Brokers' Views: Singer Capital Markets

Singer’s life sciences team has issued a comprehensive note on the evolving healthcare sector, suggesting it continues to be driven by ‘positive demographics, IP expiries and technological developments’.

However, on the flipside, economic uncertainties are affecting purchasing decisions and national healthcare budgets face a forthcoming squeeze, so Singer favours companies with ‘a combination of strong management and well-developed strategies for distribution and technology development’. Step forward Advanced Medical Solutions (AMS), Consort Medical and Optos, its three sector picks, all ‘significantly undervalued’ and expected to see ‘margin improvements and interesting news flow over the next year’.

US-led growth for AMS

Singer initiates coverage on AIM-traded AMS, the wound-care products and tissue adhesives maker (currently 32p) with a buy stance and 40p price target. AMS, forecast to grow profits from £3.3 million to £4.2 million in 2010, should deliver growth via moves into the US with its tissue adhesive range, and its new manufacturing facility should yield capacity and margin gains.

Drivers for Consort, the profitable inhalers and anaesthesia equipment maker, include long-term growth in respiratory disease and new inhaler approvals. As such, Singer sticks with its buy stance and 486p price target, suggesting significant upside potential for the 361.25p shares.

Finally, Singer espies value in turnaround counter Optos, the retinal imaging technology group forecast to grow profits to £7.7 million (2009: £4.2 million) this year. Singer kick-starts its coverage with a buy recommendation and 128p target for the shares, now 104.5p.