Latest news with #RamsayHealthCare
News.com.au
2 days ago
- Business
- News.com.au
Criterion: Healthscope's collapse puts private hospitals in a world of pain, but there's still a faint pulse
The unlisted Healthscope's misfortune casts the spotlight on the listed Ramsay Health Care Private hospital profitability has shrunk, but the sector still accounts for more than 40% of admissions Ramsay's rehab includes putting its loss-making French business up for sale Private hospital operator Healthscope's lapse into administration this week highlights the role sector's financial woes that have been brewing for years – along with that of the private equity owner's excessive debt. As the country's second biggest hospital operator, the unlisted Healthscope is a case of 'too big to fail'. The operating business is expected to be sold and recapitalised, with lenders and landlords taking a suitable haircut. Notably, the Commonwealth Bank (ASX:CBA) was comfortable enough to extend a $100 million loan to keep the wards ticking over across Healthscope's 37 hospitals. But the structural pressures will remain, with private insurance payors not adequately compensating the hospitals for ratcheting costs (notably wages). The insurers, in turn, are being squeezed by the government's control over premium increases. At the same time, medical advances mean more procedures are done via day surgery, which is less lucrative. The private hospital sector should have much going for it, given the ageing populace and the pressures on the public hospitals. According to the Australian Private Hospitals Association, the 'privates' accounted for 41.2% of all hospital admissions in the 2022-23 year, a gain on the pre-pandemic 40.3% share in 2018-19. They also account for 705 of elective procedures. Global expansion puts Ramsay in the sick bay Healthscope was listed until 2019, when it was purchased by private equity. That leaves Ramsay Health Care (ASX:RHC), the country's biggest operator, as the only ASX-listed exponent. Ramsay owns or operates 76 hospitals and clinics locally, as well as 34 in the UK and 244 in Europe. In a misguided expansion, Ramsay acquired just over half of French group Ramsay Sante – the crux of its European ops – for around $140 million in 2010. Sante means 'good health' but there hasn't been much of that. In early 2022 Ramsay then acquired Elysium, which runs mental health and rehabilitation facilities in the UK, for $1.5 billion. The French and UK hospitals face similar headwinds to the local sector – probably more so given the reliance on governments that have been equally stingy with keeping up with cost inflation. As a result, Ramsay's overseas operations have performed worse than its local ones, resulting in the board's decision to find a buyer for Ramsay Sante. In the words of Allan Gray analyst Tim Hillier, 'grossly inadequate government funding has made Ramsay Santé an unsustainable essential services charity.' Serious but stable condition Ramsay shares have declined around 25% over the last year and halved over the last five years. Despite this decline, most brokers have a 'hold' call on the stock. In other words, they think Ramsay's condition will improve but they're not braving a 'buy' call until a peer puts their delicates on the line first. Ramsay CEO Natalie Davis describes 'significant value and growth opportunity' in the Australian business, albeit with a 'multi-year transformation required.' In the first (December) half, Ramsay reported a 6% revenue increase to $8.54 billion, with a reported loss of $105 million but underlying earnings from continuing operations steady at $500 million. But Elysium's earnings declined 41% to $14.9 million, while Ramsay Sante's contribution fell 23% to $102 million. Ramsay is pursuing operational improvements and tightening capital expenditure'. Value emerges amid aversity While myriad risks remain, Ramsay's subdued valuation arguably more than compensates for them. One wildcard is that Ramsay will receive a better-than-expected price for the French ops. In any event, the divestment would remove a gangrenous limb. There's also the 'replacement value' consideration. Allan Gray's Hillier notes a new 100-bed hospital would cost $150 million today – and Ramsay has 9300 beds across its network. Ramsay's $8 billion market cap also pales against the $30 billion, $88 a share billion cash bid lobbed by private equiteer KKR in 2022. The unrequited deal offers some glimpse of the potential upside should Ramsay's stint in rehab prove successful. But as broker Wilsons cautions: 'this situation is going to get harder before it gets easier. Easier means change and change is hard'.
The Guardian
5 days ago
- Business
- The Guardian
Australians remain deeply sceptical about the value of private healthcare – it's time for radical reform
The viability of private healthcare in Australia has been thrown into doubt after Brookfield's decision to place Healthscope, the operator of 37 private hospitals, into receivership. After months of acrimonious negotiations with private health insurers and a failed search for buyers, the global investment firm has walked away. This is a 'canary in the coalmine' moment for the private hospital sector. Brookfield's exit suggests that private hospitals, at least in the near term, are no longer a safe bet for private equity investors. The reasons are complex but not new. The sector has been under pressure since 2016, when shares in Healthscope and Ramsay Health Care tumbled amid falling demand for private health insurance – a trend not seen since the early days of Medicare. Australians were questioning the value of private cover as premiums soared, out-of-pocket costs ballooned, and insurers quietly trimmed the list of services they would fund. Complaints surged. Confidence eroded. This was bad news for private hospitals. Healthscope was de-listed from the stock exchange and bought by Brookfield. In response, the federal government introduced reforms: capping premium increases, introducing tiered gold, silver and bronze policies, and trying to make specialist fees more transparent. But these measures have largely failed to restore trust or affordability, as witnessed by the events of the last few days. The pandemic has only deepened the cracks. Elective surgeries were cancelled, demand for private care dipped and, when it returned, it did so in a landscape reshaped by inflation and workforce shortages. By late 2022 inflation had peaked at 7.8%, squeezing household budgets and prompting many to delay or forgo care – especially in the more expensive private system. At the same time, hospitals faced rising costs for supplies and consumables, while medical fees continued to climb. Nursing shortages, exacerbated by burnout and shifting work-life expectations, made it harder to maintain services. Though inflation has since eased, many of these pressures remain. Health workforce retention is still a major concern. Medical out-of-pocket costs continue to rise. And the public remains sceptical about the value of private healthcare. What happens next for Healthscope depends on who takes over. Any new owner is likely to cut costs, potentially closing smaller, less profitable hospitals. Patients will need to go elsewhere. Public hospitals are facing growing demand from an ageing population, with a renegotiation of the national health reform agreement, the key funding deal between the commonwealth and the states. In Victoria the state government has injected $9.3bn into public hospitals, a sign of the growing strain across the board. The reasons why Healthscope is in trouble give us some clues about what we might do to ensure sustainability of the sector. There will always be fights about funding, whether it is private health insurers and private hospitals, or governments and public hospitals. Brookfield's decision raises urgent questions about how we fund and regulate private healthcare in Australia. The opaque and often adversarial contracts between private insurers and hospitals need greater oversight. Financial risk must be more evenly shared. And we need smarter, more localised workforce planning to address chronic shortages. Ultimately, the private system must reckon with its value proposition. While it may offer shorter wait times, care from senior specialists and private rooms, these benefits are increasingly offset by unpredictable and rising out-of-pocket costs. And when hospitals are owned by private equity firms, as in the case of Healthscope, there's growing concern, backed by international evidence, that quality of care will take a back seat to profit. The question now is whether we treat Healthscope's collapse as an isolated failure – or as a catalyst for deeper reform. Anthony Scott is a professor at the centre for health economics at Monash University
Yahoo
6 days ago
- Business
- Yahoo
Ramsay Health Care Limited's (ASX:RHC) On An Uptrend But Financial Prospects Look Pretty Weak: Is The Stock Overpriced?
Ramsay Health Care (ASX:RHC) has had a great run on the share market with its stock up by a significant 8.8% over the last month. We, however wanted to have a closer look at its key financial indicators as the markets usually pay for long-term fundamentals, and in this case, they don't look very promising. Specifically, we decided to study Ramsay Health Care's ROE in this article. ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. In simpler terms, it measures the profitability of a company in relation to shareholder's equity. We've discovered 3 warning signs about Ramsay Health Care. View them for free. ROE can be calculated by using the formula: Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity So, based on the above formula, the ROE for Ramsay Health Care is: 0.5% = AU$29m ÷ AU$5.4b (Based on the trailing twelve months to December 2024). The 'return' is the profit over the last twelve months. One way to conceptualize this is that for each A$1 of shareholders' capital it has, the company made A$0.01 in profit. See our latest analysis for Ramsay Health Care So far, we've learned that ROE is a measure of a company's profitability. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics. As you can see, Ramsay Health Care's ROE looks pretty weak. Not just that, even compared to the industry average of 3.0%, the company's ROE is entirely unremarkable. For this reason, Ramsay Health Care's five year net income decline of 17% is not surprising given its lower ROE. We believe that there also might be other aspects that are negatively influencing the company's earnings prospects. For instance, the company has a very high payout ratio, or is faced with competitive pressures. With the industry earnings declining at a rate of 19% in the same period, we deduce that both the company and the industry are shrinking at the same rate. Earnings growth is an important metric to consider when valuing a stock. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. This then helps them determine if the stock is placed for a bright or bleak future. Is Ramsay Health Care fairly valued compared to other companies? These 3 valuation measures might help you decide. Ramsay Health Care's declining earnings is not surprising given how the company is spending most of its profits in paying dividends, judging by its three-year median payout ratio of 85% (or a retention ratio of 15%). With only a little being reinvested into the business, earnings growth would obviously be low or non-existent. Our risks dashboard should have the 3 risks we have identified for Ramsay Health Care. In addition, Ramsay Health Care has been paying dividends over a period of at least ten years suggesting that keeping up dividend payments is way more important to the management even if it comes at the cost of business growth. Existing analyst estimates suggest that the company's future payout ratio is expected to drop to 63% over the next three years. Accordingly, the expected drop in the payout ratio explains the expected increase in the company's ROE to 7.7%, over the same period. Overall, we would be extremely cautious before making any decision on Ramsay Health Care. Because the company is not reinvesting much into the business, and given the low ROE, it's not surprising to see the lack or absence of growth in its earnings. Having said that, looking at current analyst estimates, we found that the company's earnings growth rate is expected to see a huge improvement. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Yahoo
6 days ago
- Business
- Yahoo
Ramsay Health Care Limited's (ASX:RHC) On An Uptrend But Financial Prospects Look Pretty Weak: Is The Stock Overpriced?
Ramsay Health Care (ASX:RHC) has had a great run on the share market with its stock up by a significant 8.8% over the last month. We, however wanted to have a closer look at its key financial indicators as the markets usually pay for long-term fundamentals, and in this case, they don't look very promising. Specifically, we decided to study Ramsay Health Care's ROE in this article. ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. In simpler terms, it measures the profitability of a company in relation to shareholder's equity. We've discovered 3 warning signs about Ramsay Health Care. View them for free. ROE can be calculated by using the formula: Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity So, based on the above formula, the ROE for Ramsay Health Care is: 0.5% = AU$29m ÷ AU$5.4b (Based on the trailing twelve months to December 2024). The 'return' is the profit over the last twelve months. One way to conceptualize this is that for each A$1 of shareholders' capital it has, the company made A$0.01 in profit. See our latest analysis for Ramsay Health Care So far, we've learned that ROE is a measure of a company's profitability. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics. As you can see, Ramsay Health Care's ROE looks pretty weak. Not just that, even compared to the industry average of 3.0%, the company's ROE is entirely unremarkable. For this reason, Ramsay Health Care's five year net income decline of 17% is not surprising given its lower ROE. We believe that there also might be other aspects that are negatively influencing the company's earnings prospects. For instance, the company has a very high payout ratio, or is faced with competitive pressures. With the industry earnings declining at a rate of 19% in the same period, we deduce that both the company and the industry are shrinking at the same rate. Earnings growth is an important metric to consider when valuing a stock. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. This then helps them determine if the stock is placed for a bright or bleak future. Is Ramsay Health Care fairly valued compared to other companies? These 3 valuation measures might help you decide. Ramsay Health Care's declining earnings is not surprising given how the company is spending most of its profits in paying dividends, judging by its three-year median payout ratio of 85% (or a retention ratio of 15%). With only a little being reinvested into the business, earnings growth would obviously be low or non-existent. Our risks dashboard should have the 3 risks we have identified for Ramsay Health Care. In addition, Ramsay Health Care has been paying dividends over a period of at least ten years suggesting that keeping up dividend payments is way more important to the management even if it comes at the cost of business growth. Existing analyst estimates suggest that the company's future payout ratio is expected to drop to 63% over the next three years. Accordingly, the expected drop in the payout ratio explains the expected increase in the company's ROE to 7.7%, over the same period. Overall, we would be extremely cautious before making any decision on Ramsay Health Care. Because the company is not reinvesting much into the business, and given the low ROE, it's not surprising to see the lack or absence of growth in its earnings. Having said that, looking at current analyst estimates, we found that the company's earnings growth rate is expected to see a huge improvement. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Business Insider
22-05-2025
- Business
- Business Insider
Ramsay Health Care (RMSYF) Receives a Hold from Goldman Sachs
Goldman Sachs analyst Davinthra Thillainathan maintained a Hold rating on Ramsay Health Care (RMSYF – Research Report) on May 19 and set a price target of A$39.00. The company's shares closed last Thursday at $22.00. Confident Investing Starts Here: Easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions Receive undervalued, market resilient stocks straight to you inbox with TipRanks' Smart Value Newsletter Thillainathan covers the Healthcare sector, focusing on stocks such as Ramsay Health Care, CSL, and Cochlear . According to TipRanks, Thillainathan has an average return of 1.6% and a 63.64% success rate on recommended stocks. Currently, the analyst consensus on Ramsay Health Care is a Hold with an average price target of $25.22, which is a 14.64% upside from current levels. In a report released on May 16, Morgan Stanley also maintained a Hold rating on the stock with a A$37.20 price target.
