2025 Outlook

I bought this one last year around $4x mark. There is compelling value here in risk/reward to be a minor feature in the portfolio, probably not a major holding. Below is simply my analysis for any newcomer looking for info on this "dog of 2024".

1. Costs/inflation/interest rate eating profits. Last year revenue grew respectably but profit was flat/tad down (margins down). The costs have increased faster, this is a combination of wages inflation and debt servicing interest (rate) increase. Overall margins is still at an enviable position for the sector. The Aus segment being the best performer and Europe being the worst performer (business almost doing work for free there). Europe takes 50% of revenue so it is really dragging down the business.

2. Debt - direct loans $5bil AUD. Next payment is on ~$2.4bil AUD April-2027. It will probably get rolled over and given the timeframe this shouldn't create any short term pressure.
Indirect - lease obligations $6bil AUD. Ongoing item in the balance sheet.
Assets - tangible asset $5.4bil AUD, right of use $4.8bil AUD and intangible $6.1bil AUD. (June-2024)
This is an interesting one where I feel the tangible assets part is significantly undervalued because on the books tangible assets such as land and building is valued at cost.

3. New CEO - Natalie Davis. Before RHC worked at Woolworths and before that Mckinsey consultant. DEI hire? How will she perform? Big challenge ahead for her and the company (especially the company methinks). Have a listen of her appearance on the podcast retail therapy (with Paul Zahra. Its a good podcast for a feel of what she can bring to Ramsay.

4. Europe is a dog. Again this one really needs to be tackled full on to improve profitability or cut loose. Europe is a strange beast of regulations and labour law restrictions. My preference is for the company to cut it loose and pay down debt.

5. Healthcare is as defensive as they get. Ramsay is a leader in Aus private health care. One of the rare still in profit operators in Aus.

6. Demographics is the tailwind for healthcare in its operating geographies. Aus/UK has population growth. Europe has aging population. People are getting older and technology is ever evolving to allow people to live longer (increase revenue potential).

Value Proposition
Attractive cashflow/yield at $34. For a defensive stock the current yield is pretty good.
Under appreciated real estate portfolio.
Takeover - My gut feel is an oversea buyer will come to the party in 2025. This was the main reason I bought in. The cost to replicate the business is in my view significantly higher than the current market cap. AUD/USD exchange rate being as low as it is, this is the perfect time for a US buyer to strike.

Risks
Cost inflation.
Europe the dog.
New management.