Estia share price increases 26% in 3 months – $5.4M profit from $303M revenue (1.8%)

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On limited share trading volume, Estia’s share price has increased 26% over 13 weeks, from $1.70 to $2.15.

Their 23 February Half Year investor presentation (three days before the Royal Commission’s Final Report was handed to the Governor-General) saw the price peak at $2.28.

At that presentation, they declared revenue of $303 million for the 6 months across 70 homes with 6,289 beds.

Net profit before tax was just $5.4 million, which equates to 1.8% of revenue. This includes $8.5 million in temporary Government funding.

22% of revenue was resident contributions; 78% was Government funds.

Occupancy was hit particularly in Victoria, averaging around 85% across their 27 homes and 2,093 beds.

New shareholders would be encouraged by occupancy outside of Victoria in February, which averaged 95%. Estia is on record stating that each additional 1% in occupancy delivers $5 million directly to the bottom line (outside of COVID times).

However Estia expects COVID to be with us into the foreseeable future, rating it and accelerating consolidation to be two of the major influences on the medium-term performance of the sector:

The Estia story is a sobering insight into the future of residential care if the Government doesn’t open the sector up to user pays on a grander scale.

Estia listed in December 2014 with 39 homes and at a share price of $4.50 and market capitalisation of $1 billion. Today, six years later and with 70 homes, it has a market capitalisation of $562 million.

The investors pushing up the price today must have confidence in the basic facts that ageing Australians will need high care and somehow operators will be able to charge sufficient to warrant staying in the market.

The Budget will tell us and it is now just five-and-a-half weeks away.