Ramsay Health Care Limited ASX Code: RHC Price: $62.32 … · Through its JV with Sime Darby,...
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Business Summary Ramsay Health Care Limited (RHC) is a global hospital group operating 212 hospitals and day surgery facilities across Australia, United Kingdom, France, Indonesia and Malaysia. Ramsay Health Care facilities cater for a range of health care needs from day surgery procedures to complex surgery, as well as psychiatric care and rehabilitation. Australia: Ramsay Health Care is the operator of private hospitals in the country with 69 hospitals, approximately 7,500 licensed beds, and day surgery units. The hospitals provide medical, obstetric and surgical services for admitted patients. Services offered include intensive care, day surgery, maternity, cardiac surgery, neurosurgery, ophthalmology, orthopedic surgery, general surgery, ear, nose & throat surgery, gynaecology, plastic surgery, dermatology & paediatric surgery. United Kingdom: RHC has 36 acute hospitals and day procedure centres providing a range of clinical specialties to private and self-insured patients as well as to patients referred by the National Health Service (NHS). Ramsay Health UK also operates a diagnostic imaging service and provides neurological services through its three neuro-rehabilitation facilities. France: RHC owns 100% interest in Ramsay Sante that operates private hospitals in the greater Paris region managing eight acute hospitals in the fields of medicine, surgery and obstetrics with approximately 1,000 beds and day places. On 1 October 2014, Ramsay Health Care acquired an interest in Generale de Sante. Generale de Sante is the private hospital operator in France with 75 facilities (61 hospitals). Asia: Ramsay Health Care Indonesia operates three hospitals located in Jakarta, Tangerang and Surabaya with a total of over 600 beds. RHC also entered a 50% JV with Malaysian conglomerate Sime Darby to expand healthcare footprint into South East Asia. This includes Sime Darby's health care assets in Malaysia (3 hospitals plus a nursing college) with Ramsay's 3 hospitals in Indonesia. Through its JV with Sime Darby, Ramsay has recently announced it has signed a non-binding term sheet, with Chinese healthcare company Jinxin, to jointly operate 5 hospitals in Chengdu, China. Latest Research Upgrading to Buy on Valuation and Momentum to Turn Positive in 2H18 Upgrade to Buy (from Neutral) on valuation; FY18-20E EPS downgrade by 1% — RHC remains our preferred hospital name. We upgrade to Buy on most attractive valuation in 5 years relative to its own historical average and relative to the ASX 200 Industrials. (21.5x P/E NTM vs. 5 yr avg 24x; 1.0x Rel. P/E NTM vs.1.2x). While we acknowledge the deceleration in profit growth profile vs. historical avg (17-20e EPS CAGR of 8.5% vs. 17% in 14-17), positive momentum shift in Aus business should outweigh weak offshore performance. Positive drivers include 1) contribution from Australian brownfields in 2H18, 2) potential for accretive acquisitions, 3) earnings contribution from pharmacy strategy ramp up, and 4) cycling of price cuts and improvement in NHS volume in the UK. The current lower growth and PHI affordability issues are now well understood by the market and, in our view, GICS - Healthcare Ramsay Health Care Limited ASX Code: RHC Price: $61.19 12 Mth Target Price: $78.50 Rating: Buy Important Disclaimer - This may affect your legal rights: Because this document has been prepared without consideration of any specific client's financial situation, particular needs and investment objectives, a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the proper authority of such licensee, who has provided you with this report by arrangement with Bell Potter Securities Limited) should be consulted before any investment decision is made. While this document is based on the information from sources which are considered reliable, Bell Potter Securities Limited, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate. Nor does Bell Potter Securities Limited accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document. This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. This is general investment advice only and does not constitute advice to any person. Disclosure of Interest: Bell Potter Securities Limited receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. Bell Potter Securities and its associates may hold shares in the companies recommended. Snapshot Date Market Cap. Shares on issue 12 Month High 12 Month Low 31 May 2018 $12,365m 202.1m $76.18 $61.03 Rating Rating 12 Mth Target Price Capital Gain Gross Yield Implied Total Return Buy $78.50 28.1% 4.0% 32.1% Investment Fundamentals FYE 30 Jun 2017A 2018F 2019F 2020F Profit $m 530.0 575.0 637.0 679.0 Profit (norm)* $m 530.0 575.0 637.0 679.0 EPS* ¢ 261.0 283.0 313.0 334.0 EPS Growth % 13.0 8.4 10.6 6.7 P/E* x 23.5 21.7 19.6 18.4 P/E Relative % 0.0 0.0 0.0 0.0 DPS ¢ 135.0 150.0 172.0 183.0 Yield % 2.2 2.4 2.8 3.0 Franking % 100.0 100.0 100.0 100.0 * Adjusted for goodwill and unusual items Source: Based on Citi estimates Share Price Chart Total Return on $10,000 Investment
Transcript of Ramsay Health Care Limited ASX Code: RHC Price: $62.32 … · Through its JV with Sime Darby,...
Business SummaryRamsay Health Care Limited (RHC) is a global hospital group operating 212hospitals and day surgery facilities across Australia, United Kingdom, France,Indonesia and Malaysia. Ramsay Health Care facilities cater for a range ofhealth care needs from day surgery procedures to complex surgery, as wellas psychiatric care and rehabilitation.
Australia: Ramsay Health Care is the operator of private hospitals in thecountry with 69 hospitals, approximately 7,500 licensed beds, and daysurgery units. The hospitals provide medical, obstetric and surgical servicesfor admitted patients. Services offered include intensive care, day surgery,maternity, cardiac surgery, neurosurgery, ophthalmology, orthopedic surgery,general surgery, ear, nose & throat surgery, gynaecology, plastic surgery,dermatology & paediatric surgery.
United Kingdom: RHC has 36 acute hospitals and day procedure centresproviding a range of clinical specialties to private and self-insured patients aswell as to patients referred by the National Health Service (NHS). RamsayHealth UK also operates a diagnostic imaging service and providesneurological services through its three neuro-rehabilitation facilities.
France: RHC owns 100% interest in Ramsay Sante that operates privatehospitals in the greater Paris region managing eight acute hospitals in thefields of medicine, surgery and obstetrics with approximately 1,000 beds andday places. On 1 October 2014, Ramsay Health Care acquired an interest inGenerale de Sante. Generale de Sante is the private hospital operator inFrance with 75 facilities (61 hospitals).
Asia: Ramsay Health Care Indonesia operates three hospitals located inJakarta, Tangerang and Surabaya with a total of over 600 beds. RHC alsoentered a 50% JV with Malaysian conglomerate Sime Darby to expandhealthcare footprint into South East Asia. This includes Sime Darby's healthcare assets in Malaysia (3 hospitals plus a nursing college) with Ramsay's 3hospitals in Indonesia. Through its JV with Sime Darby, Ramsay has recentlyannounced it has signed a non-binding term sheet, with Chinese healthcarecompany Jinxin, to jointly operate 5 hospitals in Chengdu, China.
Latest ResearchUpgrading to Buy on Valuation and Momentum to Turn Positive in 2H18
Upgrade to Buy (from Neutral) on valuation; FY18-20E EPS downgrade by1%
— RHC remains our preferred hospital name. We upgrade to Buy on mostattractive valuation in 5 years relative to its own historical average andrelative to the ASX 200 Industrials. (21.5x P/E NTM vs. 5 yr avg 24x; 1.0xRel. P/E NTM vs.1.2x). While we acknowledge the deceleration in profitgrowth profile vs. historical avg (17-20e EPS CAGR of 8.5% vs. 17% in14-17), positive momentum shift in Aus business should
outweigh weak offshore performance. Positive drivers include 1)contribution from Australian brownfields in 2H18, 2) potential for accretiveacquisitions, 3) earnings
contribution from pharmacy strategy ramp up, and 4) cycling of price cutsand improvement in NHS volume in the UK. The current lower growth andPHI
affordability issues are now well understood by the market and, in our view,
GICS - Healthcare
Ramsay Health Care Limited
ASX Code: RHC Price: $61.19 12 Mth Target Price: $78.50 Rating: Buy
Important Disclaimer - This may affect your legal rights: Because this document has been prepared without consideration of any specific client's financial situation, particular needs and investmentobjectives, a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the proper authority of such licensee, who has provided you with this report by arrangement withBell Potter Securities Limited) should be consulted before any investment decision is made. While this document is based on the information from sources which are considered reliable, Bell PotterSecurities Limited, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate.Nor does Bell Potter Securities Limited accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document.This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. This is generalinvestment advice only and does not constitute advice to any person.Disclosure of Interest: Bell Potter Securities Limited receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in thiscommission. Bell Potter Securities and its associates may hold shares in the companies recommended.
Snapshot
DateMarket Cap.Shares on issue12 Month High12 Month Low
31 May 2018$12,365m202.1m$76.18$61.03
RatingRating12 Mth Target Price
Capital GainGross Yield
Implied Total Return
Buy$78.5028.1%4.0%32.1%
Investment FundamentalsFYE 30 Jun 2017A 2018F 2019F 2020F
Profit $m 530.0 575.0 637.0 679.0Profit (norm)* $m 530.0 575.0 637.0 679.0
EPS* ¢ 261.0 283.0 313.0 334.0EPS Growth % 13.0 8.4 10.6 6.7P/E* x 23.5 21.7 19.6 18.4P/E Relative % 0.0 0.0 0.0 0.0
DPS ¢ 135.0 150.0 172.0 183.0Yield % 2.2 2.4 2.8 3.0Franking % 100.0 100.0 100.0 100.0* Adjusted for goodwill and unusual itemsSource: Based on Citi estimates
Share Price Chart
Total Return on $10,000 Investment
fully priced-in. On EPS changes and roll forward, our target price moves to$78.50 (from $74.50).
For more information see research 01 Mar 2018.
GICS - Healthcare
Ramsay Health Care Limited
ASX Code: RHC Price: $61.19 12 Mth Target Price: $78.50 Rating: Buy
Important Disclaimer - This may affect your legal rights: Because this document has been prepared without consideration of any specific client's financial situation, particular needs and investmentobjectives, a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the proper authority of such licensee, who has provided you with this report by arrangement withBell Potter Securities Limited) should be consulted before any investment decision is made. While this document is based on the information from sources which are considered reliable, Bell PotterSecurities Limited, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate.Nor does Bell Potter Securities Limited accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document.This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. This is generalinvestment advice only and does not constitute advice to any person.Disclosure of Interest: Bell Potter Securities Limited receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in thiscommission. Bell Potter Securities and its associates may hold shares in the companies recommended.
Snapshot
DateMarket Cap.Shares on issue12 Month High12 Month Low
31 May 2018$12,365m202.1m$76.18$61.03
RatingRating12 Mth Target Price
Capital GainGross Yield
Implied Total Return
Buy$78.5028.1%4.0%32.1%
Investment FundamentalsFYE 30 Jun 2017A 2018F 2019F 2020F
Profit $m 530.0 575.0 637.0 679.0Profit (norm)* $m 530.0 575.0 637.0 679.0
EPS* ¢ 261.0 283.0 313.0 334.0EPS Growth % 13.0 8.4 10.6 6.7P/E* x 23.5 21.7 19.6 18.4P/E Relative % 0.0 0.0 0.0 0.0
DPS ¢ 135.0 150.0 172.0 183.0Yield % 2.2 2.4 2.8 3.0Franking % 100.0 100.0 100.0 100.0* Adjusted for goodwill and unusual itemsSource: Based on Citi estimates
Share Price Chart
Total Return on $10,000 Investment
Profit & Loss ($M)2013A 2014A 2015A 2016A 2017A
Sales Revenue 4,134 4,909 7,320 8,648 8,667Total Revenue ex. Int. 4,180 4,930 7,361 8,690 8,705EBITDA 632 748 1,067 1,224 1,257Depreciation & Amort. -147 -170 -306 -374 -374Goodwill Amortisation -- -- -- -- --EBIT 485 578 761 850 883Net Interest -65 -75 -121 -131 -132Profit Before Tax 419 503 640 719 751Income Tax -126 -151 -221 -198 -199Outside Equity Int. -2 -6 -34 -61 -62Profit after Tax 291 346 386 460 491Significant Items after Tax -24 -42 -- -10 -2Reported Profit after Tax 266 304 386 450 489Preferred Dividends -16 -14 -14 -13 -6
Cash Flow ($M)2013A 2014A 2015A 2016A 2017A
Receipts from Customers 4,130 4,875 7,280 8,575 8,643Funds from Operations 642 799 1,126 1,234 1,211Net Operating Cashflow 450 562 746 905 882Capex -266 -246 -486 -510 -430Acquisitions & Investments -91 -300 -661 -237 -55Sale of Invest. & Subsid. -- -- -- -- --Net Investing Cashflow -341 -542 -1,115 -735 -424Proceeds from Issues -- 39 -- -- --Dividends Paid -143 -166 -304 -235 -272Net Financing Cashflow -18 -128 513 -157 -371Net Increase Cash 91 -108 144 13 87Cash at Beginning 173 272 168 316 329Exchange Rate Adjust. 8 3 4 0 3Cash at End 272 167 316 329 420
Ratios and Substantial Shareholders2013A 2014A 2015A 2016A 2017A
Profitability RatiosEBITDA Margin % 15.28 15.24 14.58 14.16 14.50EBIT Margin % 11.72 11.78 10.40 9.83 10.19Net Profit Margin % 6.66 6.77 5.08 5.17 5.59Return on Equity % 17.84 19.51 19.99 22.10 21.28Return on Assets % 7.98 8.56 6.02 6.60 7.00
Debt/Safety RatiosNet Debt/Equity % 64.11 68.86 154.57 152.28 124.13Interest Cover x 7.41 7.70 6.30 6.47 6.71
Top 5 Substantial ShareholdersPaul Ramsay Holdings Pty Ltd 32.2%
Balance Sheet ($M)2013A 2014A 2015A 2016A 2017A
Cash & Equivalent 272 167 316 329 420Receivables 483 547 996 1,142 1,172Inventories 113 124 192 205 226Other Current Assets 40 52 138 145 129Current Assets 980 890 1,654 1,843 1,960Prop. Plant & Equipment 1,970 2,145 3,592 3,860 3,866Intangibles 979 1,165 1,878 2,060 2,037Other Non-Current Assets 64 85 170 192 168Non-Current Assets 3,082 3,660 5,963 6,421 6,375Total Assets 4,062 4,551 7,617 8,265 8,335Interest Bearing Debt 1,261 1,368 3,149 3,445 3,347Other Liabilities 1,260 1,439 2,635 2,774 2,629Total Liabilities 2,521 2,807 5,784 6,218 5,977Net Assets 1,542 1,744 1,833 2,046 2,359Share Capital 916 915 885 877 895Reserves -2 21 19 -30 -18Retained Earnings 629 767 955 1,176 1,399Outside Equity Int. -2 41 -27 23 82Total Shareholders Equity 1,542 1,744 1,833 2,046 2,359
Current Analyst Recommendations *
* Source: Morningstar. This chart shows the spread of recommendations from thosebroker analyst's in Australia with research coverage of this stock.
Principals & DirectorsPrincipals
Company Secretary Mr John O'Grady
Directors
Mr Roderick Hamilton McGeoch(Non-Executive Director)Mr Peter John Evans(Non-Executive Director,Non-Executive DeputyChairman)Mr David Ingle Thodey(Non-Executive Director)Mr Kerry Chisholm Dart Roxburgh(Non-Executive Director)Mr Michael Stanley Siddle(Non-Executive Director,Non-ExecutiveChairman)Mr Bruce Roger Soden(Chief Financial Officer,Finance Director)Ms Patricia (Patty) Elizabeth Akopiantz(Non-Executive Director)Mr Craig Ralph McNally(Chief Executive Officer,Managing Director)Ms Margaret Leone Seale(Non-Executive Director)
To access further Research or for information regarding our recommendations and ratings please seewww.bellpotter.com.au
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Ramsay Health Care Limited
Bell Potter Securities Research
AFS Licence No. 243480 ABN 25 006 390 772
Email [email protected]
Website www.bellpotter.com.au
