Will Japara Healthcare Ltd’s healthy profit result satisfy investors?

Credit: Pictures of Money

What: Residential aged care provider Japara Healthcare Ltd (ASX: JHC) has reported its interim results for the six months ending December 31 this morning.

Japara is one of three recently listed operators in this sector, all of which are benefitting from the tailwind of an aging population. The other two businesses are Regis Healthcare Ltd (ASX: REG) and Estia Health Ltd (ASX: EHE).

So What: Japara’s results were solid with revenue climbing 13.4% to $155.9 million, earnings before interest, tax, depreciation and amortisation (EBITDA) gaining 10.2% to $28.1 million and net profit after tax (NPAT) up 2.5% to $16.2 million.

Helping drive top and bottom line growth was a strong operational performance with Japara reporting average occupancy of 94.2% and ongoing cost discipline.

Now What: Japara’s current development pipeline should see an additional 900 places delivered over the next four years.

Guidance was reaffirmed with the company forecasting full year earnings to exceed last financial year with the recent acquisition of Profke expected to contribute operating EBITDA of over $4 million.

Shareholders can also look forward to a fully franked dividend of 5.75 cent per share (cps), which is up on the prior corresponding period’s 5.5 cps distribution.

Given the stock is trading on a full year forecast price-to-earnings multiple of around 24 times however, Japara would look relatively fully priced at current levels and investors may find that there is better value elsewhere.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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