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14 Jul | On the Radar – Synergy Health

On the advice of a very reputable source and after doing a little of our own homework, we’re added Synergy Health to the Investor Trader Radar.

To quote from the tin, Synergy Health has achieved market leading positions in the following areas:

  • Hospital decontamination services for reusable medical and surgical equipment
  • Sterilisation services for single use medical devices and other products
  • Healthcare solutions to manage the patient’s environment, specialising in infection control, wound care and surgical products and services
  • Linen management services for healthcare facilities
  • Laboratory services including clinical pathology, toxicology and microbiological services, together with occupational health programmes

Basically a lot of the in-house sterilisation and decontamination processes that were once carried out by hospitals and medical facilities in the UK are now being outsourced to companies like Synergy who specialise in these processes.

So why buy now? Synergy Health’s price rose strongly from 2004, peaking near nine quid in early 2007, before retracing a little and heading back north of eight quid in June last year, and then….

Almost overnight the price of Synergy Health shares plummeted (dropping more than 50%) on a profit warning sparked by higher than anticipated start-up costs of their new decontamination services units. Nothing too out of the ordinary besides the severity in the drop.

So, an over-reaction? Time will tell, but the signs are good as prices again push north of 5 quid.

Oh, and did I mention China, there just has to be a China angle right? Well Synergy Health has begun it’s foray into the Far East with their first decontamination unit due to come online in Suzhou any day now. I’m not going to harp on about the potential here, read anything I’ve written recently about ReneSola, China Biodiesel or West China Cement, change the names and you’ll get the picture.

An oversold equity with a healthy order book, long term contracts and an X factor in the potential of its Chinese operations. Dare I say it, a healthy proposition.