Citi Comments On Sun Healthcare Investor Meetings

According to Citi, Sun Healthcare Group SUNH CEO and CFO attended investor meetings. Citi reported that it came away encouraged by the possibility of earnings upside in 2011. “EPS upside will have to be the driver of stock performance in 2011 as the possibility of a RUG IV forecast error adjustment in F'13 could cap the current valuation multiple. Our derived 2012 P/E of 11.8x drives our $17 12month price target and implies 2012 EV/EBITDAR of 6.2x. Our relative value model comps SUNH to the S&P600 on the basis of relative earnings growth, earnings quality, reimbursement risk (primarily Medicaid in this case), ROIC and B/S leverage.” Sun Healthcare Group closed yesterday at $13.99.