Primary Health Care is the largest medical centre operator and the second largest pathology provider in Australia. The jewel in the crown is its portfolio of 58 GP medical centres, which provide the company with a cost advantage through the increased buying power of the group.
In terms of pathology, the company’s market share is approximately 35%, with more than 1500 pathology collection centres located in close proximity to medical centres. Looking forward, the bulls argue that an ageing population will continue to drive demand for health services at a faster rate than the underlying economy.
Risks are largely regulatory in nature with the government looking to reduce its expenditure on healthcare. According to our prospective forecasts, the company is trading on 18 times earnings and paying a gross dividend yield of 5.03% at current levels; multiples which we believe are undemanding for a company positioned in an industry with structural growth.
This is a slow growth solid income company, I do not expect to see the price run but at current valuation there is still a good 9% up side in the share price. It is currently trading around $4 with a fair value of $4.35.
The company provides solid exposure to the health sector which will be a growth sector in the coming year as the population ages.