Primary Health Care Limited (ASX:PRY) announces $250m capital raise

Primary Health Care Limited (ASX: PRY) announced today a series of strategic growth initiatives and a potential acquisition that will be funded by an underwritten $250 million pro-rata entitlement offer of 1 for 5.21 new shares at $2.50 per share.

The offer price is 21% lower than the latest Primary Health Care share price which closed at $3.20 last Friday.

The shares have now been placed into a trading halt until Wednesday 22 August.

Growth initiatives

The capital raised will be used to fund various growth initiatives including a $140 million medical centre investment program and a $100 million pathology investment program.

The medical centre investment program is expected to modernise 52 facilities and generate a 20% return on capital over the next three years while the pathology investment program is expected to deliver a net benefit of $20 million per annum once fully implemented.

$140 million acquisition

Primary Health also announced that they are in exclusive negotiations to acquire a leading day hospital operator.

The investment, which is subject to final negotiations and due diligence, could require a potential investment of $140 million over three years with an upfront payment of $75 million.

The acquisition, if it proceeds, would be at an EBITDA multiple of 20x based on the company’s expected FY 2018 EBITDA of approximately $7 million.

Primary Healthcare indicated that their largest shareholder, Jangho Group, are supportive of the initiatives and have committed to subscribe 100% of the offer.

What now?

Whilst there already had been speculation of the capital raise, the announcement overshadowed the release of Primary Health Care’s FY 2018 results which showed a 5% increase in revenue to $1.7 billion, underlying profit of $92 million (consistent with FY 2017) and full year dividends of 10.6 cents per share.

Investors will now have to consider whether it’s worth participating in the entitlement offer or whether that money is better spent elsewhere.

Whilst long-term trends (including an ageing and growing population) could benefit the company, the Australian healthcare market has been experiencing tough trading conditions lately with shares in other operators such as Healthscope Ltd (ASX: HSO) and Ramsay Health Care Limited (ASX: RHC) all down by double digits from recent highs.

I think that whilst investors risk getting diluted significantly, there are better opportunities out in the market right now. A good place to start might be this list of best shares to buy right now compiled by our team of experts.

4 Stocks for Building Wealth After 50

Renowned investor Scott Phillips just released a brand-new report detailing his 4 favourite stocks to buy right now.

And I don’t know about you, but I always pay attention when some of the best investors in the world give me a stock tip.

This is your chance to get in at the very beginning of what could prove to be very special investments.

Click here to get started today!

Motley Fool contributor Kevin Gandiya has no position in any of the stocks mentioned.

You can find Kevin on Twitter @KevinGandiya.

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.

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…


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!