RAMSAY HEALTH CARE LIMITED

Mixed Scenario: Despite industry headwinds, Ramsay’s business performed well. The Australian hospitals maintained admissions growth above the industry growth rate, which is currently being impacted by affordability concerns and the ongoing negative focus on private health insurance due to which the revenue of the company grew by 5.4% to $9,176.2 million in FY 2018 compared to last year.  The EBITDA of the company grew by 6.2% to $1,395.9 million.

Earnings Scenario (Source: Company Reports)

EBITDA growth was positively impacted by disciplined cost management strategies and focus on achieving further operational efficiencies as well as some one-off benefits. The core Net profit after tax of the company increased by 6.8% to $579.3 million in FY 2018. The cash flow from operating activities was $994.69 million in FY 2018. The company saw strong CAGR growth for core NPAT and Core EPS.

What Could Drive Growth for Ramsay Health Care Limited:Ramsay Health Care Limited is expected to witness the growth moving forward which would primarily be underpinned by organic growth as well as by the capacity of the Brownfield programme. The company’s performance would also be helped mainly by the acquisitions. The company presently enjoys decent balance sheet which provides significant room for the expansion purposes. It has its complete focus on the growth avenues and has also come up with the takeover bid with regards to the pan-European healthcare company named “Capio.” The previous offer of SEK 48.5 per share has now been increased to SEK 58.0 cash per share.
Ramsay Health Care Limited would be working towards the operational excellence as well as it would be leveraging the digital capabilities moving forward. With the help of the digital capabilities, the company would be able to improve the customers’ experience. However, the company would be witnessing challenges which could impact the growth opportunities. The company’s growth might be subdued with respect to the earnings due to the neutral outlook it has in France, weaker growth momentum in Australia as well as challenges in the UK.

The management of the company expects that, over the long term, the healthcare demand would remain robust which would be supported by the industry fundamentals.

A quick view from technical standpoint:On the monthly chart of Ramsay Health Care Limited, Relative Strength Index (a momentum indicator) has been applied. The default values have been utilized for the purpose. As per the observation, the RSI is about to reach the oversold region and thus, an upward momentum is expected in near to medium term. As a result, we maintain our “buy” rating on the stock at the current market price of A$54.170.
 

COCHLEAR LIMITED 

Healthy Balance Sheet - In FY 2018, the company saw a strong growth across both developed and emerging market due to which the revenue of the company grew by 9% to $1,351.4 million. Driven by the increased revenue the EBIT of the company increased by $32.8 million to $348.4 million. Cash flow from operating activities was $258.1 million. Due to improved earnings and initiatives to improve cash management, the net debt of the company reduced by $43 million.

Profit and Loss (Source: Company Reports)

Due to additional investment in plant and equipment and IT systems the capital expenditure of the company increased to $42 million. Strong free cash flow and the continued strength of the balance sheet have supported the declaration of a final dividend of $1.60 per share, an increase of 14%. Full year dividends increased by 11% to $3.00 per share, franked at 100% and representing a payout of 70% of net profit.

What Could Help Cochlear Moving Forward: The top management of Cochlear plans to make investments in order to witness growth. The company would be allocating the funds towards awareness as well as towards avenues which could help easy access to the company’s products. Thus, they would be making deployments towards research and development activities, sales as well as marketing. Moreover, a disciplined approach towards the investment would help the company in terms of the net profit margin.

Cochlear would also optimize the production cost which could help the company in improving the competitive position. The company would be funding the growth opportunities with the help of the cash flows. Moving forward, the company has been planning the dividend payout which would approximately 70% of the net profit.

Technical Analysis:Moving Average Convergence Divergence or MACD indicator has been applied on the monthly chart of Cochlear Limited using the default values. The MACD line’s trending with respect to signal line indicates that the stock price might move in the downward direction. Moreover, the stock has tumbled 5.188% on October 09, 2018. This was at the back of concerns emanating from Bose Corp’s entry into the hearing aid market. We maintain the “Expensive” rating on the stock which has the current market price of A$191.880 per share.


RHC and COH Earnings Per Share (Source: Thomson Reuters)

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