Share to buy – Ramsay Healthcare (RHC)
- 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.
Share to buy – NIB Holdings Limited (NHF)
- Market cap: $1.48 Billion
- Recent share price: $3.38
- Cash/debt: $58.81 million/$63.89Million
- Trailing P/E: 19.54
NIB health funds is one of Australia’s largest health insurers, providing health and medical cover to more than 1.1 million Australian and New Zealand residents
Private Health insurers are a segment of the market worth watching over the coming 12 months.
Both Medibank Private and NIB have become increasingly vocal about the need to improve efficiencies in the healthcare system and to put a lid on the spiralling cost of care.
With federal reviews into private health insurance and the Medicare Benefits Schedule, among other parts of the health system, there could be significant changes in fortune for the insurers who pay medical bills.
Throughout 2015, NIB shares have been volatile after rising to nearly $3.90 in March before falling to a low of $3 in October.
However, consistent profit and dividend growth has been a regular feature from NIB in recent years helping the company’s share price lift 10% for FY 15/16.
Buy, Sell, Hold Recommendations – Herald Sun 24/11/2013
As featured in the Herald Sun on November 24th 2013, here are the latest buy, sell and hold recommendations from Geoff Saffer Equity Analyst & Educational Facilitator at the Australian Stock Report. Geoff has over 10 years’ experience researching and analysing Australian shares, with a passion for fundamental analysis and specialty in identifying undervalued companies – particularly at the smaller end of the market. Buys Challenger Limited (CGF) – CGF’s profit will drop in FY14, but super low P/E, demand for annuities and rebounding stockmarket make it good value. Ingenia Group (INA) – Retirement property manager is a turnaround play after exiting loss-making US business and cleaning up its balance sheet. Expect strong growth in next two years. Holds Woodside Petroleum (WPL) – Most recent quarter saw higher production offset by lower prices. Prospects for Browse project improving, but would like to see more strength in LNG prices. Crown Resorts (CWN) – Record gambling revenue in Macau driving Macau JV’s fortunes. Sydney Crown also offers huge upside but hype has pushed stock past value levels. Sells UGL Limited (UGL) – Property services demerger could unlock value, but otherwise under pressure from shrinking margins, weakening order book and struggling Engineering division. PanAust Limited (PNA) – Cash costs on the rise and metals prices don’t look headed higher. Further weakness in operating cash flow could see dividend cut. For all of our latest share tips and trading ideas sign up for FREE 7 Day Trial and gain full access our research files.
NIB Holdings (NHF) Share To Buy
NIB Holdings (NHF) is a health insurance company, providing health cover primarily to Australia and also to New Zealand following last year’s acquisition of Tower Medical. Established over 50 years ago, NHF is Australia’s only ASX-listed health insurer. The company offers a wide range of policies suitable for customers across the board, but its focus on the youth market has helped it to achieve the fastest growth among the major players in the sector. Recent results NHF is a company enjoying healthy growth. Since FY08, net premium revenue has risen at a compound annual rate of 11.2%. Return on equity was also a healthy 21.3% in FY13. One concerning aspect of the FY13 results was a fall in net profit margin from 5.9% to 5.1%. The group blamed higher claims costs without a commensurate increase in premium rates. The group was relatively sanguine about FY14, downplaying earning growth expectations amid higher marketing and branding costs. Nonetheless, the company negotiated a 6.5% increase in premium rates, effective April 1st 2013, which is expected to support profit margins in FY14. Medibank shapes longer-term outlook Following the Federal election, Prime Minister Tony Abbot’s government has begun the process of privatising Medibank as a way to streamline the government and cut costs. The government is awaiting results from a scoping study, expected in February 2014, before deciding when to float the insurer. Medibank has a ~30% share of the health insurance market, so a privatisation would shake things up for the industry. Bupa is the next biggest player with a 27% share, followed by HCF with 11% and then NHF with around 8%. A privatised Medibank means the potential for consolidation as the smaller companies look to stay competitive in a growth industry. NHF would be ripe for the picking in our view, given its strong fundamentals and attractiveness as a target for Medibank or Bupa. For all of our latest australian buy shares and trading ideas sign up for FREE 7 Day Trial and gain full access our research files.
Sonic Health – Buy On Solid Results
Sonic Healthcare Limited (SHL) listed as a buy share in the traders report on October 1st is the world’s third-largest medical diagnostics company, offering laboratory medicine/pathology and radiology services to the medical community. The company is structured as a decentralised federation of individually led diagnostic practices, with the head office in Sydney, Australia. SHL employees over 25,000 in eight countries: Australia; New Zealand; the UK; Germany; Switzerland; Belgium; Ireland; and the USA. Key Points: FY13 Results:
>> Revenues from ordinary activities came in at a record $3.48 billion, up 4.1% from last year >> Reported NPAT was up 6% to $335m for the year ended 30 June 2013 >> The group paid 62 cents worth of dividends over the financial year, a 5% increase on FY12’s payout >> The pleasing aspect of the results was the company’s continuing ability to grow its business organically >> Interest bearing debt sits $1.74 billion, equating to gearing (Net debt/(Net debt + equity) of 37.3% which is well within bank covenant limit of 55% >> The groups interest cover (EBITA/Net interest expense) and debt cover (Net debt/EBITDA) sit at 8.6x and 2.4x, both figures well within bank convents >> The balance sheet is supported by a healthy free cash flow, which has averaged $283 million over the last five years
Lend Lease Group (LLC) Share To Buy
Lend Lease Corporation (LLC) is an international fully integrated property solutions provider. LLC has built itself up as a major player in the property business, using its wide number of subsidiaries to win contracts in Australia and abroad. The regional business units generate earnings from four lines of business, as follows:
>> Development: involves the development of urban communities, inner-city mixed-use developments, apartments, retirement, retail, commercial and healthcare assets; >> Construction: involves project management, building, engineering and construction services; >> Investment Management: involves property and infrastructure investment management, property management and asset management and includes the Group’s ownership interests in property and infrastructure investments; and >> Infrastructure Development: arranges, manages and invests in Public Private Partnership (PPP) projects >> Revenue grew over the 2013 fiscal year by 6% to $12.2 billion >> Net profit after tax (NPAT) came at $553 million was up 9% on the prior year, and just ahead of the guidance range of $540 million to $550 million >> EBITDA increased 12% to $744.2 million >> The major drivers of the growth for LLC was the Development and Infrastructure Development divisions - Development was boosted by the disposal of the initial two Barangaroo office towers in Sydney, and from the sale of its stake in the Singaporean retail and office development, JEM >> LLC’s balance sheet is healthy, with interest coverage sitting at 6.4x and gearing (Net debt to total tangible assets, less cash) falling over the year from 6.3% to 6.1% >> The group paid 42 cents a share to investors over the year, an 11% increase on the prior year’s results
Toll Holdings (TOL) Share To Buy
Toll Holdings (TOL) is Australasia's largest provider of integrated logistics services. The company’s assets are wide-ranging in the transport space, and cover trucking, rail, air, shipping and ports. It generates annual revenue of $8.2 billion and operates an extensive network of over 1,200 sites in 55 countries, with in excess of 45,000 employees. The group is divided into six segments: >> Toll Global Express >> Toll Global Logistics >> Toll Global Forwarding >> Toll Specialized and Domestic Freight >> Toll Domestic Forwarding >> Toll Global Resources 1H13 results TOL’s 1H13 results were solid given the challenging and volatile environment. Group sales revenue was $4.5 billion for the six months ended 31 December 2012, up 2.5% on the prior corresponding period. Underlying EBIT over the six months was $256.4 million, up 3.3% from the 1H12. Underlying net profit was also impressive, with TOL reporting a profit $173.5 million, a 7.6% climb on the prior year’s result. The strong result was due to better-than-expected cost pass-through, new business wins, and investment in depots and equipment. Valuation From a valuation perspective, we think TOL is cheap. TOL looks to be trading on trough to mid-cycle earnings, with the company's forward PE an attractive 12.7x. This compares to competitors such as QUBE Holdings and Brambles, which trade on forward multiples of 19.4x and 17.9x respectively. A re-rating to a more reasonable forward multiple of 17x implies a value of $6.95 for TOL. Outlook Today, TOL announced a $200 goodwill impairment of its Toll Global Forwarding business amid continued margin pressure. This is not really a shock to us, given the group had previously stated that this division in-particular was under margin pressure. On a positive note, the group did reaffirm its full-year guidance for an EBIT of between $420 million to $430 million. Despite the weak global forwarding business, the business is still able to reach its previous guidance, which is a testament to its diversified earnings base, which should put the company in good stead moving forward. Toll was listed as a share to buy for our members on June 27th. For all of our latest share tips and trading ideas sign up for FREE 7 Day Trial and gain full access our research files.
Primary Health Care Primed For Gains
Primary Health Care (PRY) is one of Australia's leading listed healthcare companies, operating as a service company to medical and allied health professionals. PRY also boasts a network of medial and pathology centres across Australia, and is a leading provider of healthcare technology solutions to medical practitioners, medical practices and hospitals. The group’s revenue is divided into four main segments: > Medical Centres > Pathology > Imaging > Health Technology 1H13 Results PRY’s 1H13 results were a solid improvement when compared to the same period in FY12. The group’s revenue came in at $720 million, a 5% increase on the prior corresponding half. EBITDA for the 1H was $186.1 million, an 11.6% increase on 1H12. PRY was impressively able to increase its EBITDA margin by 150 basis points (bps) as a result of revenue gains, economies of scale and operating efficiencies. The group was also able to increase its interim dividend by 30% to 6.5 cents per share. Breaking it down A closer look at the recent results revealed all of the major divisions making positive contributions to 1H13 earnings. The Medical Centres division increased its EBITDA by 9% to 84.0 million, with the business expanding its margin by 80 bps to 55.4%. Pathology EBITDA grew by 13% to $69.5 million, with the margin up 100 bps to 17.0%. The Imaging division EBITDA was up 30% to $35.0 million, with the margin up a staggering 500 bps to 22.6%. Overall it was good to see that all divisions recorded not only EBITDA growth, but also growth in margins, indicating a business with a focus on cost controls. Looking ahead All PRY’s divisions performed well in first half, and we see this continuing in the second half. The group showed it was able grow its business organically, with better economies of scale and operating efficiencies driving expanding margins. With Australia’s ageing population, PRY should be able to grow its earnings at an organic level. The group has also lowered its borrowing costs from $56 million, to $40 million in the 1H13, which should also have flow on effects in the 2H. With think these factors, combined with growth from its Medical Centres division, will result in a solid full year result and further share price appreciation. For more share tips on not only the Primary Health Group, get our latest asx share market trading ideas by signing up for FREE 7 Day Trial and access all our research files.
Share Tip – JB Hi-Fi Flying High (JBH)
JB Hi-Fi (JBH) is a chain of electrical stores, selling leading brands of hi-fi, speakers, televisions, DVDs, cameras, car sound, home theatre, computers, white goods, portable audio and a variety of music, games and movies. The company has been able to grow its sales over the last 5 years in what can only be described as one of the most difficult trading conditions for retailers in over 20 years. JBH’s strategies for growth are simple: increase the number of stores, increase sales, and through that, increase profit. JBH’s expansion is not only in the Australian market, but also in New Zealand. Since entering the New Zealand market in early 2007, it has opened 14 stores. 1H13 Results JBH’s 1H13 results impressed on several fronts. Sales for the six months to December 31 were $1.81 billion, up 3.1% on the prior corresponding half. Net profit was $82.1 million, up 3% on the 1H12 result. The group also declared an interim dividend of 50 cents per share, fully franked. This equates to a solid yield of around 6.5% at current prices. Perhaps the most surprising number released by JBH was its gross margin, which rose by 28 basis points. This number is made even more impressive when it is compared to competitor, Harvey Norman, whose gross margin dropped 260 basis points over the same period. Consumer environment The operating environment for the retail sectors has been subdued over the last few years, but this appears to be abating. The latest release of the Westpac Consumer Sentiment survey, showed the consumer sentiment index rising 2% to 110.5 in February. It is the highest level the index has reached since the end of 2010. A reading above 100 indicates that more consumers are optimistic about the economy rather than pessimistic, with the index having been in the positive territory for the past five months. There are likely a few reasons for the uplift, with the RBA cutting the cash rate to 1.75% between November 2011 and December 2012, probably the key reason. Looking ahead JBH’s 1H13 results showed sales growth and more importantly, expanding margins. While these expanding margins initially helped the company’s profitability, they will be more significant when industry wide sales growth return to trend. Retail sales figures in January already have hinted of such a return, with an increase of 0.9% from December. Confirming these retail numbers, JBH noted that its sales climbed 11.7% during January (4.2% like-for-like sales growth). With the consumer sentiment reading at all-time highs and sales growth starting the year off with such a strong number, we see a solid result ahead for JBH, which should translate to further share price appreciation. JB Hi-Fi was issued as a share to buy to our members on March 27th, if you would like further information you can sign up for FREE share recommendations and access all our research files on not only JBH but all our current trading ideas. Simply click here and starting trading today, free for 7 days.
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