Author Topic: DVA – DaVita HealthCare Partners  (Read 150284 times)

sleepydragon

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Re: DVA – DaVita HealthCare Partners
« Reply #390 on: December 06, 2017, 10:38:31 AM »
If they really got $4bn for it - it would be a huge homerun.  Either way the stock is dirt cheap

Or maybe the buyer just buy the whole company? Healthcare vertical integrations are in play.  Cvs?

lol. got lucky on this one! I have 20% of my portfolio on this name.. :)
now they have 4.9b cash, which is almost half of their current mktcap. They can pay off 1b in debt, and still have 3.9b left for buy back over 2 years. That's 20% of shares outstanding per year.

Wouldn't it be more prudent to look into de-levering a bit more while the share price is elevated? From their latest repurchase announcement the stock is up nearly 30% in a mere couple of months. The current share price is also not very far off prices from a few years ago, before some of these new question marks and regulatory risks entered the picture. Personally, I'd rather see them be more aggressive with the debt pay down and then just use FCF for repurchases while at these levels.

Impo, I think it will be mistake to pivot the fair value to historical prices. BAC is up 120% from low and they are still buying back. If the management think the stock is worth a lot more, they shall just buy back regardless what happened in the previous 3 months. Deleveraging is also important, but without HCP the remaining business is very cash flow stable.


Rasputin

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Re: DVA – DaVita HealthCare Partners
« Reply #391 on: December 06, 2017, 10:43:07 AM »
Attached: ML take on this transaction

flesh

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Re: DVA – DaVita HealthCare Partners
« Reply #392 on: December 06, 2017, 10:46:34 AM »
plenty of fcf and cash to massively pay off debt and do buy backs... plus tail winds beginning 19'.

It's likely they seriously accelerated buy backs before these recent announcements.

22% position for me before today.... will not be selling anytime soon.
« Last Edit: December 06, 2017, 11:01:09 AM by flesh »

Gregmal

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Re: DVA – DaVita HealthCare Partners
« Reply #393 on: December 06, 2017, 10:47:16 AM »
If they really got $4bn for it - it would be a huge homerun.  Either way the stock is dirt cheap

Or maybe the buyer just buy the whole company? Healthcare vertical integrations are in play.  Cvs?

lol. got lucky on this one! I have 20% of my portfolio on this name.. :)
now they have 4.9b cash, which is almost half of their current mktcap. They can pay off 1b in debt, and still have 3.9b left for buy back over 2 years. That's 20% of shares outstanding per year.

Wouldn't it be more prudent to look into de-levering a bit more while the share price is elevated? From their latest repurchase announcement the stock is up nearly 30% in a mere couple of months. The current share price is also not very far off prices from a few years ago, before some of these new question marks and regulatory risks entered the picture. Personally, I'd rather see them be more aggressive with the debt pay down and then just use FCF for repurchases while at these levels.

Impo, I think it will be mistake to pivot the fair value to historical prices. BAC is up 120% from low and they are still buying back. If the management think the stock is worth a lot more, they shall just buy back regardless what happened in the previous 3 months. Deleveraging is also important, but without HCP the remaining business is very cash flow stable.

I agree regarding historical prices. More so just pointing out that going balls to the wall on a buyback at $55 is a little different than doing it around $70. Rather er on the side on caution and maybe limit buybacks to 10% of shares per year until debt is reduced a bit. At $55? Sure take out every share. $70's? Better safe than sorry.

DooDiligence

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Re: DVA – DaVita HealthCare Partners
« Reply #394 on: December 06, 2017, 11:17:23 AM »
I am lucky (to have soaked up every word on this thread.)
I believe in the value of Davita's service & understand the risks, thanks to you guys.

I'm going to hold what I've got (a 5.6% position before the news & 6.8% after.)

Hopefully they'll stick to their knitting from now on.

---

Do I read this correctly to mean CMS is paying less now to recoup what they deemed as overpayment & that after 2018 Davita may be allowed a small profit on CMS bundled payments? (the last part is implied & not stated.)

(Healthcare 42.9% - ABC BBH CVS DVA EW NVO) | (BRK.B - 14.8%) | (Media & Communication 12.6% - CHTR CMCSA DIS)

(Drinkers & Smokers 13.8% - ABEV MO) | (Auto's & Oil 10.3% - GPC VDE) | (Tech & Comms 5.5% - AAPL SFTBY)

(%'s held @ MV 9/04, excludes $)

[prepared 2 wait?]

https://twitter.com/tunawish

flesh

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Re: DVA – DaVita HealthCare Partners
« Reply #395 on: December 06, 2017, 11:33:01 AM »
I am lucky (to have soaked up every word on this thread.)
I believe in the value of Davita's service & understand the risks, thanks to you guys.

I'm going to hold what I've got (a 5.6% position before the news & 6.8% after.)

Hopefully they'll stick to their knitting from now on.

---

Do I read this correctly to mean CMS is paying less now to recoup what they deemed as overpayment & that after 2018 Davita may be allowed a small profit on CMS bundled payments? (the last part is implied & not stated.)



Yes, now look at 19'

walkie518

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Re: DVA – DaVita HealthCare Partners
« Reply #396 on: December 07, 2017, 04:23:03 PM »
the transaction makes one think differently about the underlying value of goodwill on the balance sheet

DaVita's total equity as of last quarter was $4.8B and the all cash deal is for $4.9B ...say DMG got to where they thought it would, DMG is only 1/3 of sales

When I did my initial analysis, what seemed most important was cash-flow stability through cycles rather than the balance sheet because dialysis in the US is a duopoly and DaVita is certainly a franchise business.

Now, a lot of goodwill might convert into cash and GAAP earnings will likely take a sharp turn up... there is a lot to learn about what the numbers will look like going forward, and while I don't invest with multiple expansion as a thesis, it seems ever more likely as the ratio of revenue to cash flow spikes before the value added from the announced buyback

thoughts?

ValueMaven

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Re: DVA – DaVita HealthCare Partners
« Reply #397 on: December 08, 2017, 02:37:21 AM »
Very, very interesting point!!!

Sincerely,
VM

MrB

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Re: DVA – DaVita HealthCare Partners
« Reply #398 on: December 08, 2017, 05:06:32 AM »
https://seekingalpha.com/article/4130152-implications-unitedhealths-deal-buy-davita-unit

Comment section:

"Ranjit Thomas, CFA, Marketplace Contributor
Comments (159) |+ Follow |Send Message
Author’s reply » I spoke to John Penshorn, SVP at UNH who was kind enough to provide me with some additional color on the deal and their thinking. The unit comes with a tax asset that they are valuing at $750 million (at current rates), effectively reducing the purchase price by this amount. This probably represents the amortization of the intangible asset created when DVA bought the unit. UNH believes that they can considerably increase the unit's margins over time(Optum's stated objective is 8-10%), along with increasing its revenues. So now you can get a sense of their thinking around the purchase price. $4Bn of revs to $5Bn...2% margin to 8%...and now you're talking $400 million of operating income, and a purchase price (after deducting the tax asset) that's 16x future taxed earnings, which looks reasonable. I think this is a bit of a stretch, and one can justify almost any acquisition at any price if you assume you can quadruple margins. Also, it's a debatable point whether the value from this potential improvement should flow to the seller rather than be retained by the buyer. John pointed out the strong operational record of the company (which one cannot argue with), and mentioned that acquisitions have played a big part in this."

ValueMaven

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Re: DVA – DaVita HealthCare Partners
« Reply #399 on: December 10, 2017, 01:45:15 PM »
part of the thesis has always been about Thiry as an operator...now he and the board are purely focused on improving margins, capital allocation, and buying back stock.  It's a pure play once again.  It is very tough to have a negative investment case at this point. 

Sincerely,
ValueMaven