It hasn't been a great end to the week for shareholders of IVF specialists Monash IVF Group Ltd (ASX: MVF) and Virtus Health Ltd (ASX: VRT). The shares of both companies have fallen heavily during trade today.
The reason for the decline appears to relate to the trading update that Virtus Health provided to the market after it closed on Wednesday. Amongst all the election drama and yesterday's relief rally, it seems as though investors are only getting to grips with it today.
On Wednesday Virtus Health advised that in the first quarter of FY 2017 the Australian IVF market has been far weaker than expected due to short term local economic influences.
As a result fresh cycle activity in the Australian market has fallen 3.5%, compared to the prior corresponding period.
Unfortunately for Virtus Health activity has fallen at a greater pace of 5.9% compared to the same period last year. Management has blamed the loss of market share on increased competition in Victoria, as well as the emergence of a new entrant in the market.
Although Monash IVF has yet to update the market on how it is performing so far this quarter, investors appear fearful that it too will suffer from the weaker demand.
But it is worth remembering that Monash IVF has been outperforming the industry in recent times. In FY 2016 total IVF patient treatments in Australia grew 12.9% compared to the industry average of 8.2%.
It could well turn out that Monash IVF has stolen market share away from Virtus Health. In light of this I think the sell off in its shares today is quite a surprise. Especially when at just over 13x estimated full year earnings Monash IVF can hardly be described as expensive.
I expect that Monash IVF's management will respond to the sell off by providing their own trading update in the next few days. I would recommend holding off making an investment until then just to be safe.
