Ramsay Health Care Limited

Decent Performance in 1HFY19: Health Care sector company, Ramsay Health Care Limited (ASX: RHC) has presence in New South Wales, Queensland, Victoria, South Australia, and Western Australia.The company recently announced that its French subsidiary, Ramsay Générale de Santé (RGdS), had launched a EUR625 million renounceable rights issue (RGdS Rights Issue) as part of its previously disclosed intention to refinance its purchase of Capio AB.Ramsay will be issued new RGdS shares amounting to EUR318.1M (or 56% of the RGdS Rights Issue subscriptions), and these shares have increased Ramsay’s equity ownership in RGdS from 50.91% to 52.53%.  

In another update, RHC announced change in its director’s interest where Mr. Craig McNally disposed-off 45,000 RHC shares at an average price of $64.0482 per share, taking his final holdings to 323,834 ordinary shares and 187,635 performance rights.The move has been attributed to satisfy his personal income tax obligations.

In its H1FY19 result, it reported increase in Group’s revenue by 14.9% pcp to $5.1 Bn, and its EBITDA increased by 9.8% to $728.6 Mn. The good performance can be attributed to increase in revenue in Australia/Asia market (4.8%), United Kingdom market (1.6%), and the continental Europe market (25.7%).


H1FY19 Financial Metrics (Source: Company Reports)

What To Expect From The Company:It is expected that the demand will continue to drive growth in the sector globally over the long term. The company is expected to achieve synergies related to the Capio transaction.As per the company reports, there are positive signs emerging in UK in terms of both price and volume growth. RHC has re-affirmed its FY19 core EPS growth guidance of up to 2% (including Capio).

Stock Recommendation: The stock of Ramsay generated positive six months return of 20.73%. Its gross margin stood at 73.9% in H1FY19 better than the industry median of 48.9%, which implies company’s better position to service its operating expenses than its peer group. Its net margin stood at 5.3% in H1FY19 in-line with the industry median of 5.3%. Meanwhile, the share price has risen 9.49% in the past three months and is trading slightly towards its 52-week higher levels. Hence considering the aforesaid parameters and current trading level, we give a “Hold” recommendation on the stock at the current market price of A$63.570 per share (down 0.501% on 15 April 2019).
 

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