If you're looking for a way to profit from Australia's growing and ageing population, Estia Health Ltd (ASX: EHE) could be a stock to consider.
Estia Health is one of Australia's largest aged care operators and one of three to float its shares on the ASX last year. Unfortunately, it wasn't greeted with the same warm reception enjoyed by rivals Japara Healthcare Ltd (ASX: JHC) or Regis Healthcare Ltd (ASX: REG) upon their debuts, with some investors labelling its initial public offering as "overpriced" and "opportunistic". The stock closed at $4.74 on its first day as a public company, down 17.6% from a $5.75 offer price.
Since then however, it has generated solid returns for shareholders and greatly exceeded the gains achieved by the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO). It's up 21.5% at $5.76, which is well below its recent all-time high of $6.75.
Why Estia Health deserves your attention
Australia's population is tipped to continue growing strongly over the coming years and decades while at the same time, the average age will also continue to rise. In order to cope with this trend, there is a need for new facilities and beds to care for many of these individuals post retirement.
In a presentation to the Macquarie Conference in May this year, Estia said it has built a portfolio of 49 facilities (84% of which are located strategically in metropolitan areas) with a total 4,127 operational places. Of these, 93% are single rooms which are seen as the most sought after in the industry.
Although companies such as Estia, Japara and Regis Healthcare have gone about building their portfolios via new acquisitions, there is still plenty of room for consolidation with Estia gunning to operate a total of 10,000 places by the 2020 financial year (FY20). It recently announced that it has entered into a strategic partnership with Living Choice Australia on the Sunshine Coast, with the intention to develop in excess of 500 additional aged care beds by FY19, which will help it grow towards that target.
While Estia Health is by no means a risk-free investment prospect, strong growth is expected over the coming years which could generate fantastic returns for shareholders. At the same time, dividends are also expected to grow making Estia an appealing prospect for income investors, as well.
