Is the Ramsay Health Care Limited (ASX: RHC) share price a buy amid the coronavirus pandemic and the share market selloff?
Ramsay Health Care is an interesting one because it runs private hospitals. It's one of the biggest private hospital businesses outside of the US with its networks in the UK, Europe and Australia.
Since 19 February 2020 the Ramsay Health Care share price has fallen just over 25%. That's pretty steep for what's meant to be one of the most defensive businesses on the ASX.
But it shouldn't be too surprising – this is a healthcare problem and it affects Ramsay directly.
On 18 March 2020 the company announced that it was withdrawing its guidance after the French government cancelled all non-urgent surgery to help provide capacity and services in France.
On 26 March 2020 the company responded to the federal government's decision about deferring elective surgeries. The company said it would continue to provide medical services and urgent surgery.
On 31 March 2020 the company referred to the letter received from Greg Hunt, the Minister for Health, where he said that all states and territories will complete private hospital COVID-19 agreements in the coming days which will outline the integration plan and activity requirements. The federal government will provide 50% of funding for this activity.
The federal government also said it would guarantee the viability of private hospitals with the expectation that things will go back to normal after the pandemic is over.
With all that in mind, is Ramsay a buy?
Whilst Ramsay may not be doing its high-margin surgeries at the moment it's clear that its hospitals are being utilised, or going to be utilised, in the coming weeks (and months?) because of the coronavirus.
I expect Ramsay's earnings won't quite be as good as expected in FY20 or FY21, but it will still be earning a decent amount. Perhaps enough to keep its excellent dividend record going.
It's currently trading at 19x FY22's estimated earnings. At this price I think it could be a decent defensive buy, but there are other shares I'd prefer to buy for my portfolio.
