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Daily ShareChat: Wakefield Health

By Jenny Ruth

Wednesday 24th November 2010

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 Jenny Ruth

Wakefield Health's profitability has been adversely affected in the last 18 months by the fall-off in revenue as surgical procedures declines, particularly from privately-funded and tightening criteria for ACC-funded service and lower contracting volume from district health boards, says McDouall Stuart.

"This trend will reverse but timing is difficult to determine," the broker says.

"The medium to long-term outlook remains favourable and sustained earnings growth should resume from demographics and capacity expansion (organic and acquisitions),"it says.

Rapid growth in the aging population, particularly those over 85, and weakening competition as public and not-for-profit hospitals face increasing funding pressure and are unable to service the growth in need, McDouall Stuart says.

Private health insurance cover is relatively high with 1.4 million people covered.

Wakefield has high operating leverage and a recovery in the current deferment of patient numbers should ensure further improvement in return on capital, the broker says. Its $30 million development of the Bowen hospital is almost half complete.

It is forecasting net profit for the year ending March 2011 will fall to $4.7 million from $6.2 million the previous year. From there, it will climb to $4.9 million in 2012, $5 million in 2013 and $6.7 million in 2014, its says.

Recommendation: Buy.

 

DISCLAIMER: To the extent that any of the content above constitutes advice, it is general advice that has been prepared without reference to investor’s objectives, financial situation or needs. Before acting on any advice, investors should consider the appropriateness of the advice and IRG recommend that investors should obtain appropriate financial, legal and taxation advice before making any financial investment decision. The report is based on information compiled from public information and private research. IRG have completed the report on a best endeavours basis and do not accept any liability of loss or damage. IRG suggest that clients use this as part of a decision making process and check key data before making any investment decisions.
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