Analysts issue damning Healthscope slapdown Scott Murdoch,...

Analysts issue damning Healthscope slapdown Scott Murdoch, Bridge Carter 12400AM June 29, 2018

Healthscopeʼs prospects have been hammered by Morgan Stanley analysts who say there is no “compelling reasonʼʼ right now to own the company, which remains at the centre of an expected takeover tussle.

The companyʼs share price experienced a rare positive day yesterday when its stock rallied by 2.5 per cent after DataRoom revealed a Chinese consortium was looking at the asset.
A state-owned investment company, thought to be Beijing Capital Investments, is putting together a surprise bid to buy Healthscope.

Healthscope stock closed yesterday at $2.24, well down from the peak of $2.58 it hit when it received takeover offers from a private equity consortium led by BGH at $2.36 and then Brookfield at $2.50.
Both bids were rejected by the Healthscope board, which also cut its earnings guide for the full year from $400 million to $340m. There is growing suspicion now that even that reduced target might not be met.
Sources yesterday said the performance of Ramsay Health Care, which last week also cut its earnings guidance and indicated that provisions would be made for its British businesses, showed just how tough it was currently for private hospitals.
Ramsayʼs share price has fallen 15 per cent in the past few weeks and Healthscopeʼs stock is expected to plunge back into the $1 range if takeover talk subsides.
A miss on the earnings front when the numbers are published in August is also expected to prompt investors to step up pressure on chairman Paula Dwyer and chief executive Gordon Ballantyne.
The pressure on Healthscopeʼs earnings was highlighted yesterday in a tough Morgan Stanley report in which analysts said there was no “compelling reasonʼʼ to hold the stock until its key Sydney Northern Beaches Hospital comes online later this year. The company has invested about $1.6 billion in growth projects since it listed and most of that is in the publicprivate hospital.
The company is due to receive a payment, tipped to be as much as $400m, from the NSW state government once the hospital opens.
In a note, Morgan Stanley said: “With few positive catalysts over the next 12 months, we see no compelling reasons for investors to own Healthscope before the one year earnings effect of Northern Beaches is known.”

If a Chinese bid materialises, it will not be the first time Healthscope has come under the microscope of mainland investors. DataRoom understands that Fosun, Anbang and HNA had looked at the company but did not lodge bids.
The exclusivity deal between BGH and AustralianSuper remains in place until October and the two parties are understood to be monitoring Healthscopeʼs performance.