Private health operators in market for equity raisings

While healthcare professionals may be busier than ever treating patients for COVID-19, the private healthcare sector is one not to be discounted for possible equity raisings in the coming days, according to market observers.

Names that are being discussed as possible equity raising candidates are groups such as Healius and fertility providers Virtus Health and Monash IVF, while Ramsay Health Care has also been discussed as a candidate.

The problem for healthcare providers right now is that elective surgeries and routine medical appointments are being cancelled as patients are told to stay at home.

Virtus has seen its market value fall by more than half since the coronavirus crisis to about $157m and it has $172m of drawn debt at December with more than $12.56m of cash.

Monash has also seen a demise in its market value by almost half to $118m since the start of this year.

It has $91.5m of net debt as at December and $5m of cash.

Healius recently rebuffed a $2.1bn takeover bid from Europe’s Partners Group and has high hopes of securing funds through from the sale of its medical centres division.

Before the coronavirus crisis struck, the expectations were that the division would net the company well over $500m.

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But while the sales process continues through investment banks UBS and Morgan Stanley, many believe that suitors vying for the business, including private equity firms like Pacific Equity Partners and BGH Capital, would put forward low-ball offers at best when final bids are due.

It is understood the company, which also offers radiology services as well as pathology and primary medical care, has chosen to persevere with the sale plans because the initial interest was so strong.

Yet the challenge for buyers is obtaining debt comes at a higher cost due to the global economic uncertainty linked to the coronavirus pandemic.

Last month, Healius told the market that testing in its laboratories was up on the back of COVID-19 work, but routine activities had faced a decline and it withdrew its guidance.

The market value of Healius has hit $1.25bn and it has $119.7m of operating cash on its balance sheet.

Its net debt is more than $746.6m, which means its debt level is 26.4 per cent.

Should Healius opt to pull the trigger on a raising, it would fit the bill as a company that retail investors should focus on as an investment, according to analysts at Morgans.

The broker that often works on the retail component of large equity raisings says retail investors should consider buying small stakes in quality companies sold down on COVID-19 risks and where capital raisings are more likely.

These include Healius, Ramsay Health Care, Transurban, Tabcorp, Sydney Airport, Atlas Arteria, Aristocrat, Star Group and Seek.

It comes at a time that the upper thresholds of share purchase plans for retail investors has been raised to $30,000 from $15,000.