Healthscope Ltd falls 2.75% on news it may divest its Asian pathology

The Healthscope Ltd (ASX: HSO) share price has fallen by 2.75% on news that it may divest its Asian pathology business according to the AFR.

Healthscope is Australia’s second largest private hospital operator and could be one of the biggest winners from the expected rise in patients due to Australia’s ageing demographics.

However, there’s more to Healthscope’s business than just private hospitals in Australia. Healthscope also has a pathology business which operates in Malaysia, Singapore and Vietnam.

The AFR reports that UBS is helping Healthscope with part of the review to consider if Healthscope should sell its Asian pathology business.

Asian healthcare companies are supposedly interested and some interested suitors include Fullerton Healthcare and IHH Healthcare.

If Healthscope were to sell its Asian subsidiary it would hope for a selling price of around $200 million.

If the sale went ahead it’s expected that most of the funds would be redeployed into expanding the Australian private hospital business segment, which management see as the key source of future growth.

I actually think that Healthscope has a good long-term future thanks to its expansion plans and the ageing demographics that Australia faces. Healthscope’s model of running a joint public and private hospital, such as Northern Beaches Hospital in Sydney, could be successful in the future.

Foolish takeaway

Healthscope is currently trading at 19x FY18’s estimated earnings, which isn’t cheap. If Healthscope were to fall another 10% to 15% then I’d be interested in buying more shares but I’m going to hold off for now. I think the market crash presents better opportunities elsewhere.

For example, I think these top shares look like good value after today’s crash.

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Motley Fool contributor Tristan Harrison owns shares of HEALTHSCPE DEF SET. 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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