Collected Wisdom

Ramsay Health Care, Monadelphous, Oceanagold and APA Group.

Summary: Tariff cuts to French private hospitals sees analysts reduce earnings outlooks for Ramsay Health Care (RHC), Monadelphous (MND) gets some re-rating after its first half result, Oceanagold (OGC) is considered to be fully priced on consensus views, analysts are not reacting to speculation regarding ACCC comments on rent pricing in their reports on APA Group (APA).

Key take out: Ramsay Health Care’s French operations contributed 53.6 million euro to their $426 million EBIT, and French healthcare changes are contributing to a downgrade in analyst’s earnings outlooks.

Key beneficiaries: General investors. Category: Shares.

This is an edited summary of the Australian investment press: It includes investment newsletters, major daily newspapers and broker reports. The recommendations offered represent the views published in the other publications and may not represent those of Eureka Report. This article is general advice only which has been prepared without taking into account your objectives, financial situation or needs. Before acting on it you should consider its appropriateness, having regard to your objectives, financial situation and needs.

Ramsay Health Care (RHC)

Last week, the French government announced a tariff cut for private hospitals of 2.15 per cent. The latest cut follows a 2.5 per cent cut in 2015. This change stings the health care group just as the 2014 French acquisitions were finally integrated well.

Ramsay’s French operations contributed €53.6 million to the group's overall EBIT of $425.9m. This latest cut has seen analysts across the board reduce their earnings outlooks. Also on the chopping block for analysts was the recommendation call with a number downgrading Ramsay to a hold. A number of analysts commented on the downside risk now becoming more prevalent for the group.

The average 12 month price target has remained relatively flat over the last year with the share price bouncing around. Currently the average is $67.45 with the share price at the time of writing sitting at $62.97. The most pessimistic outlook for RHC is $57.44 and the most bullish is set at $73.79.

Investors are generally advised to hold Ramsay Health Care at current levels.

Monadelphous Group Limited (MND)

Now the dust has settled after reporting season, a number of analysts are conducting sector reviews and revisiting calls. With its share price rally after the group reported in mid February, mining service company Monadelphous is one of those stocks analysts have run the ruler over again.

The market received MND’s 1H16 report well given it showed the group was able to cope during a time of large sweeping capex cuts in the sector. MND was able to maintain margins and diversify outside of the mining services space.

Given the challenges that remain in the space for MND and co, analysts with buy calls have now downgraded to hold. This is based purely on the rerating the stock received after the report and closing out any further medium term upside potential.

The current 12 month average price target for MND is $6.05 with the lower limit coming in at $5 and the upper at $7.66. At the time of writing the share price was $7.01.

The analyst calls are split right down the middle with six calling MND a hold and six calling it a sell.

Oceanagold Corp (OGC)

The Canadian based dual listed gold producer held an investor day last week (March 10) to update analysts and shareholders. The main highlights for analysts were management's optimism in expanding the life of OGC’s key mines, the never-ending goal to be a low cost producer and analysts remain comfortable with OGC’s debt levels.

OGC management also issued guidance on production with the mines expected to produce between 385,000 - 425,000 ounces of gold and between 19,000 - 21,000 tonnes of copper. All this is expected to come at the all in sustaining cost of $700 - $750 per ounce.

As with a number of low cost gold producers, the OGC share price has increased above the twelve month price targets of most analysts. The consensus clearly has OGC as a hold due to the stock being fully priced in most people's eyes. Recently though the share price has begun to track back towards the average 12 month price target.

At the time of writing the share price for OGC sat at $3.47, just a shade below the average twelve month price target of $3.49.

Investors are generally advised to hold Oceanagold Corp at current levels.

APA Group (APA)

APA Group came under some pressure last week when ACCC chairman Rod Simms gave a speech at a conference in Sydney. During the speech, Sims commented: “We may need to seek alternative forms of regulation to address monopolistic pricing and rent transfers.”

The ACCC is due to submit a report to government on the issue in April. What does it mean for APA Group in the short term? Existing contracts would not be impacted and APA’s agreements with ORG, STO and AGL which make up approximately 30 per cent of the group's EBITDA and are in place for a minimum of 13 more years.

Analysts, although putting out notes on the ACCC commentary, have not been reacting to the speculation. The 12 month price target remains $9.28 and the current share price sits just below at $8.23.

Investors are generally advised to hold APA group at current levels.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles