It's been a topsy-turvy year for shareholders of private hospital operator Pulse Health Limited (ASX: PHG). The company's shares are down 21% for the year despite rising 30% last week on the back of a takeover offer from Healthe Care Australia.
The offer, of 47 cents per share in cash, is non-binding and indicative as well as subject to due diligence, which most likely explains why Pulse's share price remained at only 41.5 cents at the close on Friday.
A Tough Year
As is so often the case, the takeover offer has come after a year where operational performance suffered and pushed the share price lower. Pulse's share price plunged 30% in a day back in May when management downgraded 2016 earnings guidance by up to 20%.
The shares fell as low as 20 cents, having previously traded as high as 70 cents back in 2014, before recovering significantly to the low-30's in August when earnings came in at the high end of the revised guidance.
Where to from here?
Pulse made a number of acquisitions in the last 12 months to take its number of sites to 13 – including eight hospitals and five day surgeries across Australia and New Zealand. Being much smaller than Ramsay Health Care Limited (ASX: RHC) and Healthscope Ltd (ASX: HSO) means that operational issues at individual sites will impact earnings more than the big boys – making it a riskier investment.
Prior to the offer, Pulse was forecasting an increase in earnings before interest, tax, depreciation and amortisation (EBITDA) from $9.1 million in 2016 to $13.5 million in 2017. If the takeover doesn't proceed then the share price will probably fall, but investors will be left with a private hospital operator poised to grow earnings strongly, while there could be another 10-15% upside in share price if the takeover does go ahead.
