Many investors will be unfamiliar with Japara Healthcare Ltd (ASX: JHC) due to it only being recently listed. Japara's initial public offering (IPO) occurred in April 2014 and has been one of the more successful of the recent batch to hit the ASX with the stock soaring as high as $2.70 on the opening day after floating at $2.
Results beat prospectus forecasts
This week, the residential aged care operator released its first set of results as a listed company and pleasingly for shareholders the company reported results ahead of its IPO prospectus forecasts. Revenues came in at $49 million and underlying net profit after tax at $6.9 million. It was a good result, however the market appeared unimpressed and sent the stock down to a new low of $2.17.
In contrast, leading private hospital operator and market darling Ramsay Health Care Limited (ASX: RHC) reported double-digit earnings growth and investors cheered the stock higher this week.
Outlook remains positive
Japara's portfolio is running at an occupancy rate of 95.2% with an average EBITDA per bed of $21,755 and average bond value of $268,000. Japara has also recently announced the $39.5 million acquisition of a portfolio which comprises 258 aged care places and 41 independent living apartments.
Most important of all however are new rules which create flexibility to allow Japara to set residential fees for accommodation and 'hotel type' specialised services from 1 July 2014. This regulatory change should produce a step change in earnings for the group. At the results release, management provided guidance for an increase in EBITDA from $40 million in FY 2014 to $48.9 million in FY 2015.
The better buy
While the growth outlook for Ramsay continues to look good it's hard to believe this growth isn't fully reflected in its share price. In contrast, there are reasons to believe an investment opportunity could be appearing with Japara.
