Tag: ASX:RHC

Ramsay Healthcare has been making a “lower high” pattern since selling off from the $75 high in August.

We’re reluctant to look at counter trend trades, however, with the broad thematic of the healthcare space being one of our preferred sectors, we now look to re-enter long positions in RHC.

Over the next 12 months we look for RHC to trade back towards $72 – $75 level on the back of the recent comments from the CEO, where he confirmed the company should deliver 8 – 10% EPS growth.

Ramsay Healthcare

Shares of Ramsay Health Care have jumped over 3.5% to $67.25 in early trade after the release of its AGM statement.

According to the release, management reaffirmed that it expects its core earnings per share to grow between 8% and 10% for FY 2018.

Based on the market reaction, investors may have been expecting the company to downgrade its guidance considering that private hospital cover has dropped to it lowest level in five years.

For a high capitalization stock, RHC trades on high volatility and wide trading ranges.

The “lower high” pattern is still in place with key resistance in the $68.30 area and support near the September lows of $61.20.

Concensus EPS for FY18 $2.84 v $2.35 for FY17

Our ALGO engine triggered a sell signal on RHC at the ASX close yesterday at $67.20.

On August 22nd, RHC posted an intraday high of $76.20 before falling close to 20% to $61.05 on September 21st.

While the price rebound over the last few weeks has given investors the chance to make some short-term profits, the medium-term outlook suggests more range-bound price action going forward.

RHC is currently trading at 23X FY18 earnings and a yield of 2.3%.

Ramsay Health Care

On September 23rd, we posted a report on the blog that shares of RHC were oversold in the low $61.00 area.

Since then the share price has moved steadily higher and are 2.5% higher today at $65.30.

From a  technical perspective, we see the next upside target in the $67.15 area.

Ramsay Health Care

After posting a 6-month low of $61.05, shares of RHC rebounded Friday afternoon to close the week at $61.85.

RHC shares traded as high $76.15 on August 22nd and have dropped almost 20% over the last month.

While  there’s no guarantee that the $61.00 level is the medium-term turning point, we believe that value investors will do very well to start scaling into long positions at the current share price.

Core earnings per share are expected to grow by 8% to 10% in FY 2018, and the company’s global footprint now extends to 25,000 hospital beds and 1,150 operating theatres across its 221 hospitals and 13 health care and treatment facilities.

Further, as the company generates over 40% of its revenue outside of Australia, when the AUD/USD resumes its down trend, RHC is well placed to benefit from favorable currency movements.

Ramsay Health Care

Ramsey reported FY17 NPAT in line with guidance at A$543 million, up +12.7% on the same time last year. Revenue was also in line at A$8.7 billion.

All divisions contributed to earnings growth with Australia & Asia as the standout.

Assuming underlying EPS growth of 15% into FY18, we have Ramsey on a 2.2% forward yield, as dividends increase to $1.45 per share.

We view Ramsey as a strong buying opportunity on the next higher low formation, or Algo Engine buy signal.

We continue to like the following healthcare names, RHC, RMD, SHL, CSL and MPL.

Ramsey Healthcare reports FY17 earnings on the 30th of August and consensus is looking for $537m.

FY18 EPS is forecast to increase by 20% to $2.60, DPS $1.32 placing the stock on a forward yield of 1.8%.

After buying Ramsey Healthcare on the recent pullback to $68.50, we now look to take profit at today’s price levels.

Within the healthcare space, we continue to like SHL, RMD, CSL and Ramsey Healthcare. Although, they’re starting to look a little expensive from a PE perspective.

Trimming profits with a view to buying back in on a pullback makes sense, or selling tight covered call options at current price levels.