Hi Madam, As you know full well, comments on future performance are necessarily subjective even when backed up by statistics. Hence, it is one person's opinion vs another's. I acknowledge that statistics indicate that RHC is expensive at present, as you indicate. There are two facets to this, of which you acknowledge one, but ignore the other. Firstly, RHC's Australian investments have been very good and operational performance has been under-pinned by Govt policy and private health insurers willingness to meet increased fees. Secondly, investments in Europe, albeit more recent, are not performing to the same level, and again Govt policy is a significant factor.
You question me as to political action that may impact. Fair enough, but everyone needs to recognise that this is a subjective matter and based on opinion. I am not hard nosed on this since I only intended flagging a potential risk factor. I judge that any pressure on RHC margins in Australia will come in the first instance from the private health funders and not the Govt. The Govt of the day responds to both public pressure and invested interests. Look at how the inquiries into the banking industry and now the aged care industry have occurred. The banks are a very powerful lobby and strongly fought an inquiiry only to be overcome in the end by the degree of public opinion in the face of now proven mis-behaviour. The aged care inquiry is yet to be finalised but again it is public outrage that has caused it. If private funders of health care find resistance to increased charges from the public and they perceive that providers are receiving margins well in excess of similar providers overseas, will the funders not increase pricing pressure on their providers? If RHC delivers more efficient services and beats "industry norms" then well and good. Otherwise, they will be pressured. A change in Govt that results in a move away from private health insurance will almost certainly result in funding pressures, as is now experienced in Europe by RHC. This is separate from any pressure in Australia resulting from public perception of "over-pricing" in the health care industry but nevertheless closely linked because policy as to government involvement with health care is just that - policy rather than reaction. I guess there is an open question at present as to whether RHC can make its Europe (incl. UK) operations more efficient and hence profitable. Time will tell. RHC has been the beneciary of fee increases from insurers in Australia but the question/risk that I raise, is how much further? Regardless of any future insurer/Government action, RHC is still facing very slow growth in overall profitability and what is going to change going forward? It is being priced for growth but after two years of slow growth should we rely on that? Will Europe perform to Australian metrics?
RHC Price at posting:
$64.44 Sentiment: None Disclosure: Not Held
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