Company Interview / Michael's scanning this stock for a turnaround

Key bullet points:

Carmody identifies Integral Diagnostics (ASX:IDX) as a turnaround story post-mergerStrong demand in healthcare driven by government incentives and higher radiology use Favourable outlook for property stocks

Michael Carmody from Centennial Asset Management highlights Integral Diagnostics (ASX:IDX) as a notable turnaround opportunity in the healthcare sector.

Carmody points to the merger between Integral Diagnostics and Capital Health as a catalyst for scale and synergy benefits, with initial expectations aiming for $10 million in cost synergies. Despite an early disappointment in the latest results and a significant share price fall from above $3 to just over $2, Carmody observes more recent confirmation that total synergies have reached $14 million. He views evidence in the latest financials supporting margin expansion and sees potential for continued improvement over the next 12 to 24 months.

Carmody identifies growth drivers in the increased demand for radiology, supported by government measures rewarding GPs for higher bulk billing rates. He notes that Integral Diagnostics’ EBITDA to sales margins, which currently track around 18%, could rise, recalling that the industry pre-COVID reached margins of 23%. With a market share of 10-12% in Australia, Carmody sees the merger as enhancing the company’s value, with EPS accretion and scale benefits likely to drive a recovery in share price and potentially deliver a 20% upside from its current level of $2.91.

Beyond healthcare, Carmody sees opportunities in property, highlighting Cedar Woods Properties (ASX:CWP), Stockland (ASX:SGP), Mirvac (ASX:MGR), and Wagners (ASX:WGN) as positioned to benefit from positive housing market trends. He points to strong clearance rates and confidence in the broader outlook for small caps, especially domestically focused names and infrastructure providers involved in major projects like those linked to the upcoming Queensland Olympics.