What: Global Health Limited (ASX: GLH) made the first step towards reversing a horror 12 months by announcing a new customer that pushed the share price up a massive 19% on Thursday morning. The company announced the implementation of its MasterCare ePAS patient administration system, LifeCard Patient Portal and HotHealth Managed Website at the new Hospitals for Specialist Surgery in Baulkham Hills, NSW.
So What: Bringing on a new practice is welcome news for patient shareholders that have suffered through inconsistent messages from management and the loss of a major contract to SA Health over the last 12 months. The loss of the contract, which actually was a failure of SA Health to upgrade from the legacy 1980s CHIRON system, proved earnings were not as resilient as shareholders believed.
Global Health announced that the lost contract would cost approximately 1.5 cents per share of earnings this year, or 34% of FY2014 earnings, despite stating previously that the business model had been de-risked due to 80% of revenues being recurring. This loss of confidence has been the catalyst for a number of analysts recommending selling the company.
What Now: The new contract is good news but is only for a single, 78 bed hospital, compared to the 64 hospital contract with SA Health. Earnings upside will be minimal, one would imagine, seeing as the announcement wasn't considered market sensitive. Many long-term shareholders, like yours truly, are sticking with Global Health because so many hospital and health organisations are calling for software just like Global Health's.
Analysts are predicting earnings per share of just 3.2 cents in the 2015 financial year, representing a price to earnings ratio of just 8.8 based on the last sale price of 28 cents. With a market capitalisation of just $8 million and no dividend on offer, Global Health is still a risky proposition and investors like me are far from certain about the integrity of management.
