Shares in companies exposed to nursing homes for the aged surged higher on a brighter outlook for the healthcare sector.
A short time ago, Japara Healthcare was up almost 11% to $2.19, Regis Healthcare almost 10% to $4.42 and Estia Health 7.5% to $2.72.
The gains come after Macquarie delivered a positive analysis for the sector on Monday.
Macquarie upgraded Japara to outperform.
“The stock is trading at a significant discount to our target price of $2.50,” says Macquarie in its note to clients.
“Japara is also arguably well placed for the uncertain regulatory environment: more conservative gearing levels (lower net debt and lower deposit per place than its peers) and more generous staff costs per place.”
Macquarie says the healthcare sector, including Regus and Estia, consumes a significant amount of the federal budget and demographic growth could see this increase.
Healthcare stocks were hit in September after the Turnbull government clarified what fees can be levied for additional care and services at nursing homes.
The government interprets the law as disallowing regular fees charged for capital refurbishment. The Department of Health said it was aware of aged care providers charging additional services fees, including capital refurbishment fees and asset replacement contributions.
However, Macquarie expects an ageing population to support demand growth over the medium to long term. The key demographic, 85 and over, is forecast to increase by almost 600,000 in the next two decades from under 500,000.
“This optimistic outlook needs to be tempered by an understanding that the growth will accelerate later in the period,” Macquarie says.
“We expect growth in the number of Australians in care to remain around 3,000-4,000 per annum over the next decade before accelerating.”
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.