The Monash IVF Group Ltd (ASX: MVF) share price is trading in the red at Friday lunchtime. At the time of writing, the shares are 1.73% lower for the day at 85 cents a piece.
The ASX All Ords stock's share price stormed 44% higher two weeks ago on the 24th November after the company received and rejected "an opportunistic, unsolicited, conditional and non-binding indicative proposal" from a consortium comprising Genesis Capital and Washington H. Soul Pattinson and Co Ltd (ASX: SOL).
For context, the All Ordinaries Index (ASX: XAO) is 0.12% higher today. Over the past two weeks, the index has climbed 1.3%.
For the year-to-date, the specialist assisted reproductive services provider's shares are still 32.28% lower, thanks to several sharp sell-offs earlier in the year.
And now Macquarie Group Ltd (ASX: MQG) analysts have weighed in on the shares.
Here's what the broker had to say.
Limited upside ahead for this ASX All Ords stock
In a note to investors, the team at Macquarie downgraded Monash IVF's shares to neutral from a previous outperform rating. The target price remains unchanged at 94 cents.
At the time of writing, this implies a potential 10.6% upside for investors over the next 12 months.
"We move our recommendation to Neutral, from Outperform. While we continue to expect medium-term upside on an improving macro environment, increased genetic testing, underlying structural demands, demographic and social changes, we think the share price is approaching fair value," the broker said in its note.
Macquarie said that increased competition, recent operational incidents, and regulatory costs weigh on Monash IVF's outlook. The broker sees the current share price as close to fair value.
Despite the lower offer relative to historical benchmarks, the outlook for IVF has changed since CY22. Incidents have potentially weighed on customer acquisition and triggered greater regulatory scrutiny, likely increasing compliance costs as additional safeguards are implemented. Aggressive competition from unlisted peers, especially in VIC, is adding pressure. As such, we believe MVF's share price appears close to fair value.
What did Macquarie say about the bid rejection?
Two weeks ago, Monash IVF rejected an 80 cent per share cash offer from a private equity consortium comprising Genesis Capital and Soul Patts. The two companies currently hold 19.6% of ASX All Ords company's shares.
Macquarie explained that the offer implied a company valuation of 7.7 times its FY25 EBITDA. This is substantially less than comparable transactions in the sector.
"Despite a 31% premium to the pre-bid share price, the board's decision reflects their view that the bid materially undervalues MVF's strategic position and longer-term prospects," Macquarie said in its note to investors.
For context, Monash IVF's rival Virtus Health was acquired by BGH Capital in 2022 after a takeover battle. The sale represented 11.9 times the company's EBIDTA, Macquarie explained in its note.
"However, it's important to note that market conditions have since shifted, with FY21 benefiting from COVID-driven demand. Further, on a FY26E basis, MVF's offer multiple increases to 8.6x (MRE EBITDA forecasts), as earnings are expected to reduce," Macquarie said.
