"I’ll be buying" – Why Jun Bei Liu sees more upside in Pro Medicus

Despite its sky-high valuation, Jun Bei Liu, co-founder and lead portfolio manager at the newly launched active manager TenCap, remains one of Pro Medicus' (ASX: PME) earliest and most vocal champions.

She first bought PME five years ago at a bargain price of $25, and the stock has since 10x’d. The big question now: how much higher can it climb?

While today’s HY25 results came in line with expectations, Jun Bei remains bullish on the company’s long-term potential, citing its impeccable execution, expanding margins, and growing dominance in the vast U.S. hospital network.

We spoke with Jun Bei immediately after the earnings announcement to unpack the results—and, more importantly, what they signal for Pro Medicus' next leg of growth.

STAY TUNED: While Jun Bei Liu shares her take on the results, Livewire Managing Editor Chris Conway will be speaking with PME CEO Dr. Sam Hupert today. The full video interview will be published on our website—follow him to get notified as soon as it’s live!

Pro Medicus’s HY25 Results

• Revenue from ordinary activities $97.2m – up 31.1%
• Underlying profit before tax $69.9m – up 42.9%
• Net profit $51.7m – up 42.7%
• Underlying EBIT margins increase to 72% (HY24: 66%)
• Cash and other financial assets $182.3m – up 17.7%
• Company remains debt-free
• Fully franked interim dividend 25c per share

What was the key takeaway from this result?

Once again, Pro Medicus has demonstrated strong cash flow and solid revenue growth. But as we know, we're not just looking at the near term—the real focus is on their pipeline. In fact, their earnings call is happening as we speak, and as usual, they’ll be discussing what continues to be a very strong pipeline.

What really stands out is their incredible margin expansion—growing from 64% to 72%. That’s just phenomenal. It reinforces that this is a highly scalable, intellectual property-driven business, where the product does the heavy lifting. 

The result came in line with expectations, and frankly, there’s nothing to fault—it was a fantastic set of numbers.

Would you buy, hold or sell PME off the back of this result?

I’ll be buying—especially if the stock dips on the result. Every time we’ve seen a result like this, the share price tends to pull back slightly before recovering very quickly. Given the strength of the business, that presents a great buying opportunity.

Can I ask about your position sizing in the fund?

Yes, we hold about $30 million worth of Pro Medicus which makes it an under 3% weight in the TenCap Alpha Plus Fund. We run a very diversified portfolio, so we have a bit of everything. But despite the weighting, PME is still a top-five position for us.

Are there any risks investors need to be aware of? In particular, I’d like to point out that Morningstar thinks PME has a narrow moat or a limited ability to defend its business from competitors offering a similar product.

This is something that could potentially be a threat—like any technology company, Pro Medicus is always at risk of disruption. If a newer, more advanced product were to emerge, it could pose a competitive challenge. In fact, a few months ago, there was some discussion around a potential new entrant that could shake things up.

However, healthcare technology is not like other tech industries. Unlike consumer or enterprise software, hospital systems take years to implement and are incredibly conservative when it comes to change—because they’re dealing with patient outcomes.

Once a system is embedded, it’s not something that can be easily or quickly replaced, especially if it works well. Even doctors, like the rest of us, don’t want to relearn an entirely new system unless it offers something significantly better.

So, while we always keep an eye on potential competitive threats—because this is a high-growth business—any disruption would take a long time to play out.

From 1 to 5, where 1 is cheap and 5 is expensive, how much value do you see in PME's shares?

Rating: 4

If I had to put a number on it, I’d say it’s four in terms of valuation concern.

From a long-term perspective, there’s still a significant amount of value to come for Pro Medicus if we consider a five-year horizon

Looking at this graph, Pro Medicus is the most expensive stock on the ASX—trading at a more expensive PE that even NVIDIA. How should investors interpret this valuation in the context of its growth potential?

Because Pro Medicus is such a high-growth business with a massive untapped market, I think it’s a mistake to focus too much on its near-term P/E ratio. 

The reality is that, in two years' time, it will likely be earning at a completely different level. If you compare it to other businesses on lower multiples, they simply won’t be growing at the same trajectory. That’s why looking at today’s valuation in isolation misses the bigger picture.

It took me some time to fully grasp the sheer size of the addressable market for Pro Medicus. Typically, when Australian companies expand offshore, they struggle to scale effectively—but Pro Medicus has executed exceptionally well.

The scalability of the product is what makes it so compelling: once a hospital signs on, usage naturally expands. More doctors use it, more scans are processed, and as imaging technology advances, demand for higher-resolution products increases. That creates a powerful network effect that continues to drive growth.

For the past five years, people have been calling it ‘too expensive,’ yet the stock has continued to prove them wrong. 

Personally, I’ve never seen a reason to sell, because the investment thesis has remained intact: the addressable market is enormous, and Pro Medicus is still in the early stages of tapping into it. 

Plus, the business has incredible operating leverage—its margins are expanding, and its ability to scale into new categories makes the growth runway even longer."

Some argue that there’s no room for error at this valuation, but the company’s track record speaks for itself. They’ve consistently executed, winning contracts with large U.S. hospital systems that are notoriously difficult to penetrate. Once they’re in, they become deeply entrenched, which makes them incredibly hard to displace.

Why TenCap? What’s the story behind the name?

Well, ‘J’ is the 10th letter of the alphabet, which ties back to my name. But beyond that, we love what we do and always strive for excellence—so the idea of ‘10 out of 10’ really resonates with us. It’s about setting the highest standard and always aiming to be the best.

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