I think hso should trade at a discount given the quality of its...

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Just_a_guy

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25/10/18

18:29

Post #: 36263387
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Originally posted by sebbie ↑

Originally posted by BullsLife
The offer price may be a low ball offer but your discount rate is too low. 3.2% does not take into account HSO's credit rating for example and seems to be a really low figure for corporate debt.
Dear BullsLife,

You are correct in stating that a discount rate of 3.2% is low and expected return on invested capital should be higher. In my basic back of napkin valuation, however I asssume no growth ( not taking into account future contributions by Northern Beaches Hospital or other capex as well as admission growth.) According to government statistics private hospital growth has been about 3.5% and analysts predict this growth will continue ( maybe at a slower rate). I never use grow figures in my valuation has they are just hypothetical. However, I do assume steady and reoccuring cash flow due to the very defensive and long term nature of the business.

The 3.2% is just taken as the time value of money and considers the oppotunity cost of putting your cash in long term bonds. I understand everyone has different expected returns for their capital so I cannot assume this.

A current ( I stress current) valuation of $2.60, I believe is a conservative measure of the business intrinsic value.

I hope the board has done their due diligence and not to be bullied to the detriment of small shareholders.

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I think hso should trade at a discount given the quality of its board. I think it rated as worst board in the asx 200 in a recent survey and I agree.

HSO Price at posting: $2.15 Sentiment: Hold Disclosure: Held
1 Upvote

0 Great analysis

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