On Monday, 28 July, private hospital operator and pathology service provider Healthscope will return to the ASX after being taken private in 2010 by private equity groups TPG and The Carlyle Group.
There are two major players here that have done quite well over the past four years in Healthscope's absence and which I believe would be better buys than Healthscope at this point.
Healthcare is regularly a good industry to invest in because of the defensive qualities (lots of sick and injured patients constantly needing care regardless of the current economy). So when Healthscope's return via IPO happens, should investors buy it up or just stick with what they have now in the healthcare space?
— Sonic Healthcare Limited (ASX: SHL) is a pathology and medical imaging diagnostic service provider with an extensive federation of practices in Australia and abroad in the US, the UK and Europe. Several years ago it even tried to buy some of Healthscope's pathology businesses in Queensland, but was blocked by the ACCC.
It has an FY 2015 forward earnings price/earnings ratio of 17, whereas with the initial $2.10 share price that Healthscope is expected to start at it has a forward earnings PE ratio of 21.9. Sonic Healthcare has a market capitalisation of $7.3 billion and Healthscope will start with a $3.6 billion market cap. The dividend yield is 3.6% partially franked. Analyst consensus forecasts have earnings expected to rise about an average 12% annually over the next two years.
— Ramsay Health Care Limited (ASX: RHC) is a private hospital and medical centre operator in Australia, France and Indonesia. In Australia, it runs about 69 hospitals, but due to a recent spate of acquisitions, especially in France, its total worldwide network has grown to 151 hospitals and medical centres.
It has an FY 2015 forward earnings PE ratio of 24, so Healthscope will start out between Ramsay and Sonic. Ramsay is a $9.3 billion company, more than double Healthscope and is forecast by analyst consensus to grow earnings about an average 19% annually over the next two years.
