Japara Healthcare is one of Australia’s largest private sector enterprises in the aged care and retirement industry. JHC stock dropped 20% this year on the back of the government’s review of aged care funding. We are not overly concerned about the changing regulatory environment, as it is prudent for the government to protect the budget against the adverse impact of an ageing population. We feel the market overreacted given the growth profile of the indutry. Over the next 40yrs two million people will be in their mid-eighties, JHC's targeted demographic. In the shorter term, JHC estimates that the industry will need to provide 76,000 new beds, costing around $30 billion over the next 10 years. The industry remains fragmented with 2,600 facilities operated by 1,000 providers nationally; offering potential for consolidation. JHC trades on a P/E of 18x, a discount to the broader aged-care sector of 22x and pays a grossed up yield of 8%, at current levels we find the valuation of JHC compelling. Full note attached visit the website: (VIEW LINK)
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