Business SummarySonic Healthcare Limited (SHL) is an international medical diagnosticscompany, offering laboratory medicine/pathology and radiology services tothe medical community. The company is structured as a decentralizedfederation of medically-led diagnostic practices, with the head office inSydney, Australia. SHL provides the services and infrastructure in eightcountries: Australia; New Zealand; the UK; Germany; Switzerland; Belgium;Ireland; and the USA.

Pathology Services: Sonic Healthcare provides pathology laboratory tophysicians, hospitals, community health services, and their patients.Pathology is the study and diagnosis of disease through examination oforgans, tissues, cells and bodily fluids. It seeks to understand themechanisms of disease and abnormality of cells and tissues, as well as thebody's means of responding to and repairing abnormalities. Pathology testsare an essential component in the delivery of modern healthcare services andare estimated to influence approximately 70% of healthcare decisions and100% of cancer diagnoses. Pathology/clinical laboratory services provided inAustralia, New Zealand, the United Kingdom, the United States of America,Germany, Switzerland, Belgium and Ireland.

Diagnostic Imaging Services: Diagnostic imaging (including radiology) isthe medical specialty of using medical imaging technologies to diagnose andtreat diseases. The array of imaging technologies includes general x-ray,bone densitometry, mammography, ultrasound, computed tomography (CT),nuclear medicine studies and magnetic resonance imaging (MRI). Diagnosticimaging also includes interventional radiology, the performance of medicalprocedures under the guidance of imaging technologies. The servicesprovided in Australia and New Zealand.

Other Services: Sonic conducts a number of smaller complementarybusinesses, with a focus on the medical centre and occupational healthbusinesses of Sonic's subsidiary Independent Practitioner Network (IPN). IPNinvolves over 220 primary care clinics across Australia providing facilities andadministrative services to over 1800 General Practitioners. PrecedenceHealth Care Pty Ltd has objective of transforming the care of chronically illpeople. Through the use of advanced broadband, mobile, and informationtechnologies. Sonic Clinical Trials (SCT) provides a dedicated, superiorcentral laboratory service, exclusively in support of Phase I-IV clinical trials,safety testing and patient monitoring services to the Pharmaceutical,Biotechnology and Research organisations in the Asia Pacific region.DoctorDoctor, formerly the Australian Locum Medical Service (ALMS), hasbeen providing after hours medical care to patients on behalf of GeneralPractitioners for nearly half a century. Established as the first service of itskind in Melbourne and Perth we also facilitate access to afterhours healthcare in Brisbane and Sydney as well, providing after hours primary care forthe patients of more than 2,000 GPs. Sonic Nurse Connect, focuses on thedelivery of community-based healthcare services to support a better patientjourney & health outcome for those with acute or chronic, complex healthconditions. Australian Skin Cancer Clinics provides Australians with caring,accessible and efficient service in the early detection, diagnosis andtreatment of skin cancer and melanoma. Sonic Healthcare is one of theworld's largest medical diagnostics companies, providing laboratory andradiology services to medical practitioners, hospitals, community healthservices, and their collective patients.

Latest Research

GICS - Healthcare

Sonic Healthcare Limited

ASX Code: SHL Price: $22.49 12 Mth Target Price: $32.50 Rating: Buy

Important Disclaimer - This may affect your legal rights: Because this document has been prepared without consideration of any specific client's financial situation, particular needs and investmentobjectives, a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the proper authority of such licensee, who has provided you with this report by arrangement withBell Potter Securities Limited) should be consulted before any investment decision is made. While this document is based on the information from sources which are considered reliable, Bell PotterSecurities Limited, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate.Nor does Bell Potter Securities Limited accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document.This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. This is generalinvestment advice only and does not constitute advice to any person.Disclosure of Interest: Bell Potter Securities Limited receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in thiscommission. Bell Potter Securities and its associates may hold shares in the companies recommended.

Snapshot

DateMarket Cap.Shares on issue12 Month High12 Month Low

4 April 2020$10,684m475.1m$32.07$20.06

RatingRating12 Mth Target Price

Capital GainGross Yield

Implied Total Return

Buy$32.5041.3%4.7%46.0%

Investment FundamentalsFYE 30 Jun 2019A 2020F 2021F 2022F

Profit $m 522.0 375.0 628.0 668.0Profit (norm)* $m 522.0 375.0 628.0 668.0

EPS* ¢ 116.0 79.0 132.0 140.0EPS Growth % 5.4 -31.9 67.1 6.1P/E* x 19.8 29.1 17.4 16.4P/E Relative % 0.0 0.0 0.0 0.0

DPS ¢ 84.0 54.0 99.0 104.0Yield % 3.7 2.3 4.3 4.5Franking % 26.0 30.0 30.0 30.0* Adjusted for goodwill and unusual itemsSource: Based on Citi estimates

Share Price Chart

Total Return on $10,000 Investment

FY20 guidance withdrawn. Balance Sheet intact. Buy

SHL withdrew FY20 guidance on Covid-19 concerns – trading YTD in-linewith

guidance. While forecasting accurately is very difficult near term, we now

assume a Q4 decline in revenue of 25% offset by a 50% decline in costs(given the high level of variable costs) – this results in FY20 EBITDAdowngrade of -18% and FY20 EPS downgrade of -35%. It is likely that therevenue decline will be less than

25%, but this scenario demonstrates a worst case. Our DCF is littlechanged.

For more information see research 23 Mar 2020.

GICS - Healthcare

Sonic Healthcare Limited

ASX Code: SHL Price: $22.49 12 Mth Target Price: $32.50 Rating: Buy

Important Disclaimer - This may affect your legal rights: Because this document has been prepared without consideration of any specific client's financial situation, particular needs and investmentobjectives, a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the proper authority of such licensee, who has provided you with this report by arrangement withBell Potter Securities Limited) should be consulted before any investment decision is made. While this document is based on the information from sources which are considered reliable, Bell PotterSecurities Limited, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate.Nor does Bell Potter Securities Limited accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document.This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. This is generalinvestment advice only and does not constitute advice to any person.Disclosure of Interest: Bell Potter Securities Limited receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in thiscommission. Bell Potter Securities and its associates may hold shares in the companies recommended.

Snapshot

DateMarket Cap.Shares on issue12 Month High12 Month Low

4 April 2020$10,684m475.1m$32.07$20.06

RatingRating12 Mth Target Price

Capital GainGross Yield

Implied Total Return

Buy$32.5041.3%4.7%46.0%

Investment FundamentalsFYE 30 Jun 2019A 2020F 2021F 2022F

Profit $m 522.0 375.0 628.0 668.0Profit (norm)* $m 522.0 375.0 628.0 668.0

EPS* ¢ 116.0 79.0 132.0 140.0EPS Growth % 5.4 -31.9 67.1 6.1P/E* x 19.8 29.1 17.4 16.4P/E Relative % 0.0 0.0 0.0 0.0

DPS ¢ 84.0 54.0 99.0 104.0Yield % 3.7 2.3 4.3 4.5Franking % 26.0 30.0 30.0 30.0* Adjusted for goodwill and unusual itemsSource: Based on Citi estimates

Share Price Chart

Total Return on $10,000 Investment

Profit & Loss ($M)2015A 2016A 2017A 2018A 2019A

Sales Revenue 4,141 4,947 5,054 5,476 6,076Total Revenue ex. Int. 4,197 5,048 5,119 5,538 6,177EBITDA 697 882 889 962 1,061Depreciation & Amort. -179 -220 -228 -256 -273Goodwill Amortisation -- -- -- -- --EBIT 518 662 661 706 788Net Interest -52 -63 -65 -75 -79Profit Before Tax 466 599 596 631 708Income Tax -109 -132 -139 -132 -163Outside Equity Int. -6 -15 -15 -9 -9Profit after Tax 350 453 442 489 536Significant Items after Tax -2 -2 -14 -14 14Reported Profit after Tax 348 451 428 476 550Preferred Dividends -- -- -- -- --

Cash Flow ($M)2015A 2016A 2017A 2018A 2019A

Receipts from Customers 4,180 5,082 5,219 5,642 6,258Funds from Operations 683 865 897 928 1,051Net Operating Cashflow 512 708 736 768 847Capex -264 -394 -409 -328 -387Acquisitions & Investments -49 -479 -271 -143 -863Sale of Invest. & Subsid. -- -- -- -- 141Net Investing Cashflow -289 -786 -673 -464 -1,099Proceeds from Issues 13 91 28 15 944Dividends Paid -281 -219 -281 -240 -374Net Financing Cashflow -219 132 89 -433 688Net Increase Cash 4 53 151 -130 436Cash at Beginning 232 249 290 438 313Exchange Rate Adjust. 14 -12 -4 6 -12Cash at End 249 290 438 313 737

Ratios and Substantial Shareholders2015A 2016A 2017A 2018A 2019A

Profitability RatiosEBITDA Margin % 16.83 17.83 17.59 17.57 17.46EBIT Margin % 12.51 13.39 13.08 12.89 12.96Net Profit Margin % 8.46 9.16 8.74 8.94 8.82Return on Equity % 10.70 12.37 11.54 11.71 9.90Return on Assets % 6.18 6.85 6.29 6.72 6.03

Debt/Safety RatiosNet Debt/Equity % 59.41 61.20 62.03 57.97 41.86Interest Cover x 9.93 10.51 10.13 9.38 9.92

Top 5 Substantial ShareholdersBlackRock Group 9.2%Veritas Asset Management LLP 5.4%

Balance Sheet ($M)2015A 2016A 2017A 2018A 2019A

Cash & Equivalent 249 290 438 313 737Receivables 649 704 717 747 828Inventories 76 89 96 107 120Other Current Assets 46 53 52 64 69Current Assets 1,020 1,137 1,302 1,232 1,753Prop. Plant & Equipment 791 958 1,102 1,155 1,268Intangibles 4,427 5,159 5,381 5,722 6,765Other Non-Current Assets 63 75 73 88 109Non-Current Assets 5,329 6,234 6,576 6,969 8,207Total Assets 6,349 7,371 7,878 8,201 9,960Interest Bearing Debt 2,225 2,575 2,873 2,796 3,036Other Liabilities 797 1,063 1,079 1,122 1,432Total Liabilities 3,023 3,638 3,952 3,918 4,468Net Assets 3,326 3,733 3,926 4,283 5,492Share Capital 2,562 2,802 2,886 3,006 3,967Reserves -14 -11 -53 28 146Retained Earnings 726 872 997 1,144 1,299Outside Equity Int. 52 70 97 106 80Total Shareholders Equity 3,326 3,733 3,926 4,283 5,492

Current Analyst Recommendations *

* Source: Morningstar. This chart shows the spread of recommendations from thosebroker analyst's in Australia with research coverage of this stock.

Principals & DirectorsPrincipals

Company Secretary Mr Paul Joseph Alexander

Directors

Mr Christopher David Wilks(Chief Financial Officer,Finance Director)Dr Colin Stephen Goldschmidt(Chief Executive Officer,ManagingDirector)Mr Mark Raymond Compton(Non-Executive Director,Non-ExecutiveChairman)Dr Phillip James Dubois(Executive Director)Mr Neville Mitchell(Non-Executive Director)Mr Louis (Lou) James Panaccio(Non-Executive Director)Dr Elizabeth Jane Wilson(Non-Executive Director)Ms Kathryn (Kate) Dianne Spargo(Non-Executive Director)

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Sonic Healthcare Limited

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