Why Primary Health Care Limited (ASX:PRY) shares tumbled lower today

It was a disappointing start to the week for the Primary Health Care Limited (ASX: PRY) share price.

The healthcare company started the week with a 4% decline to $3.15.

Why did Primary Health Care’s shares tumble lower today?

On Sunday the AFR tipped Primary Health Care as one of a number of companies that could tap the markets for funds this month when it releases its full-year results.

The report suggests that the healthcare company could be looking at a $250 million capital injection to help it with its transformation goals.

The company last raised equity in September 2009 when it pulled in $180 million through a share placement.

Management responded to the speculation this morning, stating that: “Primary continues to review its capital management options and potential acquisition opportunities in conjunction with its strategic investment plans.”

Before adding that “Results for the year ended 30 June 2018 will be announced on Monday 20 August 2018 when further details regarding the company’s strategy and outlook will be provided.”

I suspect that the AFR is spot on with this one and expect to see a capital raising of some kind next week when its results are released.

Speaking of which, Primary Health Care’s management also revealed that its underlying net profit after tax is expected to come in at the low end of its guidance range of $92 million to $97 million. This will potentially be flat on FY 2017’s underlying net profit after tax of $92.1 million.

Should you buy the dip?

I would suggest investors stay clear of Primary Health Care for the time being. I don’t think its shares represent value for money right now and feel investors can get more for their money elsewhere on the share market.

Especially given the tough trading conditions being experienced in the Australian healthcare market. Because of this, the same applies for industry peers Healthscope Ltd (ASX: HSO) and Ramsay Health Care Limited (ASX: RHC), which I expect to struggle over the coming year.

Instead of these shares I would consider this top dividend pick which is growing strongly and shows little sign of slowing.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ramsay Health Care Limited. 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.

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