Now could be a good time to add Japara Healthcare Ltd (ASX: JHC) to your portfolio, or at the very least to your watchlist, with the aged care operator's shares trading near an all-time low.
After jumping 9.3% yesterday, shares of the aged care operator have retreated 3.8% to be trading at $2.04. Since its inception into the ASX in April this year, the stock has traded between a low of $1.86 and a high of $2.79. At its current price, it boasts a market capitalisation of roughly $550 million.
The company's shares came under heavy selling pressure last week as a result of a review of its payroll, which revealed that it had materially underpaid some employees. While an auditor has been appointed by the company to determine the full extent of the issue, Japara said that its best early estimate suggested the problem could amount to $5 million. Despite this, it still confirmed previous earnings guidance for FY15, with the majority of the missed payments occurring prior to the company listing on the ASX.
Taking a longer view of the company's prospects however, Japara could be a good bet. With Australia's population ageing, the Aged and Community Services Australia group believes the country will need a further 82,000 aged care beds by 2020. The government recently issued 465 new bed licenses to Japara which should improve the company's growth prospects in the coming years. Regis Healthcare Limited (ASX: REG) was also issued new bed licenses while Estia Health Ltd (ASX: EHE), a freshly listed company, missed out.
According to Morningstar's estimates, Japara is tipped to announce earnings of 11.2 cents per share in 2015, which would put the stock on a forecast P/E ratio of just 18.2 times. Considering the population trends and Japara's opportunity to capitalise on them, that seems like a reasonable price to pay.
