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Daily ShareChat: Wakefield Health

By Jenny Ruth

Monday 21st December 2009

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Wakefield Health is unlikely to see an improvement in profitability until patient numbers recover although it has been able to mitigate the effects of the falloff seen in the six months ended September by lowering operational costs, says McDouall Stuart.

Wakefield's revenue fell 10% to $40 million and net profit fell 41.2% to $3.6 million in the six months.

"The nature of medical procedures make it very difficult to predict demand in the short term," the broker says. "However, the long-term picture remains unchanged with an aging population meaning increasing pressure on an already stretched health system. The big unknown is when, not if, demand returns to a steady growth trend."

McDouall says despite short-term earnings weakness, it is confident Wakefield's long-term prospects are bright.

"The continuing investment in the business, evident in its $16.5 million stage 1 Bowen redevelopment, due to complete by the end of 2010, demonstrates the company's commitment to long-term growth."

Wakefield's gearing is only 8.8% so it is ideally positioned to grow through acquisition, should the current tough economic conditions affecting all private hospitals present the right opportunity, the broker says.

There are also positive signs from the government that, unlike the previous administration which saw the private sector as a last resort, it will consider using private healthcare if it provides best value for money, it says.

BROKER CALL: McDouall Stuart rate Wakefield Health as short-term hold, long-term accumulate when patient numbers improve.

Daily ShareChat articles report how the main experts in the market might view a certain share and we provide this commentary as a useful resource for investors. Content on this site does not in any way constitute a recommendation to buy, hold or sell any particular share. Investors should always seek professional advice before making any investment decisions.

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