Pulse Check on Ramsay

I’m hopeful the worst of the sell off is behind us now. This weeks media around Healthscope had a knock on effect to the Ramsay sp and seemed to return some confidence to the private hospital sector.

Recent headlines around the private hospital sector being ‘uninvestable’ weren’t great for sentiment. The Healthscope development will hopefully settle things down a bit. Let’s hope the snoozers at Ramsay can negotiate some better outcomes with the insurers as well.

In any case Ramsay has to be looked after to some extent by the government. I’m generally not a fan of government interference…..but the health sector is such a ‘messed with’ sector I make an exception.

1.The Medicare levy is simply a government tax that underpins the whole system.

2.The government penalises through the tax system people on high incomes who don’t take out private health insurance …..in doing so it props up the private health insurance sector while at the same time regulating its premium increases.

It’s hardly free market capitalism.

So I’m not opposed to the government pulling a few levers that helps the private hospital sector (and RHC obviously)…and I think the media around the struggles of the private hospital sector has the government on watch.

There are parallels here with another sector that has government paws all over it - the education sector. The private schools and the public schools. The government is locked into a finely balanced system where they have to support private schools to a certain extent (with taxpayers money) because if the private education sector fell over the government simply couldn’t cope with the consequences.

The same goes with Ramsay - these 70 odd hospitals are an integral part of the health system in this country. The government can’t afford them (and other private hospital operators) to fail and overwhelm the public hospital system. Ultimately the government will have to pull a few levers. It might also be more willing to back mergers/acquisitions and takeovers in the space because of the circumstances in the sector.

RHC bounced 5% off its mid week lows. $38.70 (last Wednesday’s low and 10yr low) is a dismal state of affairs however I’m sticking with my holding - I think Ramsay is oversold and will trade higher (eventually) from here.