Estia Health Limited

FY 2018 EBITDA Stood as Per Guidance: Estia Health Limited (ASX: EHE) posted the EBITDA for FY 2018 of $90.1 million and was supported by favourable momentum in the revenues as well as maintaining the disciplined cost management. However, the company’s strategy related to the portfolio expansion as well as improvement also supported FY 2018 EBITDA. In the same period, the company posted NPAT of $41.2 million which implies the YoY rise of 1.1%.

Summary P&L Account (Source: Company Reports)

The company also possesses a robust position when it comes to important margins. The company’s EBITDA margin stood at 16.4% in FY 2018 which is higher than the industry median of 13.4%. The company’s net margin is also higher than the industry median. In FY 2018, the company’s net margin stood at 7.5% while the industry median was 3.2%. 

Working for Refurbishment and Expansion Plans: Estia Health Limited would be working towards the performance optimisation moving forward.The company would be carrying out the activities which would support it in the refurbishment as well as expansion plans’ execution for the existing homes. The company happens to possess robust balance sheet which would support it moving forward.

The company’s conservative approach with respect to the expansion as well as improvement of its existing portfolio reflects that Estia Health Limited is progressing towards the sustainable future growth.

Stock Recommendation: On the daily chart of Estia Health Limited, Exponential Moving Average or EMA has been applied and default values were considered for the purposes. As per the observation, the stock price has crossed the EMA and, after the crossover, it had trended in the downward direction. This signifies that the stock might witness a downward momentum moving forward.

As a result, the market players need to avoid the stock at the current market price of A$2.130 per share, given the above scenario along with a tight regulatory framework of the sector while the Royal Commission is now underway to hammer the shortcomings in this space.

Japara Healthcare Limited 

Acquisitions Aided JHC in Increasing Footprints: Not so long ago, Japara Healthcare Limited (ASX: JHC) had conducted UBS Australasia Conference in which it focused on the FY 2018 performance. The company had carried out refurbishment activities in 6 homes in FY 2018 and it stated that in FY 2019 it plans to carry out refurbishment activities in 8 homes. The company had also managed to acquire the portfolio of Riviera Health and it had also done the integration of that. This would support the company in increasing the footprints across the Sydney market. 

FY 2018 Net Debt Movement (Source: Company Reports)

The company had witnessed a rise in the net debt because of deployments towards the portfolio so that it can be enhanced and can grow.The company had done Riviera Health portfolio’s acquisition as well as it carried out refurbishments.
Announcement from Royal Commission Might Have Financial Impact: There are expectations that Japara Healthcare Limited might witness a rise in the EBITDA of 5-10% in FY 2019 as compared to FY 2018. However, this would be achieved if no significant changes are witnessed in the regulatory or market conditions. Thecompany stated that the acquisition of Riviera Health portfolio would contribute more than $3.5 million towards the EBITDA in FY 2019.

However, the announcements from the Royal Commission might have a financial impact on Japara Healthcare Limited’s business.
 
Stock Recommendation: On the daily chart of Japara Healthcare Limited, Exponential Moving Average or EMA has been applied and default values were considered for the purposes. As per the observation, the stock price has crossed the EMA and is moving in the downward direction. This signifies that the stock might encounter downward movement moving forward. Based on foregoing, we advise that the market players need to avoid the stock at the current market price of A$1.150 per share (down 5.35% on January 18, 2019).  
 

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