In interesting news on Australian stocks, shares of Ramsay Health Care Ltd (AU:RHC) gained 7.3% today despite reporting a massive decline in profits and a dividend cut. For the six months ending December 31, 2023, the hospital operator’s profit from continuing operations fell 39.6% year-over-year to AU$135.5 million, excluding a one-time gain on sale (AU$618.1 million) of its Asia-focussed joint venture with Malaysia’s Sime Darby. Investors seemed to have reacted positively to the company’s guidance about achieving full-year net profit after tax growth.
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Details About Ramsay’s H1 FY24 Results
Notably, Ramsay’s board of directors slashed the interim dividend by 20% to AU$0.40 per share. On the brighter side, Ramsay reported a 10.6% year-over-year increase in revenues to AU$8.16 billion. Meanwhile, EBITDA (earnings before interest, tax, deprecation, and amortization) from continuing operations rose modestly by 2.9% compared to H1 FY23.
The hospital industry is pressured by mounting costs (wages and medical consumables) owing to the inflationary environment and the resultant decline in hospital treatments and demand patterns, as tariffs increase. Ramsay is undertaking a strategic review of its global hospital portfolio and divesting those units that seem unscalable. At the same time, the company aims to expand investments in high-growth areas to unlock maximum shareholder value.
For Fiscal 2024, Ramsay forecasts mid-single-digit top-line growth, slow margin recovery owing to ongoing inflationary pressure, and increased investment in digital and data. Also, the company hopes to maintain a dividend payout ratio between 60% to 70% of statutory net profit.
Is Ramsay Health Care a Buy?
Following the results, Citi analyst Mathieu Chevrier reiterated a Hold rating on RHC shares with a price target of AU$51 (6.9% downside potential). Chevrier noted that Ramsay’s outlook for Foscal 2024 was below expectations owing to cost inflation and higher interest expenses.
On TipRanks, RHC stock has a Hold consensus rating based on one Buy and four Hold ratings. The Ramsay Health Care Ltd share price forecast of AU$58.21 implies 6.3% upside potential from current levels.
