Large private aged care provider Japara Healthcare has made a strong debut on the Australian Securities Exchange, becoming the first ASX-listed aged care operator in the country.
Trading of Japara’s shares on the ASX commenced on Thursday and closed 35 per cent higher than its initial public offer price.
Japara entered into residential aged care in 2005 and now owns 3,131 aged care beds across 35 facilities, primarily in Victoria but also in New South Wales, South Australia and Tasmania, equating to approximately 3 per cent of the market.
In its prospectus for investors, Japara cited high demand for services, substantial government funding and significant opportunities for sector consolidation as key factors in its favour, and outlined a medium-term growth strategy to own an additional 2,000 beds.
In the last five years, Japara has increased its portfolio by over 400 places through five acquisitions of existing facilities and three brownfield developments.
Favourable policy environment
In its prospectus, the private provider also talked up the positive financial impact of the 1 July reforms, which will enable providers to charge bonds in high care and greater flexibility to charge residents additional fees.
In 2013, Japara’s average bond value was $236,491, which was lower than the industry average of $276, 206.
The company forecasted net accommodation inflows of approximately $77 million for 2015, driven by these regulatory changes and the completion of brownfield projects.
Encouraged by Japara’s successful market launch, The Australian also reported that private equity- backed Allity, which in March acquired ECH’s 10 aged care facilities, was also considering a public offering.
Despite considerable excitement over the stock’s market debut, the float also attracted criticism from some commentators who highlighted the potential risks to quality under a short-term profit-driven environment.
Crikey Business editor Paddy Manning wrote in an article titled ‘Meet the men cashing in on Australia’s aged care crisis’ that mixing the needs of vulnerable clients with extreme capitalists and sharemarket investors looking for constant profit growth could be a recipe for disaster.
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