, the ones that are performing and those still being turned around which bodes well for the future.
Revenue growth
- 26% for the Nurse Call unit
- The MD flagged in his AGM speech that the business already had $7m in Health Solutions work (up $2m on previous year) coming into FY18/19 with other wins already secured
- Further to this, the Health business is expanding to NZ which should help the growth continue
- Flagged expansion into Asia potentially in 2020 for the Nurses Call product
- Also a cross over in the patient engagement space, with the Guest Wi-Fi solution being trialled in 500 beds at Royal North Shore. Indication was 4 more NSW Local Health Districts were going to sign up for this as well, but they also have the 19,000 existing beds which I gather they could upsell this solution to as well?
- 20% for the IT business- 14% for the enterprise business
E-Commerce platform
This has taken a while to build, but as per the AGM speech, it was to have 12,000 products available online by December. You would expect that only keeps growing, but now provides a great platform with the distribution centre to better service customers and improve margins.
Costs
- Further improvement in costs expected this year after 20% reduction last FY
Over the full year, even if Hills keeps revenue stable and improves net profit by half of what they did last FY, they could bank $5m in net profit.....I think the market will pay attention to that!
I will throw out a prediction, as it means nothing, I expect Hills is closer to a 50 cent share price following the next AGM, than it is to a 20 cent share price. So if it is 35 cents or above, I would be right. Now if the share market keeps falling that could be a big challenge.....
