When it comes to private hospital operators most investors will be well aware of industry giants Ramsay Health Care Limited (ASX: RHC) and Healthscope Ltd (ASX: HSO).
But there is a smaller player amongst the ranks that I feel investors should be taking note of and that is Pulse Health Limited (ASX: PHG).
This morning the private hospital operator reported a strong full year result which initially had its share price rocketing higher by 10%. Its shares have since come down a touch and finished the day higher by just over 5%.
For FY 2016 Pulse Health reported revenue growth of 29% to $72.4 million, with an impressive 23% of this growth coming from established hospitals and day surgeries.
Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) came in 38% higher at $9.1 million after excluding one off items and its greenfield ramp up. This meant underlying EBITDA came in at the top end of the guidance management provided in May of between $8 million and $9.2 million.
On the bottom line the company reported a loss of $3.9 million, compared to a $2.5 million profit last year. This was largely the result of acquisition, development, and integration costs related to the acquisition of Zenitas Holdings Pty Ltd and Boulcott Hospital, as well as the unsuccessful acquisition of Vision Eye Limited. Excluding significant and one-time items meant net profit after tax was 13.5% higher at $4.6 million.
Overall I feel this was a solid result if you look beyond the one-time items. The 38% jump in EBITDA is fantastic, but perhaps even better is the fact that the company has forecast FY 2017 underlying EBITDA from established hospitals in the range of $13.5 million to $15.5 million.
This implies stunning annual EBITDA growth of 48% to 70% which I believe could make Pulse Health a great investment this week. Especially considering its shares are trading on an EV/EBITDA ratio of just over 9x. This is a big discount to both Ramsay and Healthscope which have been trading on EV/EBITDA ratios of around 15x recently.
