Analysts at Macquarie have offered more fuel to the theory of potential corporate activity around Ramsay Health Care by applying a closer level of scrutiny to its value, which they say could be as high as $17.3bn.
The analysts said that Ramsay’s Australian operating business was trading at a discount to multiples applied to the sale of its smaller private hospital provider Healthscope in 2019 to Brookfield for $5.7bn.
Macquarie’s analysts said if the same multiple — 14.6 times its 2018 financial year earnings before interest, tax, depreciation and amortisation — was applied to Ramsay, its share price would increase by $15.50 – about 23 per cent upside compared to its current share price.
They place a value of $17.3bn of the Ramsay business, including its debt at 10.9 times its forecast earnings before interest, tax, depreciation and amortisation on an adjusted basis of $1.6bn for the 2023 financial year.
Using an 11.7 times Ebitda multiple, the Australian business including debt is worth $12.2bn, its French assets based on a 9.5 times multiple is $3.05bn, its British business $1.1bn based on 8.7 times and its Nordics business on 9 times at $592m. Its Asia business is worth $368m at 11.5 times.
It takes the total value, with an average multiple at 10.9 times forecasted Ebitda to $17.3bn.
Of Ramsay’s 72 hospital property assets, it owns 55. The analysts place a $5.7bn valuation on the real estate including debt.
They calculate this to imply a $2.3bn valuation for its operating business based on a 12.3 times trailing Ebitda.
When it applies a similar methodology it used to get the valuation for all of Ramsay, Macquarie suggests that the property portfolio is worth $8.7bn, which implies a value of $3.5bn for the operating business and a multiple of 5.7 times.
Assuming a multiple of 11.5 times forecasted earnings for the operating business, it would add $3.5bn to the valuation, equating to an overall share price increase in the stock of $15.50 per share. This provides a total equity valuation of $83.50 a share – implying to about 23 per cent upside the current share price.
Ramsay’s shares are currently trading at about $68.96 and its market value is $15.6bn.
It comes after suggestions in recent months that Ramsay could be attractive to a super fund buyer amid a low interest rate environment, given that ASX-listed Sydney Airport is the $23.6bn target for an IFM-led buyout.
Pension funds and sovereign wealth funds are drawn to the prospects of healthcare due to its low risk profile, with AustralianSuper an earlier shareholder of Healthscope and the Queensland Investment Corporation a part owner of the country’s largest cancer care provider Icon Group.
The Paul Ramsay Foundation owns about 19 per cent of Ramsay.
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