Healthscope - HSP

[winner69]

Healthscope HSP taken a beating the last couple of days after saying things weren't going quite to plan ... or punters expectations

Healthscope is Australia's largest player in both private hospitals and pathology services.

Was a big profit warning ... F06 earnings down 25% odd ... and not extracting synergies from the Gibbles acquisition seems to be the main problem.

All the fundamentals remain solid .. like ageing demographics and supportive government policy underlying strong ptospects for both prvate hospitals and pathologocal services.

Given a little more time to get the most out of the Gribbles acquisition no reason why F07 earnings shouldn't be be about $70M ... compared to this years forecast $50M

At current price of 420 (down from 680 not that long ago) PE is now below 20 on prospective earnings growth of 40%

Price might still drift down a bit more (so keep an eye on) .... which when looking back in a years time people will wonder why a very good company was so cheap.

Remember you only make money when you things at low valuations ... this could be one of those.

Personally when I now buy some i will be buying heaps more than I would have got a few months ago.

[SEC]

Be careful W69, Gribbles was a dog as a listed company and continues to be a dog for HSP. The expected synergies may not be realised at all. Analysts have cut their 07 estimates by ~15% so consensus has been cut from $83M to $70M.

Health related companies on the ASX are too expensive wrt the overall index and to global health stocks. A wakeup call like this profit warning has seen the overall sector significantly fall over the past two days, hopefully some more realistic valuations are occurring.

HSP has flagged another profit warning after they revise profit forecasts from the ex-Affinity hospitals.

Perhaps the best time to look at buying HSP is just before the HY report when the market may have may factored in too much of a profit warning. Personally I think there are better health plays and if the sector falls further there may be some buying opportunities available.

SEC

[tracker]

Day 3 today guys and girls

tight stops

tracker

[winner69]

Good call Sec ... might be worth waiting a while.

Management credibility and reputation does mean a lot

From the SMH today



Analysts scathing of Healthscope forecasts
Email Print Normal font Large font By Michael Evans
January 18, 2006

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AdvertisementANALYSTS have questioned the credibility of Healthscope management after the private hospital operator's profit warning stemming from its Gribbles pathology acquisition.

Shares in Healthscope fell for a second day yesterday, losing a further 22c, or 5 per cent, to $4.16, amid a series of broker earnings revisions to add to the 24 per cent wipeout on Monday.

Healthscope has warned that net profit for the year will be about $50 million, some 18 per cent below the median market forecast.

Having forecast extra earnings from the Gribbles pathology business of about $30 million this year, analysts were surprised at the size of the downgrade, believing it revealed the company had achieved only 50 per cent of its Gribbles pathology expansion program.

"Our view is the magnitude, the timing and the lack of detail have blotted management's reputation," Credit Suisse analyst Moira Daw said.

"This is made even more telling by management's overt enthusiasm for the pathology business: assuring the market that it had bought well, that it had delivered on its promises. To us it looks like a crisis of confidence that will take time to fix.

"We do not think that the businesses are broken but we do think that management does not have its finger on the pulse," she said. Estimates of earnings from the Gribbles acquisition were "a touch too enthusiastic", she said.

Healthscope's qualified comments over the new profit guidance due to external forecasts made by Ramsay Health Care on the sale of 14 hospitals "provokes a little nervousness", she said, with any "refining" of figures "unlikely to result in good news".

Goldman Sachs JBWere analyst Rob Gilderdale said: "It may take some time before the market is able to restore its confidence in the clarity of management's forecasts."

He said he was concerned competitor Symbion was ramping up its pathology business and could be stealing market share.

"The more burning question is the extent to which it represents a structural change in industry competitive dynamics. Our concern is that, with Symbion now focusing increasingly on pathology … and excess industry capacity, competition is increasing and the ability to get GPs to redirect pathology traffic to Healthscope is more difficult than anticipated."

Andrew Goodsall from Citigroup said he had concerns over estimates for 2007 because of the failure to get the in-house pathology operations up to speed.

He said there was a "possibility" of a Mayne-style backlash by doctors against the company.

Healthscope management is currently subject to a blackout period ahead of its results.

[robbo]

Healthscope (HSP)

Two quick, and related (HSP) questions....

(1) What was the Price Earnings (PE) on Healthscope (HSP) - before the profit downgrade revision ?

(2) What is the PE for HSP today?

Regards,

Robbo

[winner69]

You know the answers mate .... pe about the same as before ... I get the message

If consensus F06 forecast was $66M (29 cps) then a pe of 20 last week and at $50M (22 cpc) on todays close a pe of 18

So some rerating today ... most Aust shares often tend to fall to a pe of about the market average (15-16 .... at least thats what I have observed over the years) so on that basis supposse another 40-60 cents to go !!!!!

Is that what you are trying to tell us ... good point though mate ..... some big players obviously pissed off with management .... reputation and reliability does go a long way so these dudes have a lot of work to do get that 'trust' back

[robbo]

Healthscope (HSP)

Hmmmm excellent response winner69...

Way I see the Ramsays, Sonics and the Healthscope's is that the overly inflated PE ratios that the amrkt ascribed/ascribe to these Health Sector Stocks is that it is premised on One Fundamnetal Tenet....

And that Tenet is that they are largely underwritten by Government's Medicare....

But guess waht is happening now..?

AThe Feds are starting to realy rally crack down on "Overservicing" and even starting toi use the "f" word..... jno no that sear word, but the "f" for fraud word.....

So there is a more intense scrutiny of "Overservicing" in areas such as radiology and especiually pathology --- which goes to the hearts of these sorts of companies -- "Revenues Models"

-- Already Tony Abbot, the Health Minister has expressed reservation about the Mayne Health spin off, in the newly listed Symosium --- over just these same sort of pathology etc overservicing issues....


So are the days of fat monopoly, high profit, rivers of gold from the Health Budget and Listed High PE Health Co's sucking off the Federal Govt Health Department teat, numbered....?

"The above" -- is admitedly a rather simplistic precis; , but there is possibly a kernel of truth in there as well....

Regards,

Robbo

[Skol]

Looking at the chart and the performance of HSP over the last couple of days it hasn't hit bottom yet. I'll be in there around $3.50.

[tracker]

day five coming up, and its Friday

tracker

stops as always

[SEC]

quote:Originally posted by SEC

Personally I think there are better health plays and if the sector falls further there may be some buying opportunities available.

It produced one alright - Ramsay Healthcare. Been drifting since HSP's warning, it announced a great HY result today. I was in straight away after the announcement. $10 has been a glass ceiling for months but it might take that out in the next few days, especially of there is rotation of money within the sector. Ironically HSP fell to its lowest price for over a year.

SEC