Abano Healthcare Group Limited [NZX:ABA] has enjoyed a favourable bump in its share value by over 14% today.  

Abano — established in 1961 — is a healthcare provider that specialises in dental care. It also has side interests in audiology and medical labs. It has branches throughout Australia and New Zealand.

The company’s share price is currently $2.39, and it has a market capitalisation of $62 million.


Why has the [NZX:ABA] share price surged today?


Abano Healthcare, like most customer-facing businesses, was hit hard by a slew of bad news during the COVID-19 pandemic:

  • On March 23, Abano was forced to close all non-essential services at its New Zealand branches, as well as tighten access to its Australian outlets. This was done to comply with health-and-safety procedures being rolled out in both countries.
  • On March 30, the company suffered another setback. A potentially lucrative takeover bid by BGH capital and Bidco was cancelled. This has put additional downward pressure on Abano’s share price, causing it to deteriorate by 61% for the year.

Since then, bearish sentiments have turned bullish again.

This comes as New Zealand Prime Minister Jacinda Ardern announced that the Level 4 lockdown would be eased to Level 3 on April 27.


Where could [NZX:ABA] go from here?


As an essential service, Abano Healthcare branches may be allowed to reopen again — but carefully, with stringent conditions attached.

While there is cause for optimism, it’s important to note that there are two key risks here:

  • Abano’s price-to-earnings ratio is 31.61, which is way above the healthcare industry average of 17.8.
  • The market cap for Abano is fairly small, at $62 million.

This may make Abano more of a speculative investment. Profit margins appear razor-thin. The share price has been volatile.

Discerning investors should approach Abano with caution.



John Ling,
Contributor, WealthMorning.com

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