Aged Care – regulatory environment masks the opportunity

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The industry remains highly fragmented despite the recent acquisition activity (Regis acquiring the Masonic portfolio and Japara acquiring the Profke portfolio). The changes announced will put additional pressure on the business models of all operators, but in particular, the weaker operators will become less viable. This provides an opportunity for the well-run operators like Regis and Japara. We believe the current share prices of both providers account for the uncertainty surrounding the budget cuts and we can see share prices moving up by approximately 10% into the August reporting season. Both companies offer a reasonable yield of approximately 4% fully franked. We recommend clients add either Japara or Regis to their portfolios.

Article contributed by Morgans Financial:  (VIEW LINK)