Based on recent corporate activities, Pulse Health Limited (ASX: PHG) has gained some traction with regard to acquisition speculations that revolve around the following:
                                                                   
Strong presence in Australia and New Zealand with wide and diverse asset base: Pulse Health has been expanding its asset base via acquisitions. The group completed the acquisition of Boulcott Hospital in Wellington, New Zealand. This is a specialist surgical hospital with 29 beds, three operating theatres and on endoscopy unit. This makes the count of 13 hospitals in company’s portfolio of niche specialist private hospitals. The Group has completed the acquisition of the three day surgeries comprising Hobson Healthcare, in Melbourne suburbs Altona, Werribee and Sydenham. The Group also acquired Health woods Day Surgery that was completed on 15 January 2016. Moreover, the Group acquired the Hills Clinic Pty Ltd. (HCPL). The transaction entailed initial payment of $27.7 million cash. The vendors are eligible to receive additional copped earn out payments subject to the achievement of FY15 and FY16 revenue targets, making total consideration at $33.6 million. With this move, the group intends to target the Australian mental health market worth over $6.9 billion in 2010 -11 having an anticipated growth of 6%-7% per year over the next 15 years. Meanwhile, the group has terminated the acquisition of Waikiki Private Hospitals and Westminster Day Surgery. PHG’s strategy is to grow via acquisition or development of niche, specialized private hospitals or day surgeries. The group ramped up Mackay Rehabilitation Hospital to profitability within 12 months of acquisition while executed acquisition of seven facilities across Australia and New Zealand with completions spanning 2H16. To fund these acquisitions, PHG finished raising over $43 million of equity. Meanwhile, Pulse opened its Gold Coast Surgical Hospital on 31 August 2015 which is a specialist surgical hospital with 6 theatres, 24 bed in-patient ward and on track for contribution in the first half of 2017.  
 

Facilities (Source: Company Reports)
 
Delivered strong first half of 2016 financial performance: The Group reported a stellar performance during first half of 2016 with 29% jump in its revenue to $34.9 million. Its underlying EBITDA grew 46% to $4.5 million while NPAT before significant items grew strong 57% to $2.9 million.The group even declared an interim dividend of 0.3 cents. However, pulse downgraded the EBITDA estimates for FY16. Going forwards, Pulse Health expects FY16 underlying EBITDA of between $8.0 - 9.2 million from existing assets, down from earlier estimates of $10.2 million. The revised guidance excludes any FY16 contributions from recently announced acquisitions, which are expected to deliver an incremental FY17 EBITDA of $6.4 million. The downward revision in FY16 EBITDA estimates is due to the downturn in activity in its three rehabilitation hospitals. Although the demand outlook is positive for rehabilitation services, the company is also focusing on increasing the utilization of non-rehab services to make up the shortfall.

Positioned to leverage the opportunity from rising ageing population: Pulse’s expanding presence in Australia makes it well positioned to benefit from the rising ageing population in Australia in future. Based on government’s earlier estimates, the number of Australians aged 65 is forecasted to rise rapidly, from over 2.5 million in 2002 to 6.2 million in 2042. This is an increase from over 13% of the population in 2002 to over 25% in 2042. For Australians aged 85 and over, this growth is even more rapid, rising from over 300,000 in 2002 to 1.1 million in 2042.


Population Growth Indices (Source: Australian Government_The Treasury)

Supporting fundamentals: Pulse has reported that the principals of Evolution Healthcare have recently increased its stake in the company to 10% - 11%. The company has also received proposals relating to the acquisition. Although the management explained that the board has not pursued these confidential proposals owing to proposals seemingly undervaluing the company but has also retained Allier Capital to act as financial adviser and Norton Rose Fulbright as its legal adviser. The company’s price-to-earnings ratio (PE) of 36.1 is above Australia’s Healthcare Facilities’ industry’s PE of 27.2, while the price-to-book-value at 0.7 which is below industry’ average of 3.9. Pulse’s Total enterprise value (TEV)/EBITDA of 12.3 is 8% less than the industry’s 13.4 that seems to draw various takeover bids.
 
The stock price has fallen sharply after the company downgraded its EBITDA estimate for FY16. The stock fell over 34.04% in the last six months (as of August 01, 2016).

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