Many investors are holding healthcare stocks. The aging population is widely expected to increasingly draw on available services and facilities, assuring earnings growth, and the government paying a lot of the bills gives security.
So far, so good. But what about the price? That’s where things look less attractive. P/E ratios in the 20’s and 30’s are not compelling, despite the good growth profiles. Which brings us to Aveo Group (AOG) – formerly FKP Property. Despite its status as a property group, retirement community builder and administrator Aveo is exposed to a similar demographic . AOG is focussed on the healthy and wealthy among the aged, offsetting the fact the government doesn’t pay the bills.
AOG has 75 retirement communities around Australia. Long term growth expectations around 14% speaks directly to the demographics. A P/E of 17x doesn’t look expensive against that sort of growth. The reason AOG has underperformed could be the past lack of dividends, but the company has lifted in this area as well, and it’s traded back towards support around $2.60.
If you buy onto AOG’s register, you’ll be in good company. Mulpha and Perpetual hold more than 40% between them.