Ramsay Health Care is under Algo Engine buy conditions and has now been added into the ASX 100 model portfolio.
We see price support developing near $62, following Ramsay Health Care advising that Paul Ramsay Holdings has completed the underwritten block trade sale of 22m shares in the Company to institutional investors at $61.80 per share.
Buy RHC at $62.00
Ramsay Health Care is under Algo Engine buy conditions and is a current holding in our ASX 100 model portfolio.
RHC trades on 21x forward earnings, dividend yield of 2.4% and underlying EPS growth into FY20 of 2 – 4 %. Forecast FY20 revenue $13bn, EBIT $1.2bn, EPS $3.00 & DPS $1.55.
In a low rate environment, we see the new trading range for Ramsay within the $65 – $70 band.
We see buying support building at the $64 price level.
Ramsay Health Care is under Algo Engine sell conditions and we may see further weakness in the share price down to the $62 level.
FY20 earnings outlook suggests 2 – 4% EPS growth supporting a forward dividend yield of 2.3%.
Ramsay Health Care was one of our picks heading into the earnings result on Thursday. The result came in ahead of market consensus.
RHC delivered a good 1H19 result which demonstrated the Australian business continues to achieve decent revenue growth.
We view the stock price as full value now at $65
Shares of RHC have been edging higher as investors respond favorably to their recent AGM on Tuesday.
With respect to their Capio AB acquisition, management continues to target overall positive core growth of up to 2% in FY 2019.
With the share price at 22X present earnings, we would have liked to seen a higher rate of expected core growth to sustain a rally from current levels.
RHC remains under an ALGO sell signal but we expect the $51.00 level to show solid support and an ALGO buy signal in the medium-term.
Ramsay Healthcare remains in a Algo Engine “sell” condition, however, after the share price correction from $85 to $52, we now see value beginning to emerge.
Shareholders in Swedish hospitals group Capio have given the approval to RHC’s 51% owned French subsidiary A$1.3bn takeover offer, to proceed.
With all conditions now satisfied, the deal’s expected settlement will be early next month.
Watch for RHC to turn positive and generate an Algo Engine buy signal in the coming months.
Ramsay Healthcare reported FY18 results in-line with market consensus, however, the FY19 guidance was below expectations.
Underlying earnings increased 7% in FY18 and that growth rate is likely to slip to 4 – 5% in FY19. With the stock on a forward yield of 2.7% we see further downside risk to the share price in the short-term.
RHC is a high quality business and we’ll be watching for the next Algo Engine buy signal.
Material earnings benefits from new hospital projects are expected in the coming years; we see both Healthscope and Ramsay Healthcare as long-term value plays with a defensive yield.
Buy Healthscope today and remain patient for the entry condition into Ramsay.
Shares of Ramsay Heath care are down over 2% to $53.30 in early trade.
Last Friday, the private hospital group announced an unsolicited offer for almost a $1 billion to take over Capio AB, a European healthcare company.
Over the weekend, the Capio board unanimously rejected the deal.
Over the last 2 months, the RHC share price has dropped over 16%. Most of this negative sentiment is based on the company’s admission that earnings growth will contract from 8% to 5% over the next year.
At current prices, we see RHC on a 2.9% dividend yield. As such, we consider the stock near fair value and would look to acquire it at lower levels.
Ramsay Health Care
Shares of RHC are down about 20% year to date.
Changes in government funding and regulations have been a headwind for the private health sector, in general, and on RHC, specifically.
However, recent industry research is estimating RHC EPS growth to reach 8% for FY 18 and then rise to 10% for FY 19.
At $58.20, the stock is trading at 18.7 X 12 month forward EPS.
We see scope for the share price to reach $74.50 over a 12-month time horizon.
Ramsay Health Care
Shares of RHC remain under pressure and have posted a 6-month low of $62.50 in early trade.
This is on top of yesterday’s 5.75% drop after a weaker profit report.
RHC, Australia’s largest private hospital operator, reported a 3.7% fall in H1 profit to $246 million; most of the weakness is from hospital operations in the UK.
From a technical perspective, the daily price chart shows solid support in the $61.50 to $61.20 area dating back to June 2016.
We’ll update our signals on RHC and look for a reasonable level to enter the stock.