Since hitting the ASX boards at $1.00 per share in January of this year, the Zenitas Healthcare Ltd (ASX: ZNT) share price has gained a massive 23%.
Despite this strong gain I don't believe it is too late to invest in the home care and health services company.
Here are three reasons why I think it is a great buy and hold investment option:
Strong demand for healthcare services.
Much like private hospital giant Ramsay Health Care Limited (ASX: RHC), I believe Zenitas is in a great position to profit in the long-term due to increased demand for healthcare services as a result of Australia's ageing population, longer life expectancy, and increased chronic disease burden. Zenitas has five businesses providing services across allied health, home care and primary care. Through these businesses the company operates 54 clinics nationally with approximately 760 healthcare professionals.
Growth through acquisitions.
Management has added to its network through the acquisition of two more businesses in the last two months. The first is national home care business Nextt Care which provides personalised care and support services across NSW, Victoria and Queensland. This transaction is expected to be highly accretive to earnings. The second business is Dimple, Australia's largest aged care podiatry provider with an estimated 24% market share. Pleasingly, this transaction is also expected to be highly accretive to earnings. I believe the company's balance sheet will allow for more acquisitions of this nature over the next 12 months should there be an appropriate opportunity.
Great value.
In FY 2017 Zenitas delivered underlying earnings before interest, tax, depreciation, and amortisation of $7 million. This was 27% higher than in FY 2016 and 6.1% higher than its prospectus forecast of $6.6 million. Ultimately this led to the company reporting pro forma earnings per share of 7 cents, or 11 cents when including the Nextt Care and Dimple businesses. Based on the latter, Zenitas' shares are changing hands at just over 11x earnings at present. I believe this is very cheap for a company which expects to deliver organic earnings growth of between 7.5% and 10% in FY 2018.
