The unexpected announcement of a royal commission into the aged care sector has investors worried with suggestions the finding could be similar to that of the inquiry into the financial services sector.
Estia Health (EHE) is beset by uncertainty surrounding the sustainability of earnings. The company has a poor track record in setting guidance, in Morgan Stanley’s opinion, and there is a risk of further blow-out in costs associated with integrating acquisitions. There is also no full-time chief financial officer.
Morgan Stanley notes the volatile response to the AGM. The broker considers the update as a negative as EBITDA estimates and RAD inflow guidance are less than expected. The broker believes a tight liquidity position leaves little room for error.