MENU

Japara Healthcare Ltd (ASX:JHC) share price falls after broker downgrade

The Japara Healthcare Ltd (ASX: JHC) share price is currently down 2.1% after receiving a downgrade from a broker.

Japara is one of Australia’s largest aged care providers, along with Regis Healthcare Ltd (ASX: REG) and Estia Health Ltd (ASX: EHE).

Macquarie Group Ltd (ASX: MQG) downgraded Japara to neutral from outperform and cut the price target by 17% to $1.86, which is slightly higher than the current price of $1.84.

The aged care sector has gone through a tough time over the past couple of years with the government not increasing the aged care funding instrument (ACFI) in FY18. However, the ACFI will start to be increased again soon.

Japara also has to repay the capital refurbishment deduction that it was charging residents, which will cost around $4.65 million in total.

The government recently increased funding for home-care packages, to keep residents out of expensive acute care. This could be a negative for Japara in the long run if the government continues to focus funding on this area.

However, Japara believes there are several reasons to be positive about its future. Japara says it’s more cost efficient to fund aged care rather than hospital beds. Government funding for the industry is growing at around 5.2% per annum and could reach $14.6 billion by FY21.

The population of over-85s is projected to double by 2032 and residents will need more care as the average entry age increases. That’s why Japara is looking to add around 1,200 new operational places by the end of 2021.

Foolish takeaway

I can understand why Macquarie downgraded Japara, its FY18 result could be pretty uninspiring. However, by FY22 its profit could have grown significantly, which could make today’s share price of $1.86 attractive.

It’s a higher risk choice considering the government is heavily involved in the funding model, but I think an investment today could work well over the medium-term.

Another company looking to cash in on the ageing boom is one of these top stocks, that’s why it’s in my portfolio.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Tristan Harrison owns shares of JAPARA 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 Scott Phillips.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!