Japara Healthcare Ltd

JHC Details

FY18 earnings expected to be below FY17: Japara Healthcare Ltd (ASX: JHC) stock fell 5.66% on December 19, 2017 after the company gave the business update related to its operational and financial performance for the first five months of FY18 to November 2017. For the first half of FY18, JHC expects EBITDA from operations to be approximately 15% to 17% below the prior corresponding period due to the lower than expected occupancy levels. The management expects the second half EBITDA from operations to exceed the first half. Therefore, the full year FY18 EBITDA is expected to be 5-10% below FY17.
 

Operational Update (Source: Company Reports)
 
However, for FY 19, JHC expects the earnings to be significantly higher than FY18 due to the income on an additional 391 net new places due to the brownfield and greenfield developments expected to be completed during FY18 and FY19, improved occupancy, increased revenue per occupied place, COPE escalation and a reduced revenue impact and the cost efficiencies. Meanwhile, JHC stock has risen 23.62% in three months as on December 18, 2017, but was removed from S&P/ASX 200 Index, effective from December 18, 2017. Based on the foregoing weakness, we give an “Expensive” recommendation on the stock at the current price of $2.00


JHC Daily Chart (Source: Thomson Reuters)
 

Estia Health Ltd

EHE Details

Maintained the outlook for FY18 EBITDA: Estia Health Ltd (ASX: EHE) has maintained its outlook for mid-single digit percentage growth in EBITDA in FY18, taking into account that there will be no material changes in market or regulatory conditions. Moreover, EHE is continuing its capital investment program in FY18 and investing in a combination of already committed projects and those in the advanced stages of approval, including new greenfield sites at Blakehurst in New South Wales and Maroochydore and Southport in Queensland for which land, development approvals, and bed licences have been approved. All these three will commence in FY18. Meanwhile, EHE stock has risen 22.80% in three-months as on December 18, 2017 as the company has delivered the FY17 performance as per the guidance, but the stock is trading at a slightly high P/E. The stock otherwise fell 6.4% on December 19, 2017 that may be owing to peer driven weakness. Therefore, we give an “Expensive” recommendation on the stock at the current price of $3.53


EHE Daily Chart (Source: Thomson Reuters)
 

Ramsay Health Care Ltd

RHC Details

Strong growth in the Australian business expected to continue: Ramsay Health Care Ltd (ASX: RHC) has reaffirmed core EPS growth of between 8 per cent and 10 per cent for FY18. On the other hand, RHC had appointed David Thodey AO to join the RHC Board as a non-executive director. Further, the strong growth in the Australian business is expected to continue, while the company expects ongoing challenging environments in Europe in the near term. Moreover, the company has completed major brownfield projects. RHC’s key focus is to drive operational efficiencies, and is progressing on its integrated care opportunities which will broaden the company’s business beyond hospitals. Additionally, the Federal Health Minister Greg Hunt has recently announced a private health insurance (PHI) reform package, which shows the government’s support to the private health system. Meanwhile, RHC stock has risen 10.96% in three months as on December 18, 2017. Given the potential, we put a “Buy” recommendation on the stock at the current price of $69.80


RHC Daily Chart (Source: Thomson Reuters)
 

Sonic Healthcare Ltd

SHL Details

Expects 6-8% growth in FY18 EBITDA: Sonic Healthcare Ltd (ASX: SHL) for FY18, is expecting about 6-8% growth of EBITDA on underlying FY17 EBITDA to A$889 million at constant currency FY17 FX rates. The company has projected on assumption that there will be no regulatory changes, including the proposed US Medicare fees, which has potential FY18 impact of less than 1%. The projection also excludes future acquisitions. The interest expense is expected to increase by 10-15% at constant currency in FY18 and the tax rate is expected to be approximately 25%. Further, in FY18, the capital expenditure is expected to be significantly lower after the completion of major infrastructure projects. The company has maintained its dividend policy and the dividend is franked to 20%. Additionally, in FY17, the company’s statutory net profit fell 5% to A$428 million. Meanwhile, SHL stock has risen 8.70% in three months as on December 18, 2017, and is trading at a slightly high level. We believe that it will be prudent to keep a watch on any dip and give an “Expensive” recommendation on the stock at the current price of  $23.22


SHL Daily Chart (Source: Thomson Reuters)
 

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