Identifying a tailwind can be very useful for finding businesses that could make long term profit growth.
Some tailwinds aren’t really tailwinds, but the ageing population is certainly one of the best ones. Over the next 20 years the number of people aged over 65 is projected to grow by around 70%.
So how can we profit from this? Here are three ideas:
Ramsay Health Care Limited (ASX: RHC)
Ramsay is the largest private hospital operator in Australia, Scandinavia and France. It also has a major presence in the UK. It has been operating for more than 50 years, having been started by Paul Ramsay AO in 1964. It has 480 facilities across 11 countries with 77,000 staff, annually treating around 8.5 million patients.
More older Australians and Europeans should mean more patients needed some type of healthcare treatment at one of Ramsay’s hospitals over time.
Ramsay keeps diversifying its earnings to increase its contact points with patients, such as Ramsay Pharmacy.
An added benefit is that Ramsay has one of the best dividend records on the ASX, it has increased its dividend each year since 2000.
Japara Healthcare Ltd (ASX: JHC)
Japara Healthcare is an Australian aged care operator and owner. It runs communities across Australia which house more than 3,000 residents, making it one of our country’s largest providers.
The aged care Royal Commission has decimated the share prices of aged care operators and funding increases were limited before that.
But the Royal Commission is winding down and if new rules are put in place it could turn into industry consolidation with the small players simply not having the economies of scale to remain profitable.
Japara has a reputation of higher quality care and it has a pipeline of new facilities which will boost revenue and hopefully profit too.
Eureka Group Holdings Ltd (ASX: EGH)
Eureka is by far the smallest business of the three. It aims to provide quality and affordable rental accommodation for independent seniors and disability pensioners within a comfortable community environment. Eureka owns 30 villages, five of which are owned in a joint venture, and has nine villages under management, representing 2,119 units.
In FY19 the company generated a net profit of $6.8 million, up from a net loss of $0.28 million in FY18. It also generated an operating cashflow of $4.75 million (up 13%). It had strong occupancy levels of 91%.
This solid performance led to the “commencement” of a dividend to shareholders based on its confidence for the future.
So it has a dividend yield of 3.3% based on the 1 cent per share dividend, which is a solid start.
All three are interesting ideas. At the current price I’d say Eureka looks like the best value idea, although it is higher risk. Ramsay may be better for those looking for reliable returns.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.