Good article in the Australian - Pulse Diagnosis Rosier Since...

Good article in the Australian -

Pulse Diagnosis Rosier Since Management Cleanout

PRIVATE equity's $5.50-a-share pitch for Healthscope (HSP, $5.19) may be seen as generous, but Pulse chief Ian Kadich reckons the buyers are motivated by more than the Florence Nightingale feel-good factor.

Kadich says the key to making the deal stack up financially is to hive off some or all of Healthscope's valuable property into a separate trust and enter sales and leaseback arrangements. This frees up capital, and for property investors the hospitals are favoured as stable, long-term rent payers. No doubt the buyers (reportedly TPG and Carlyle Group) have already done their sums and Kadich wonders why Healthscope (and Ramsay) hadn't thought of it.

But guess who's on to the idea? Hospitals minnow Pulse, with a $5 million sale and leaseback deal on its Gympie hospital. With a 1.5 per cent market share and a $14m market cap, Pulse doesn't exactly encroach on Healthscope/Ramsay territory.

As a stock, it has suffered from a chequered history of overgearing and overpaying for assets. Pulse's diagnosis is now much rosier since a management cleanout and a $6.2m capital raising. The Gympie sale will push debt to $6.5m, half the bank covenant-busting levels of 12 months ago. Pulse was cashflow negative to the tune of $1.02m in the March quarter, but Kadich says it has chalked up its first profit in March and should have a profitable current quarter.

Despite the debt scare, Pulse is eyeing further eastern seaboard acquisitions. On Kadich's reckoning, Ramsay owns 30 per cent of private hospitals, Healthscope accounting for 17 per cent and the not for profits another 30 per cent.

That still leaves 91 unaffiliated hospitals typically owned by an individual doctor or surgeon.

"A lot of them are reaching an age where they are seeking an exit," Kadich says.


http://www.theaustralian.com.au/business/opinion/pulse-diagnosis-rosier-since-management-cleanout-pulse-health-phg-55c/story-e6frg9lo-1225868387804