Ramsay Health Care Limited (ASX: RHC), Australia's largest private hospital operator and international healthcare provider, released a pleasing double-digit increase in both revenue and net profit, in part due to overseas acquisitions and expansion as well as brownfield development investments in Australia.
Here are the key half-year results:
- Revenue $3.34 billion, up 41.6% from $2.35 billion
- Earnings before interest, tax, depreciation and amortisation (EBITDA) $511 million, up 40.2% from $364.6 million
- Net profit after tax (NPAT) reported NPAT $191.4 million, up 21.3% from $157.8 million
- Earnings per share 91.1 cents per share, up 22.4% from 74.4 cps
- Dividend per share interim dividend 40.5 cps, up 19.1% from 34 cps
Half-year business highlights:
— The acquisition of French healthcare provider Générale de Santé was completed, which made up a great part of this half-year's big surge in revenue. Ramsay Health Care managing director Christopher Rex said: "In completing our purchase of a controlling stake in Générale de Santé in October 2014, we are now a market leader in France as well as Australia and are thus very well-positioned to cater for the increasing demand for health care in these regions."
— Growth in the company's UK business was solid with operating earnings before interest and tax (EBIT) gaining 9.1%, with an increase in the number of National Health Service (NHS) patient admissions.
— Developments in existing Australian hospitals saw $175 million invested into the expansion of 11 sites, which boosted organic admissions growth.
— Ramsay Health Care agreed to enter a non-binding term sheet with a Chinese healthcare provider to jointly operate five hospitals in Chengdu, China. With its Asian joint venture partner Sime Darby, this will be Ramsay Health Care's first entry into the growing Chinese healthcare market.
Company outlook:
Integration of Générale de Santé will generate further improvements in business performance and margins as Ramsay Health Care becomes the country's largest private hospital operator. Overall, the company projects its underlying NPAT and earnings per share to rise about 18% – 20% for financial year 2015, up from previous growth projections of 14% – 16%.
Ramsay Health Care has been a long-term business success story and solid investment for long-term shareholders. Analysts forecast earnings growth to be an average annual 18% over the next two years.
The stock is trading at 34x forward earnings, so it's not a bargain. Other strong healthcare stocks like ResMed Inc (CHESS) (ASX: RMD) and Cochlear Limited (ASX: COH) are also at high price multiples due to high growth.
For Foolish investors, the important question is where the business will be in 5-10 years from now. I think Ramsay Health Care has a long growth runway ahead of it, so if better entry price points appear, you may want to add this defensive stock to your portfolio.
