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A (re)visit to the hospital: Healthscope and Ramsay


A (re)visit to the hospital: Healthscope and Ramsay

Over the course of 2016, we provided insight into the competitive dynamics and aggregate prospects of several industry sectors, from financial markets to supermarkets, listed on the Australian stock market.


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Roger is the Founder and Chief Investment Officer of Montgomery Investment Management. Roger brings more than two decades of investment and financial market experience, knowledge and relationships to bear in his role as Chief Investment Officer. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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  1. Hi Roger & Team,

    Do you still feel the market is treating temporary conditions as permanent given the latest results and guidance?



  2. Hi Roger,

    As you say, the demographics of the healthcare sector are compelling. But as a value investor, how do you get your head around the risks associated with changes in government policy? I know that this can work both ways (look at the banks) but do you try to quantify this risk in some way in your valuation models somehow?

  3. Hi Roger and team,

    Thank you for your continued analysis and commentary.

    I am interested in your thoughts on the recently announced retirement of Chris Rex (Ramsay) and Robert Cooke (Healthscope) as well as the appointment of Gordon Ballantyne to succeed Cooke at Healthscope. Will the change in leadership alter your position on either organisation?

    More generally, I understand that NSW Health released a tender in late 2016 for collaborative development of new hospitals throughout regional NSW (Shellharbour, Wyong, Bowral and Maitland). Recognising that Ramsay’s further expansion in to greenfield locations has been constrained by the ACCC in recent times (ie. proposed acquisition of Wollongong Day Surgery was rejected), prompting brownfield redevelopment of existing hospitals and expansion in to community pharmacy, will the collaborative development model remove these impediments to further domestic growth? Are you aware of the timeline for submission and evaluation of EOI’s by interested parties, presumably Healthscope and Ramsay?

  4. Roger,
    In your valuation analysis for RHC & HSO how do you account for the much higher historical returns on invested capital that RHC has relative to HSO. It would appear that historically RHC generates much higher incremental sales per dollar of new capital invested (noting that HSO has much higher pre-tax operating margins). How is RHC able to do this & is it sustainable long term?

    • Healthscope’s ROE is reduced by the intangibles on the balance sheet that relate to acquisitions when it was last listed, prior to private equity taking it private and relisting it. If you look at the returns on incremental equity capital you will find the differences are smaller.

  5. Robert Warren

    I will be moving to the old fart stage of life in the next few years and after a lifetime of hard labor the body ain’t what it used to be hospitals and many other age and health related companies are all a must for investors thanks for all the wonderful information Montgomery allows readers to enjoy

  6. Hi Roger, read this article in Money in January — What happened to the SRX part

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