Share to buy – Ramsay Healthcare (RHC)


Company Snapshot:

  • Market cap: $12.01 Billion
  • Recent share price: $59.9
  • Cash/debt: $315.86 million/$3.17B
  • Trailing P/E: 32.64

Ramsay Healthcare is the largest private hospital operator in Australia and one of the top five hospital companies in the world. It has a presence in the UK, France, Indonesia and Malaysia. In Nov 2015, they inked a joint venture agreement with one of China’s leading medical universities to build a number of new private hospitals in China’s Pearl River Delta thus expanding its reach further.

RHC has a strong competitive advantage, which it has leveraged to grow its business. Key features include;

  • Guaranteed demand given the growing ageing populations on a global scale 
  • Pricing power over its customers, insurers and governments, which often have no alternative but to use Ramsay’s services.
  • Buying and building hospitals is very expensive and this is a major deterrent to other companies looking to enter the market.
  • Ramsay has also proven to be very astute at building new beds at just the right pace to grow earnings without increasing supply beyond demand. 
  • Ramsay delivered solid growth in FY15 with revenues, core earnings per share and full year dividends increasing by 49.8%, 20% and 18.8% respectively.
  • Management has provided guidance of 12-14% earnings per share growth in FY16 barring any unforeseen circumstances.