Purchase of Ramsay Health Care (ASX: RHC)

11th July 2022

Across the Australian equity component of investor accounts, we have bought Ramsay Health Care (ASX: RHC), a global health care company with a reputation for operating high-quality services and delivering excellent patient care.

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, and should you require further information, do not hesitate to contact your adviser.

Warnings and disclosures

This material has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in this material is General Advice and does not take into account any person’s individual investment objectives, financial situation or needs. Before making an investment decision based on this advice you should consider whether it is appropriate to your particular circumstances, alternatively seek professional advice. Where the General Advice relates to the acquisition or possible acquisition of a financial product, you should obtain a Product Disclosure Statement (“PDS”) relating to the product and consider the PDS before making any decision about whether to acquire the product. You will find further details of the service we provide and any cost to you within the Financial Services Guide. Any references to past investment performance are not an indication of future investment returns. Prepared by EP Financial Service Pty Ltd ABN 52 130 772 495 AFSL 325 252 (“Elston”). Although every effort has been made to verify the accuracy of the information contained in this material, Elston, its officers, representatives, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this material or any loss or damage suffered by any person directly or indirectly through relying on this information.