Private hospital operator Ramsay Health Care Limited (ASX: RHC) announced it is in talks to buy up to a 57% stake in Générale de Santé, a leading French private hospital operator. Together with French insurer Crédit Agricole Assurances, the consortium plans to buy an 83.43% shareholding in total.
Last December, Ramsay Health Care acquired the French psychiatric hospital group Medipsy, which has 30 hospitals and annual revenues of €150 million. Since 2011, it has made three acquisitions in France and currently operates 40 facilities there. Générale de Santé operates 75 facilities and centres with annual revenues of about €1.7 billion.
Why has Ramsay Health Care been a winner for investors and what can investors look forward to?
Share price gains
Since early 2010, the stock has climbed steadily from about $12 to $45.59, or 279%. The company has been more like a fast grower than a defensive stock that healthcare companies usually are. During that time, the S&P ASX All Ordinaries Index (ASX: ^XAO) only gained 19.7%.
Growing private hospital network
It operates 151 hospitals worldwide, recently expanding into France and Asia. It sees the huge growth potential in countries like China that has a large, yet aging population and a rising middle class. It has hospitals in Indonesia, a densely populated country, as well.
Health care is universal in application, so it can take its successful model and transplant the company's expertise and business structure.
Financial Performance
Ramsay Health Care is growing like a chain restaurant or store, generating higher revenue and earnings. Since 2009, underlying net profit has more than doubled to $275.4 million.
Return on equity is usually in the mid to high-teens. In 2013, annual dividends rose from 60 cents per share to 70.5 cps. In the first half of FY2014, underlying net profit was up 15.8%
Outlook
The company is expecting FY2014 net underlying profit and earnings per share to increase 16%-18%.
For investors looking for fast growing stocks in housing, financial services or retail, Ramsay Healthcare could satisfy their need for strong portfolio returns. The company plans to expand more and if it can enter the Chinese healthcare market, the prospects may be good and long lasting.
