Two Growth Stock Picks - Ramsay Health Care + G8 Education
Oct 25, 2015 | Team Kalkine
Ramsay Health Care Ltd
Expanding market opportunity would drive its domestic and International business: Ramsay Health Care Limited (ASX: RHC) delivered a solid revenue increase by 49.8% year over year (yoy) to $7.4 billion in FY15, with its Australian and Asian business rising by 8.2% yoy to $4,055.5 million in fiscal year of 2015. RHC has already built a strong network of 226 hospitals, with 115 in France, 36 in United Kingdom, 3 in Malaysia, 3 in Indonesia and 69 in Australia. We believe that the group would continue to enhance its business, as it is well positioned to leverage the growing demand for health care driven by rising ageing demographics in Australia and continue to expand its capacity through its brownfield investment strategy. RHS had already finished developing capacities worth of $190 million during fiscal year of 2015 which comprised over $58.2 million expansion related to Warringal Private in Heidelberg, Melbourne; $53.3 million worth of expansion at Pindara Private on the Gold Coast as well as the $19.5 million expansion of Kareena Private in Sydney. The group also approved over $197 million for building new brownfields capacity along with existing projects. RHS is also expanding its presence in China, Indonesia, Malaysia and France apart from Australia. Accordingly, Ramsay made an agreement with Jinxin, a Chinese based health care company, to jointly operate five hospitals in the city of Chengdu, China during this year. Synergies from two hospitals integration - Ramsay Santé and Générale de Santé in the coming months would also boost its France business. Impact from the Australian government’s review of the Medical Benefits Scheme on examining the merits of 5,700 subsidized items, on RHC is yet to be seen.
Financial performance (Source: Company Reports)
Ramsay healthcare shares delivered a year to date returns of over 4% (as of October 23, 2015), and we believe that the stock is poised to grow in the coming months. Based on the foregoing, we give a “BUY” recommendation to the stock at the current price of $60.200.
RHC Daily Chart (Source: Thomson Reuters)
G8 Education Ltd
Affinity takeover battle: G8 Education Ltd (ASX: GEM) had approached Affinity for a potential takeover, to strengthen its Australian childcare centers, but Affinity declined GEM’s offer. Moreover, the takeover panel had recently ordered GEM that affinity shares acquired from Taxonomy Pty Ltd in excess of 20% of the total voting power in Affinity, need to be disposed by GEM and also issued withdrawal rights to non-associated Affinity shareholders who accepted GEM’s bid. Meanwhile, Affinity Education agreed the terms of Anchorage Capital which bid for 92 cents per Affinity security, against the GEM’s recent cash offer of 80 cents for each Affinity share. The shares of GEM plunged over 28.87% (as of October 23, 2015) during this year to date partly impacted by the investor’s concerns on its dependence on acquisitions for growth as well as Affinity takeover battle. On the other hand, G8 Education Ltd built a strong network of 457 centers in Australia and 18 centers in Singapore, after adding 21 new centers in first half of FY2015. GEM need to settle 17 more centers, and after this GEM expects to have 35,125 licensed places in Australia. G8 Education also delivered solid performance with a 5.6% yoy revenue growth (for its 229 centers-Like for Like growth) during the first half of fiscal 2015, while its underlying EPS soared 60% on year over year (yoy) basis during the same period, indicating its capabilities of deriving synergies through acquisitions.
Financial Performance (Source: Company Reports)
Moreover, around $3.5 billion worth of government’s federal budget was allotted to childcare, which might benefit GEM’s centers and subsequently drive the group’s price per child revenue, if more parents start working. GEM also has an outstanding dividend yield of over 7.9%. We reiterate our “BUY” recommendation on the stock at the current price of $3.03.
AU
CA
NZ
UK
US
IND
.png)
.jpg)
.bmp)
Please wait processing your request...