UBS notes larger private hospitals and not standalone day hospitals dominate when it comes to day stay services. The broker highlights according to data from 2019, of the circa $10bn paid by private health insurers to private hospitals, about 21% went to fund day stays out of which the share of day admissions within private hospitals was about 16%.
The broker also notes incentives for sector consolidation are not clear. Also, insurer rates for the same procedure may be lower than those achieved by larger groups like Ramsay Health Care.
Without a material change to incentives for operating in the standalone market, the broker does not think it wise for Ramsay to increase its exposure in this subsector. Capital may be better spent improving the day service offering within its existing large hospitals, suggests UBS.
UBS retains its Neutral rating with a target price of $71.20.
Sector: Health Care Equipment & Services.
Target price is $71.20.Current Price is $64.75. Difference: $6.45 – (brackets indicate current price is over target). If RHC meets the UBS target it will return approximately 9% (excluding dividends, fees and charges – negative figures indicate an expected loss).
