1. profit margin highest in ASX - lowest % staff costs at 58%, EBITDA margin 23%. Low depreciation compared to REG allows high net profits. High margin due to less concessional and higher extra service places
2. over 6% yield FF at current levels, good strong dividends with 100% payout ratio
3. aged care/health industry defensive and not cyclical - ageing population forecast growth and organic growth from conditions becoming more acute
4. RAD self sustaining cash flows - RAD prices are going up for EHE
5. Metro regions high 80% - higher than JHC, good single rooms and lesser concessional places + more extra services like REG
5. Fragmented market - EHE is a proven acquirer - over 50,000 beds from single operators(profit+not for profit) remain..Already 1 acquisition of a 80 place facility.
6.Debt facility - $150m facility well funded.
Against
1. Shocking downtrend and collapse of sentiment - Esp with JHC payroll - sucked life out of this new issue. Price gapped down 15% and has had only 1 proper green day in 9 days. This is a technical, not a fundamental reason however.
2. No ACAR aged care bed licenses awarded - EHE is primarily into acquisitions.
3. Priced at CY15 earnings(unlike REG and JHC FY15), but this is mitigated by comparison issues- better to include the contracted acquisitions for like for like comparison.
4. Acquisition/integration risks - need to deliver otherwise further punish.
5. Has much less brownfield/greenfield licenses than REG and JHC - again, it has grown via acquisitions.
EHE Price at posting:
$4.45 Sentiment: Hold Disclosure: Held
