Healthscope hurdles a symptom of pressures on healthcare stocks
You’d think owning a private hospital would be a licence to print money. There are certainly a number of favourable underlying drivers for private hospital operators in Australia — not least the ageing population — resulting in increasing service volumes per person.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. 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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Edward
:
Hi Roger,
Are you now in a position to provide feedback on your analysis of the HSO annual result and more broadly, growth prospects for Healthscope post divestment of the medical centre business unit?
With the recent decline in share price, is Montgomery contemplating the purchase of additional units to increase weighting of this business in your broader investment portfolio?
san raj
:
Hi Roger,
I have been following your commentaries on the Healthscope for a while now. The market didn’t like their result today and I wondering what is your current take on Healthscope future? Do you still own the shares on your managed fund. I’m holder of your managed funds. Would you buy more shares on current dip ? if yes why?
Roger Montgomery
:
We’re working through the numbers and our assumptions with a particular focus on the fixed asset turnover over the next few years. Looks like the demographic trends remain positive but FY18 could continue to disappoint thanks to development Capri and a deeper than anticipated slowing in admissions. It’s a circa 3% position currently.
John E
:
Also, HSO’s debt is becoming quite high relative to equity.
No major concerns at the moment but depends how much more capex they have in the next 2 years.
Roger Montgomery
:
And keep in mind a large payment from government for building the public hospital upon completion and transfer of patients.
san raj
:
Thanks Roger.
Kyle McGeechan
:
It does not suprize me even one bit that doctors are being asked to meet a certain quota. My father was working in the public healthcare system and when he’d raise issues about similar issues on the ethical nature of how a scheme like that is right he was told by managers “it’s not about patient care”. I won’t mention the state “Queensland”.
andrew ronan
:
Hi Roger, do you see a greater risk going forward due to the aging population and their political power which may sway government policies with regards to healthcare and therefore profits from the sector, as government intervention in all areas seems to be a growing trend as seen recently in the Australian gas market where government is forcing companies to sell gas locally at a reduced price to what they could otherwise receive, even though it was their own over regulation that led to the situation in the first place. It would seem healthcare is a sitting duck for this kind of heavy handed government intervention, specially as the population ages and their political clout grows.
Phil Nicholson
:
Thanks Roger. On longer term demand for aged healthcare just have a chat to David Sinclair about NMN.