What’s the Buzz about Ramsay Health Care and Pro Medicus’ Soaring 12-months Returns?

  • Jan 22, 2020 AEDT
  • Team Kalkine
What’s the Buzz about Ramsay Health Care and Pro Medicus’ Soaring 12-months Returns?

Ageing and growing population are the two important factors benefitting the health care sector. As people get older, they are more susceptible to suffer from ailments, thereby requiring hospital admittance or increased healthcare. Hence, the Australian health care industry is predicted to flourish over the next 4-5 years because of the country’s fluctuating patient demographics, soaring occurrence of a number of chronic diseases as well as growing the health insurance protection by private health insurers.

As per certain market research report, the expenditure on the global health care is anticipated to increase with a CAGR of 5% between 2019-2023, offering many opportunities for the health care sector in upcoming years.

In this article, we are discussing two ASX listed health care stocks that have shown an outstanding returns in the last twelve months period along with their key achievements in 2019 and future outlook for the forthcoming year.

Ramsay Health Care Limited (ASX: RHC) Shares Rose 34.30% in Twelve Months

RHC’s market capitalisation stands at around $15.76 billion, with nearly 202.08 million outstanding shares. On 22 January 2019 RHC was trading at a price of $78.725, which is near its 52 weeks high of $78.780, moving up by 0.942% (at AEDT1:17 PM). The 52 weeks low price of the stock has been noted at $56.22, respectively. The P/E ratio stands at 29.44x with an annual dividend yield of nearly 1.94%.

It is worth noting that RHC’s share price has outperformed generating a positive return of 34.30% in the last one year period from 21 January 2019 to 21 January 2020, surpassing the S&P/ASX 200 Index (ASX:XJO)’s one year return of 20.6%, but lags behind the S&P/ASX 200 Healthcare Index (ASX: XHJ)’s return of 46.4%.

A deep dive into Ramsay Health Care’s remarkable growth journey

Sydney Headquartered, Ramsay Health Care Limited is Australia’s one of the largest and most diverse private health care companies with over 50 years of experience in delivering acute health care services and operations in more than 500 locations across 11 countries.

Year 2019 has been a significant year for RHC in terms of growth, which is largely driven by the acquisition of a pan-European Health Care Company, Capio in 2018, placing the company as the as the second largest private healthcare provider in Europe, with market-leading positions in both France & Scandinavia.

RHC’s Financial Achievements for FY2019 ended 30 June

  • Core EPS increased 2.1% to 285.8 cents compared to previous year.
  • Full year dividend was noted at 151.5 cents, up 5.2% compared to the previous year.
  • Revenue generated amounted to $11.4 billion, up 24.4% on pcp.
  • EBITDA rose 14.1% amounting to $1.6 billion.

RHC’s FY2019 Non-Financial Achievements

  • Boosting its operating model across all regions.
  • Accomplishing Employee Engagement Survey throughout the Group in eleven languages.
  • Completed implementation of Net Promoter Score (NPS) across all markets.
  • Completed Capio acquisition.

Ramsay’s Growth Strategy and Prospects for Future Financial Years

Ramsay’s magnitude and size offer prospect to delve into greater efficiencies as well as to form stronger collaborations, that would engender earnings growth along the healthcare value chain. Ramsay’s growth strategy is divided into five main components as shown below-

FY2020 Outlook

For FY2020, RHC is expecting to complete the brownfield projects that is worth $170 million. The company is also expecting stronger volume growth, boosted by its Australian brownfield investment program including the progress in NHS volumes in the U.K. Further, the company mentioned over the coming years, changes in its operating model across its business would also contribute to the profits.

In a nutshell, Ramsay Health Care continues its focus on ensuring that its stay on the path to deliver the best results for its patients, improving the customer experience, maintaining the highest level of engagement and respect for the doctors, developing an adaptable and forward thinking workforce for the future. Simply put, delivering quality outcome in future.

Pro Medicus Limited (ASX: PME) share price rose 102.35% in 12 months

PME’s market capitalisation stands at around $2.7 billion, with nearly 103.95 million outstanding shares. On 22 January 2019, PME was trading at $26.400, up 1.617% (at AEDT 1:37 PM). The 52 weeks high and low price of the stock was noted at $38.39 and $11.91, respectively. The P/E ratio was noted at 140.43x with an annual dividend yield of nearly 0.31%.

Interestingly, PME’s share price has also outperformed the market by generating a positive return of a whopping 102.35% in the last one year period from 21 January 2019 to 21 January 2020, exceeding the S&P/ASX 200 Index (ASX:XJO)’s one year return of 20.6%, as well the S&P/ASX 200 Healthcare Index (ASX: XHJ)’s return of 46.4%.

Zooming lens over Pro Medicus’ incredible progress

Health imaging IT provider Pro Medicus Limited (ASX: PME) is specialised in enterprise imaging and RIS (radiology information system) software. With over thirty years of experience, the company offers first-rate patient care by streamlining and improving medical practices.

PME’s product line comprises;

  • Solutions for RIS/practice management,
  • Health care imaging and e-health.
  • Software applications for clinical reporting, medical accounting, scheduling appointments/ and marketing/management.

PME’s impressive success over the past twelve months was driven by its remarkable FY2019 performance.

PME’s Financial Achievements for FY2019 ended 30 June

  • Reported NPAT amounting to $19.13 million, up 91.9%
  • Reported Underlying after-tax profit valued $22.74 million, increased by 83.1%
  • Generated Revenue of $50.11 million, reflecting an increase of 47.9%
  • EBIT Margins grew to 51.6%
  • Cash reserves amounted to $32.32 million, increasing by 28.0%
  • Reported strong debt free balance sheet
  • Fully franked dividends of 10.5 cents per share, up 75.0%

PME’s Business Highlights for FY2019

  • Transaction revenue boosted by 43.5%.
  • Secured two major contracts with Partners Healthcare and Duke Health.
  • PME’s Visage 7 technology has been standardised in five of the top twenty hospitals in the US.
  • Implementations are on or ahead of the scheduled time.
  • Future revenue soared to $180 million over next five years.
  • Business operations across Europe and Australia continued to do well.
  • Reported growth in revenue of 102.3% in EU and of 30.2% in AU.
  • PME has a robust pipeline with regards to quantity and quality of prospects.

PME’s Possible Future Developments and Anticipated Outcomes

PME’s management is of the belief that the financial year 2020 is going to bring more opportunities manifesting for the company due to increased possibilities in North America and the continued commercialisation and roll out of PME’s new technology RIS platform, Visage RIS.

Key Performance indicators for FY2020

  • PME is expecting an increase in revenue from previously won transaction-based contracts.
  • Several sales opportunities from continued strong interest in PME’s Visage 7.0 portfolio in the North American market.
  • Expanding footprints across key market segments including large Health Systems and Hospitals, private radiology and teleradiology markets.
  • Anticipating increased revenue from PME’s novel technology RIS platform, Visage RIS, with its continued rollout.

In a nutshell, PME expects a continuous improvement in its operational results in the financial year 2020 that are, however, subject to many market factors over which the management have limited or no control.


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