Why the Capitol Health Ltd share price is crashing today

Shares of Capital Health Ltd (ASX:CAJ) have crumbled more than 27% today.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you thought you were having a tough day, try being a shareholder of Capitol Health Ltd (ASX: CAJ). The company's shares have fallen more than 27% to 41.2 cents, while they're down nearly 63% since March this year.

Capitol Health is Victoria's leading medical diagnostic imaging facilities operator while it is also expanding its operations into other states.

Today's plunge appears to be related to an announcement made after the market's close on Tuesday in which Capitol Health downgraded its revenue guidance for the 2016 financial year.

It said that the Federal Government's recently announced Medicare Benefits Schedule (MBS) review has led to changes in referral patterns in some areas, prompting slower-than-anticipated growth so far in FY16.

Gross revenues are 4% to 6% below expectations with existing Victorian operations experiencing even greater revenue weakness than that of recent acquisitions, including those in New South Wales.

Indeed, the MBS review was launched earlier this year by the Minister of Health and Sport, Susan Ley, and will aim to cut unnecessary costs for the Australian government. This will likely include a crackdown on doctors ordering too many scans and x-rays which can cost hundreds of millions of dollars per year.

Primary Health Care Limited (ASX: PRY) is another pathology and diagnostic imaging provider that is vulnerable to the review, as is Sonic Healthcare Limited (ASX: SHL). In saying that, Sonic Healthcare is less reliant on the domestic market with more than half of its revenues being generated overseas in the 2015 financial year.

While a further update will be provided at the group's Annual General Meeting next month, the company said it is too early to tell whether the trend will continue for the remainder of the financial year.

Motley Fool contributor Ryan Newman has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. You can follow Ryan on Twitter @ASXvalueinvest. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »