Analysts say the sale of Ramsay Sime Darby Health Care for $1.88bn was a price higher than anticipated.
However, its 50 per cent owner, Ramsay Health Care, has offered few clues over its next steps for the business after receiving proceeds from a sale as shareholder pressure mounts for a review of its European hospital operation Ramsay Sante.
In a research note on Monday, analysts from the Royal Bank of Canada said they anticipated the price range for the sale of the Ramsay Sime Darby Health Care business would be between $1.4bn and $1.6bn.
“Our forecasts had assumed Ramsay Sime Darby was sold for a price of $1.5bn and was 1 to 2 per cent earnings per share accretive in the 2024 to 2026 financial years.”
The analysts said the higher-than-expected sale price would add a further 0.6 per cent to 1.5 per cent earnings per share accretion between the time period and would reduce Ramsay’s debt ratio to 2.4 times earnings at June 2024, compared to the anticipated forecast of between 2.3 times and 3.2 times at June 2023.
“We consider the sale of Ramsay Sime Darby for $1.88bn to be a positive development for Ramsay as it reduces the company’s leverage ratio to a more comfortable level, boosts earnings and could lead to a valuation re-rating.”
The analysts say the sale price equates to 18.9 times its earnings before interest, tax, depreciation and amortisation for the 2023 financial year.
As reported by DataRoom at the weekend, the TPG Capital and Hong Leong Group-owned Columbia Asia purchased Ramsay Sime Darby Health Care for $US1.3bn.
Ramsay, Australia’s largest private hospital operator, owns the Sime Darby Health Care business in a 50-50 joint venture with Malaysia multinational conglomerate Sime Darby.
It includes four hospitals in Malaysia and three in Indonesia.
Yet while investors backed the price offered for the company, Ramsay is set to face pressure at its upcoming annual general meeting on November 28 over its share price and performance.
Shares closed at $52.44, equating to a market value of $12bn — below the $88 per share or $20bn offer that Kohlberg Kravis Roberts proposed early last year.
The KKR consortium, which includes super fund backers, came up with an alternative offer that Ramsay rejected, where shareholders would have received $78.20 per share and about 0.22 Ramsay Sante shares.
KKR had difficulties obtaining due diligence material from the Ramsay Sante board.
Before KKR approached Ramsay in April last year, its share price was around $65.
After presenting to investors at the UBS conference in Sydney on Monday, Ramsay chief executive Craig McNally declined to comment on its plan for Ramsay Sante when approached by DataRoom.
Earlier, it is understood during a presentation closed to the media he told investors that the company was open to exploring various options to optimise value.
The falling share price comes amid tough conditions throughout the healthcare industry, which include staff shortages and rising costs.
Investors have been lobbying the company to spin off the European arm and return it to shareholders by way of an in-specie distribution.
Ramsay first purchased hospitals in France in 2010.
It owns 52.3 per cent of Ramsay Sante, the second-largest private care provider.
Ramsay Sante has 443 hospitals, clinics, primary care and imaging centres across Europe.
Analysts at Morgan Stanley say they see limited upside to Ramsay Health Care’s current share price at a time when the company continues to suffer from a drag on overall patient volumes.
Surgery levels, up from 2019, were offset by maternity and mental health care volumes which are down about 10 to 12 per cent below previous Covid-19 volumes, while rehabilitation was in line with pre-pandemic levels.
“We are unclear if this suggests risk to 2024 financial year guidance of mid single-digit volume growth.”
They added that significant margin improvement appeared to be stubborn.
Ramsay’s largest shareholder is The Paul Ramsay Foundation, which owns 19 per cent.
Major equity holders of Ramsay Sante, listed on Euronext Paris, are Predica with almost 40 per cent, and Credit Agricole group’s personal insurance subsidiary.
Long term, Ramsay’s prospects are strong, with an expanding ageing population.
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