Ramsay Health Care’s FVE Maintained at AUD 65.00 as 1H Result Meets Expectations

Narrow-moat Ramsay Health Care’s first-half result was in line with both our expectations and management guidance. We maintain our earnings forecasts and AUD 65.00 fair value estimate. The share price has risen 16% over the past four months, and at the current price of AUD 64.64, the stock is now fairly valued. The price and fair value imply a fiscal 2020 P/E ratio of 21 and dividend yield of 2.4%, or 3.5% including franking credits. We consider the dividend sustainable due to the defensive nature of the business. Although Ramsay is expanding its overseas operations, we expect the dividend to remain fully-franked for the foreseeable future due to the magnitude of the franking balance.