Regis Healthcare
About the author:
- Author name:
- By Scott Power
- Job title:
- Senior Analyst
- Date posted:
- 29 August 2016, 10:50 AM
- Sectors Covered:
- Healthcare, Life Sciences
Key points
- Regis Healthcare (REG) posted an FY16 result in line with guidance and our forecast.
- The occupancy rate and EBITDA margin were higher.
- The Masonic acquisition is being well integrated and adds materially to FY17. Green and brownfield developments add approximately 1,600 places.
- Government funding cuts to be offset by higher charges.
FY16 result
Regis Healthcare (REG) posted an FY16 NPAT result of A$46.1m, which was in line with guidance and included a number of one-off acquisitions costs (A$10.4m). The normalised NPAT was $A56.8m up 24%. A fully franked dividend of 5.94cps was declared bringing the total to 15.34cps. Total revenue was up 10% to A$483.5m, normalised EBITDA was up 10.5% to A$105.1m and the margin increased marginally to 21.8% (was 21.6%).
The occupancy rate was 95.2% (pcp 94.4%), across a portfolio of 5,880 beds of which 211 new places were opened in FY16. The average revenue per occupied bed day was A$272 (higher than the pcp at $258).
Outlook commentary
REG noted that the recent Masonic acquisition is being integrated well, adding 711 operational places, a potential Refundable Accommodation Deposit (RAD) uplift of A$50m and an additional A$10m to EBITDA. The strategy remains consistent with a focus on pursuing appropriate acquisitions and there are 1,592 places available for brown and greenfield developments. REG plans to spend $160m in capital expenditure across the portfolio in FY17. As a result, higher depreciation and interest expense has been guided. On the current plan REG will have a portfolio of 7,200 places by FY20. The changes to government funding will have minimal impact on FY17 results, however from FY18 the impact is more significant and it's highly likely that additional charges will be borne by the residents together with a review of the full service offering.
Modest changes to forecasts
We have reduced our NPAT forecasts by 3.3% to A$64.3m and by 0.2% to A$72.5m for FY17 and FY18 respectively. The major adjustment in FY17 relates to higher levels of depreciation and interest expense which has been guided by REG.
Investment view
Given the changes to forecasts and with the roll forward of our model, our share price target has increased slightly. The key downside risk is an inability to offset the announced government funding cuts with additional payments from residents.
We maintain our positive stance and our Add recommendation.
More information
Morgans clients can login to view our share price target and further detailed analysis on Regis Healthcare (REG). Alternatively, contact your nearest Morgans office for more information.
Disclaimer(s): Analyst owns shares.
The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents ("Morgans") do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.