Deutsche Bank Gives Update On Amsurg; Raises PT

Deutsche Bank introduces Amsurg's AMSG 2012 estimates and rolls forward its valuation target to base off these new out-year forecasts. While AMSG trades at a discounted valuation and is favorably leveraged to a recovery in health care service volumes, DB continues to believe the fundamental outlook in the ASC space remains challenging due to excess capacity and weak pricing power. DB's 2011 EPS estimate is $1.75, up 3% yoy, which is underpinned by: revenues of $743.1m with SS volumes +2% and SS revs +1% after Medicare pricing pressure is taken into account; EBITDA after minority interests of $133m, or +6.5% yoy; and negative leverage below the EBITDA line due to higher yoy interest expense stemming from the mid-2010 refinancing. Deutsche Bank continues to base its valuation on roughly 7.0x forward EV/EBITDA, which is below the ASC sector's historical average of 8-11x due to slower growth, but in line with DB's broader coverage universe, which currently trades at 7.2x forward EV/EBITDA. It continues to view the ASC sector as relatively mature, which translates to fundamentally slower revenue growth and less opportunity for margin expansion. DB has a Hold rating and $24 PT on Amsurg AMSG is trading higher at $21.88