Daily ShareChat: Wakefield Health

By Jenny Ruth

Monday 15th June 2009

Wakefield Health is achieving sustained earnings growth from favourable demographics and capacity expansion both through organic growth and acquisitions, says McDouall Stuart.

The rapid growth in the aging population, particularly those over 85 years, is a strong macroeconomic driver while competition is weakening as public and not-for-profit hospitals come under increasing funding pressures and are unable to service the growing need, it says.

That is confirmed by the continued growth in private health insurance cover.

The company's strategy is to acquire additional hospitals and, after buying Bowen Hospital in 2004 and Royston Hospital in 2006, it is in continual discussions with other private hospitals throughout the country.

"The company has high operating leverage. Revenue growth, driven by volume and pricing, should ensure further improvement in return on capital employed," McDouall Stuart says.

Wakefield's near-term growth will be constrained by the proposed two stage development at Bowen Hospital which will encompass a new multi-level specialist facility and a new five-theatre complex to replace the existing three theatres, it says.

McDouall Stuart is forecasting net profit will rise from $10.1 million reported for the year ended March to $11.2 million next year and $11.6 million in 2010. It values the stock at $12.80 compared with last Friday's $9.25 share price.

BROKER CALL: McDouall Stuart rate Wakefield Health (NZX: WFD ) as buy.

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