An investment team are very excited about the ASX healthcare share we're going to look at.
The ASX includes businesses from various healthcare sectors, including vaccine makers, private hospital operators, private health insurance providers, and device makers.
Aged care operator Regis Healthcare Ltd (ASX: REG) is one business worthy of attention, according to fund manager Blackwattle's small-cap investment team.
The company provides services to more than 9,000 older Australians through residential aged care homes, home care service hubs, day therapy and respite centres, and retirement villages.
The ASX healthcare share had a strong August, with the Regis share price increasing by 22% over the reporting season month. It reported revenue from services increased 29.9% to $1.01 billion, underlying operating profit (EBITDA) grew 28.7% to $107.2 million, and underlying net profit grew 24.7% to $35.6 million.
While the result was solid, Blackwattle is most excited about the outlook.
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Improved outlook
The fund manager said the rise in the Regis Healthcare share price reflected a "significant change in the outlook for operators in the aged care industry."
Providing care and funding for aged care is a long-term issue for Australia – Blackwattle said governments have historically "kicked the can down the road for the next government to deal with".
Blackwattle then said:
But with the first baby boomers now moving into care the consequence of insufficient investment is upon us. The current government has no choice but to increase the funding of aged care operators to encourage the buildout of more beds. We believe the next decade is likely to be a golden era for aged care operators.
The Regis Healthcare share price jumped another 11% over the two days following the government's announcement that new aged care entrants will make larger means-tested contributions.
Regis is planning for growth
The ASX healthcare share expects to benefit over time from the "ageing population, improved workforce availability, additional government funding and strategic growth initiatives".
It plans to use its balance sheet and debt facility to pursue more acquisitions and greenfield development sites to grow shareholder value.
For example, in December 2023, it completed the acquisition of CPSM, which included five residential aged care homes in southeast Queensland with 644 beds for $75.2 million. The homes had an average occupancy of 97% in FY24.
The company also has a number of planned greenfield sites. The 112-bed Camberwell (VIC) site is in development, while the 123-bed Toowong (QLD) site is due to commence construction soon.
Future greenfield development locations include the 99-bed Belrose (NSW) and 101-bed Carlingford (NSW) sites, with development approval in place for both projects.
Overall, the ASX healthcare share believes there is insufficient new supply coming onto the market to meet the expected demand, which could push occupancy higher.
