Estia Health will make its debut on the Australian Securities Exchange on Friday 5 December, joining rivals Japara Healthcare Ltd (ASX: JHC) and Regis Healthcare Limited (ASX: REG) which have also floated their shares this year.
Estia is one of Australia's largest aged care operators with 3,203 beds and 39 facilities, up from just 13 facilities in October 2013. The facilities are spread between Victoria, South Australia, New South Wales and Queensland while a contract exists for a further 410 places and five facilities, which are all expected to be complete by February 2015. While some of the proceeds from the sale will go towards paying down debt, you can expect many more acquisitions to be made, too.
The company's major shareholder, Quadrant Private Equity, will retain around 20% of the company after it is listed. Estia will become the fifth company that Quadrant has listed on the ASX in the last 18 months, with the others being Burson Group Ltd (ASX: BAP), Virtus Health Ltd (ASX: VRT), iSentia Group Ltd (ASX: ISD) and APN Outdoor Group Pty Ltd (ASX: APO).
While the prospectus provided an indicative price range for the shares as being between $5.17 and $6.96 (with between 75.9 and 146.8 million shares on sale), The Australian Financial Review has reported the shares are being offered at $5.75, or a multiple of 21-times forecast net profit. This would give the company a market value of $1.035 billion as well as a forecast dividend yield of 4.8%, which is certainly attractive in today's low interest rate environment.
What should investors do?
Investing in companies like Estia could be a great way for investors to benefit from Australia's growing and ageing population. Indeed, recent statistics by the Australian Bureau of Statistics showed that the life expectancy for both Australian men and women has risen above 80 years, indicating a favourable trend for Estia.
Investors may also find an investment in Estia to be significantly cheaper than an investment in Medibank Private (ASX: MPL), which is listing on Tuesday November 25. While Medibank should also benefit from the ageing population, there is an enormous level of hype surrounding the stock and the shares are unlikely to go cheap.
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