Ramsay Health Care’s global network extends across 7 countries, with over eight million admissions/patient visits to its facilities in over 460 locations. Facilities cater for health care needs spanning primary care, complex surgery & mental health.
Ramsay is currently subject to a takeover from a KKR led consortium. The acquiring price is at $88 a share, and given recent softness in the market, we believe this bid provides significant upside despite recently exiting our position in Ramsay.
The takeover initially brought forward our return, resulting in Ramsay being switched for CSL in the portfolio. However, Ramsay is a fundamentally strong business that we are happy to own over a long-term horizon, and the mentioned market softness has given us another opportunity to own the business.
We are positive on the long-term outlook for RHC for the following reasons:
· Population growth combined with aging demographics in key markets provide long term patient volume growth prospects and will drive hospital revenue.
· Stretched public patient waiting lists and elective surgery backlogs caused by COVID-19 will drive volume through the private healthcare system. Ramsay are well positioned to capture this influx of these higher margin elective surgeries that provide earnings upside.
· Ramsay’s material balance sheet capacity can be used for growth projects, acquisitions & buybacks. Ramsay’s disciplined capital management will help drive shareholder value. The business is also well positioned to provide additional surgical capacity to capture the aforementioned backlog.
· The business has played a key role in treating COVID-19 globally, highlighting its critical hospital infrastructure, potentially putting itself in good stead for future government dealings.
The purchase of RHC has been funded through the sale of Origin Energy (ORG), trimming the portfolio’s exposure to commodity markets.
As always, thank you for your ongoing support, it is very much appreciated. If you have any questions or would like more information, please contact your adviser.
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