Primary Healthcare (ASX:PRY): The Good, The Bad and The Ugly

The AFR is reporting that multiple banks are running the slide rule over PRY as a potential leverage buyout candidate. While the idea is not new, it appears to have come into greater focus now with the recent appointment of CEO Mr Peter Gregg along with positive changes to the company's account practice for healthcare practices. The good... Conceptually, we believe the move would make sense, given attractive sector dynamics underpinned by a long-term structural growth story and a proven track record of private equity plays across the space. The bad... Fundamentally, we view the possible private equity move as challenged, given modest B/S leverage, ongoing regulatory risk and at model that is not that amenable to breaking up the parts. While a private equity play for PRY has been on the cards for awhile and would play into the sector's favourable thematics, it is not without challenges. That said, given the renewed emphasis and c5-8% upside to current trading levels based on our EV/EBITDA valuation, we would suggest investors consider adding to positions or locking-in a short term trade.