Financial impact: institutional investors downgrade aged care and other impacts

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An obvious outcome of the Royal Commission is a hit to the share price of the three listed aged care operators, Regis, Estia and Japara.

In one week their values are down around 20%.

Macquarie is quoted in The Australian newspaper in a note to its institutional clients:

“We note that aged care operators are driven by a needs basis but still see the market slowing down in the next 12 months, given the material increase in scrutiny the industry will receive”.

“We struggled to find a catalyst to be exposed to aged care operators”.

12 months of intense focus on staffing levels, quality of food etc will cause potential residents and their families to question costs, especially the size of RADs. If large numbers opt for DAPs, this could have a significant impact on funding for some operators.

Banks will also look at already marginal businesses and consider the impact of the transition to higher staff ratios if that is brought in. There will be a delay between costs and revenue.

If you are a small private operator and decide to sell, will there be buyers?

Frontline ‘sales’ staff will be challenged, fielding perhaps cynical families when they positively present services.

And think about staff; for the next 12 to 18 months their friends and family will be asking why they work in such a questionable system.

The more you think about it, the more challenges materialize.

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