Macquarie upgrades Ramsay Health Care on Healthscope 'distress'
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The news: Macquarie has upgraded its rating on private hospital operator Ramsay Health Care, expecting the company to benefit from the potential sale of its Europe subsidiary Ramsay Sante as well as issues at Brookfield-owned rival Healthscope.
The numbers: Macquarie upgraded Ramsay from 'neutral' to 'outperform' and increased its target price from $37.70 to $38.65. Ramsay shares last closed at $33.40.
The context: Macquarie analysts noted that fellow hospital operator Healthscope has been in financial distress due to high debt levels, rental repayments, disputes with health insurers and inflated operational costs.
They said Healthscope's problems offer Ramsay a "rare opportunity" to expand its domestic footprint and improve its margins in Australia.
The analysts also flagged that the potential sale of Ramsay Sante remains a "near term catalyst", possibly offering a valuation uplift of around 6% to its current share price.
The source: Macquarie research
