Regulatory change to benefit Sonic Healthcare

Andrew Stanley

Ralton Asset Management Limited

In a somewhat unusual outcome, Sonic Healthcare (ASX:SHL) was a beneficiary of regulatory change in Australia in May. Your local GP, if they have a pathology lab on site, has likely been receiving rent for its pathology room well above the going market rate for similar space. The Federal Government has proposed to effectively re-regulate pathology collection centre rents. Such a proposal would see rental rates fall and revert to a market rent, saving the industry tens of millions of dollars. SHL and its industry support group have long lobbied for such reform. By providing the rental cost cut to the pathology sector, pathologists will not need to impose co-payments (i.e. the burden now falls on the GPs). For SHL, we would expect the net outcome to be either neutral at a profit level, or perhaps an overall benefit – subject to the timing and degree of rental and staffing cuts. This appears to provide clarity for SHL’s Australian pathology operations, at least until the next round of changes. (VIEW LINK)

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Andrew Stanley
Head of Australian Equities
Ralton Asset Management Limited

Andrew has been with Ralton since its inception in 2006 and leads the investment management of Ralton’s managed accounts. He brings over 25 years of funds management and investment banking experience having held senior positions with major...


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