Hi there! Welcome to the new look Pendal website... Take a two minute tour to see what we’ve changed.

Mainstream Online Web Portal

Investors can view their accounts online via a secure web portal. After registering, you can access your account balances, periodical statements, tax statements, transaction histories and distribution statements / details.
Advisers will also have access to view their clients’ accounts online via the secure web portal.

ASX midcaps: Why medical imager Pro Medicus has captured our attention

ASX midcaps offer exposure to fast-growing industries such as medical technology. Here Pendal equities analyst OLIVER RENTON outlines one example, Pro Medicus

SAM HUPERT started as a GP in 1980 and within a couple of years realised that the then-nascent world of computing would have a massive impact on medicine.

Within three years he’d started Pro Medicus, an imaging software provider working with hospitals, imaging centres and health care groups.

Today the ASX-listed group – held in Pendal Midcaps Fund – is worth more than $6 billion.

Pendal MidCap Fund invests in the 100 biggest companies outside the ASX50, where market caps typically range from around $1 billion to $10 billion.

The global diagnostic imaging market is worth some $US28 billion globally – and growing at 4.9%, according to Grand View Research.

Growth drivers include an increasing prevalence of lifestyle-related diseases, rising demand for early detection tools, speedier diagnosis, government investment and expansion into developing nations, Grand View reports.

“Simplistically, Pro Medicus makes the software that radiologists use to view images and diagnose cases,” says Pendal equities analyst Oliver Renton.

But it’s technology could be used in cardiology, ophthalmology and pathology as well as all areas of reflected light, says Renton.

“Largely Pro Medicus is in radiology, but its IP can extend to other ‘ologies’.”

This video shows Pro Medicus’s Visage 7 Enterprise imaging platform 

“It operates in a large addressable market, which we think is larger than what the market ascribes because the technology is applicable more broadly than radiology as well as the core market being larger due to Pro Medicus premium monetisation.”

The narrower radiology addressable market is between 600 million and 650 million scans in North America per annum.

Revenue is based on the number of scans undertaken using Pro Medicus equipment, and Renton estimates the group makes about A$3 per scan.

“Down the track, cardiology could add 20 per cent to the addressable market,” says Renton.

“If you look across the whole spectrum there is probably a 50 per cent increase in the addressable market.”

A two-layered market

Pro Medicus operates in a two-layered market.

The first is the older legacy hardware manufacturers which have owned a large chunk of the market for decades, who initially gave software away for free to ensure radiologist bought their equipment.

The second are the software providers like Pro Medicus, who offer value added services to the sector.

Within the newer IT solutions, Pro Medicus unlike its competitors, streams images whereas older competitors largely compress files before sending.

Oliver Renton – analyst and co-portfolio manager, Pendal Australian equities

“The legacy providers are struggling as data sizes get larger, and data sizes are on an inexorable rise,” Renton says.

“There is now a structural advantage embedded in terms of streaming, versus compressing. And that will only widen as providers shift to the cloud, and increasingly use artificial intelligence.”

Pro Medicus currently has about 5 to 6 per cent of market share in the US, Renton says, and is growing.

Previously, dominant legacy hardware players like GE, held up to 30 per cent market share at its peak.

The group transformed in 2009 when it bought German based Visage Imaging (see video above).

Many of the team of imaging experts that came with the purchase remain at Pro Medicus, providing great stability. The core R&D for the company remains in Germany.

Like any piece of software, Renton says the key risk for Pro Medicus is that someone “builds a better mousetrap”.

“However, we think that as the business model transitions and becomes less about the core software, and more about networks especially as artificial intelligence is introduced, then Pro Medicus will benefit and that key risk diminishes,” Renton says.

“There is a risk that someone comes out with a technology that competes, but we think this is less of a risk as AI becomes more real and network effects start to kick in.”

Like all technology businesses, there’s also risk around key staff, Renton says, particularly given it’s a lean model.

“But if you’re working on the best product in the industry with the best clients, it’s unlikely that you will leave especially when you are at the cutting edge of healthcare and its interaction with artificial intelligence, cloud computing and data.”

About Oliver Renton

Oliver is an analyst and co-portfolio manager with Pendal’s Australian equities team. He has more than 15 years of industry experience.

About Pendal MidCap Fund

Pendal MidCap Fund features 40-60 Australian midcap shares. Led by portfolio manager Brenton Saunders, the fund leverages insights and experience gained from Pendal’s access to senior executives and directors at ASX-listed companies.

Pendal operates one of Australia’s biggest Aussie equities teams under the experienced leadership of Crispin Murray.

Pendal is a global investment management business focused on delivering superior investment returns for our clients through active management. 

Find out more about Pendal MidCap Fund here

Contact a Pendal key account manager here

Find out more about Pendal Focus Australian Share Fund  

Contact a Pendal key account manager

This information has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and is current at May 25, 2023. PFSL is the responsible entity and issuer of units in the Pendal Focus Australian Share Fund (Fund) ARSN: 113 232 812. A product disclosure statement (PDS) is available for the Fund and can be obtained by calling 1300 346 821 or visiting www.pendalgroup.com. The Target Market Determination (TMD) for the Fund is available at www.pendalgroup.com/ddo. You should obtain and consider the PDS and the TMD before deciding whether to acquire, continue to hold or dispose of units in the Fund. An investment in the Fund or any of the funds referred to in this web page is subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested. This information is for general purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation. The information may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information is complete and correct, to the maximum extent permitted by law neither PFSL nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information. Performance figures are calculated in accordance with the Financial Services Council (FSC) standards. Performance data (post-fee) assumes reinvestment of distributions and is calculated using exit prices, net of management costs. Performance data (pre-fee) is calculated by adding back management costs to the post-fee performance. Past performance is not a reliable indicator of future performance. Any projections are predictive only and should not be relied upon when making an investment decision or recommendation. Whilst we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The actual results may differ materially from these projections. For more information, please call Customer Relations on 1300 346 821 8am to 6pm (Sydney time) or visit our website www.pendalgroup.com

Keep updated
Sign up to receive the latest news and views