Author Topic: DVA DaVita HealthCare Partners  (Read 215871 times)

Rasputin

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Re: DVA DaVita HealthCare Partners
« Reply #150 on: August 07, 2017, 08:46:25 AM »
DVA sold its NxStage shares within the same purchase year

From 2008 10-K

NxStage agreement
 
In February 2007 we entered into a National Provider Agreement with NxStage, Inc. As a part of the agreement, we purchased outright all of our NxStage System One equipment then in use for $5.1 million, and have been purchasing a majority of our home-based hemodialysis equipment and supplies from NxStage. In connection with the provider agreement, we purchased two million shares of NxStage common stock in a private placement offering for $20 million, representing an ownership position of approximately 7%. We subsequently sold our NxStage Inc. shares in the second and third quarters of 2007 for approximately $25.9 million and recognized a pre-tax gain of $5.9 million or $3.6 million after tax. This pre-tax gain is included in other income.


sleepydragon

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Re: DVA DaVita HealthCare Partners
« Reply #151 on: August 07, 2017, 07:02:53 PM »
It's a little amusing to me that Goldman sachs USA team has a Sell rating on DVA (for a year or so now), but their Europe team (different analysts) have a Conviction Buy rating on Fresenius

sleepydragon

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Re: DVA DaVita HealthCare Partners
« Reply #152 on: August 07, 2017, 07:07:21 PM »
It's a little amusing to me that Goldman sachs USA team has a Sell rating on DVA (for a year or so now), but their Europe team (different analysts) have a Conviction Buy rating on Fresenius

On Fresenius, GS Europe analyst:
"what we see as highly compelling fundamentals, given 1) improving revenue /
treatment dynamics in the US, 2) ongoing opportunities for efficiencies,
and 3) earnings upside from care coordination. We reiterate Buy (on CL). "

On DVA, GS USA analyst:
"Aside from pricing and regulatory uncertainty, we remain concerned with lack of operating leverage in the business model and runway for growth" ..." We remain Sell on risks to the earnings growth story"

One of them has to be wrong.

Rasputin

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Re: DVA DaVita HealthCare Partners
« Reply #153 on: August 08, 2017, 11:51:38 AM »
I agree with both GS teams with regards to their take on the business and environment. 

Management seems incompetent if we just look at results between 2013 and today.
From beginning 2014 through end of 2016, management has spent $2 B beyond what they categorize as maintenance capex while EBITDA remains stagnant. 

I am a buyer though.  In a scenario where all capex = maintenance capex and they stop acquisition, I get fcf (cash by op activities minus all capex) of around $3.4 per share for 2018.

flesh

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Re: DVA DaVita HealthCare Partners
« Reply #154 on: August 08, 2017, 11:56:11 AM »
Thought this was worth mentioning.

"Whit Mayo - Robert W. Baird & Co., Inc.

Thanks. Good afternoon. Looking at the cost per treatment in the quarter, if I isolate all of the EPO purchases just within the June quarter, was it all under the new contract or did you have any purchases or any old inventory that you were working through rather I should say? And I'm just trying to think through the run rate going forward.

Kent J. Thiry - DaVita, Inc.

Yeah. All of the purchases were under the new contract for this quarter.

Whit Mayo - Robert W. Baird & Co., Inc.

So, does the second quarter have the full benefit of the new contract or is there a tail on this that we should consider as the year plays out?

Kent J. Thiry - DaVita, Inc.

It's got the benefit that's intended to have for this year."

And then at the end of the call......

"John W. Ransom - Raymond James & Associates, Inc.

Hey, sorry if you have addressed this. I'm just old and forgetful. But the cadence of the EPO purchasing benefit. I mean, we've taken some statements from the manufacturer to interpret that to mean, it's sort of equally weighted between this year and next year. Is that a fair way to think about it?

Kent J. Thiry - DaVita, Inc.

I don't know if we can comment on that. We have big restrictions on what we can say on the contract. So I think, we're going to have to pass on that one.

John W. Ransom - Raymond James & Associates, Inc.

Well. I thought I would try anyway. All right. Thank you.

Javier J. Rodriguez - DaVita, Inc.

Thank you.

Kent J. Thiry - DaVita, Inc.

Thanks, John. Good try.

John W. Ransom - Raymond James & Associates, Inc.

Yeah. Thanks."

crastogi

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Re: DVA DaVita HealthCare Partners
« Reply #155 on: August 09, 2017, 01:17:09 PM »
I agree with both GS teams with regards to their take on the business and environment. 

Management seems incompetent if we just look at results between 2013 and today.
From beginning 2014 through end of 2016, management has spent $2 B beyond what they categorize as maintenance capex while EBITDA remains stagnant. 

I am a buyer though.  In a scenario where all capex = maintenance capex and they stop acquisition, I get fcf (cash by op activities minus all capex) of around $3.4 per share for 2018.

So, I am new, trying to understanding this business.  I got interested as the prices have come down.  Can someone please summarize the bull case? 

cubsfan

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Re: DVA DaVita HealthCare Partners
« Reply #156 on: August 09, 2017, 03:03:54 PM »
I'll just give you my view. Valuation-wise, if we are selling below 10X FCF and DVA continues to buy back 10% of their stock each year with their FCF - then 5 yrs from now, we are at 112M shares outstanding, doing maybe $1600M+ in operating income without
trying to grow, which DVA still does. So I get $14/share at that point. Does the stock still remain at $60?

DVA is still growing around 5% organically and rolling up other clinics too.  Growth is not even factored in.

You have to be fearful of re-imbursement rates - since this stuff is expensive. But we don't let people die in this country, and unless
we want many thousands more dying every year or flooding the emergency rooms - someone needs to perform this service.
I see no alternative to DaVita or Fresenius, who now control 70% of the business. The demand is predictable, the uncertainty of the future pricing keeps lots away.  DVA gets high marks for quality of care - and that is crucial to their success.

If someone can come up with reasonable alternatives about how this ESRD is going away - I might see it differently.

I guess my biggest concern is the HCP acquisition - and if this turns sharply positive, which Thiry says it does next year.
Then things look even better.

matts

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Re: DVA DaVita HealthCare Partners
« Reply #157 on: August 09, 2017, 04:30:58 PM »
I'll just give you my view. Valuation-wise, if we are selling below 10X FCF and DVA continues to buy back 10% of their stock each year with their FCF - then 5 yrs from now, we are at 112M shares outstanding, doing maybe $1600M+ in operating income without
trying to grow, which DVA still does. So I get $14/share at that point. Does the stock still remain at $60?

DVA is still growing around 5% organically and rolling up other clinics too.  Growth is not even factored in.

You have to be fearful of re-imbursement rates - since this stuff is expensive. But we don't let people die in this country, and unless
we want many thousands more dying every year or flooding the emergency rooms - someone needs to perform this service.
I see no alternative to DaVita or Fresenius, who now control 70% of the business. The demand is predictable, the uncertainty of the future pricing keeps lots away.  DVA gets high marks for quality of care - and that is crucial to their success.

If someone can come up with reasonable alternatives about how this ESRD is going away - I might see it differently.

I guess my biggest concern is the HCP acquisition - and if this turns sharply positive, which Thiry says it does next year.
Then things look even better.

I don't understand this logic. If government programs and the major insurers decide to reimburse 10% less than the current rate will people just stop coming and die?! Of course not, Davita would adjust to the new market dynamics and eat the lower profit margins because it still makes good profits, just less than before. and THAT'S the bear case.


cmlber

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Re: DVA DaVita HealthCare Partners
« Reply #158 on: August 09, 2017, 04:39:44 PM »
I'll just give you my view. Valuation-wise, if we are selling below 10X FCF and DVA continues to buy back 10% of their stock each year with their FCF - then 5 yrs from now, we are at 112M shares outstanding, doing maybe $1600M+ in operating income without
trying to grow, which DVA still does. So I get $14/share at that point. Does the stock still remain at $60?

DVA is still growing around 5% organically and rolling up other clinics too.  Growth is not even factored in.

You have to be fearful of re-imbursement rates - since this stuff is expensive. But we don't let people die in this country, and unless
we want many thousands more dying every year or flooding the emergency rooms - someone needs to perform this service.
I see no alternative to DaVita or Fresenius, who now control 70% of the business. The demand is predictable, the uncertainty of the future pricing keeps lots away.  DVA gets high marks for quality of care - and that is crucial to their success.

If someone can come up with reasonable alternatives about how this ESRD is going away - I might see it differently.

I guess my biggest concern is the HCP acquisition - and if this turns sharply positive, which Thiry says it does next year.
Then things look even better.

Is there an explanation, besides stupidly conservative guidance, as to why at the investor day DVA projected 4-9% net income growth, but EPS growth (net income growth boosted by share repurchases) is only projected to be 5-12%?  I.e., projecting that they reduce the share count by 1-3% per year. 

But they say they'll have $3.35Bn available for share repurchases over that time frame, which would mean a pace of 10%/year share repurchases.  Is there something I'm missing?

cubsfan

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Re: DVA DaVita HealthCare Partners
« Reply #159 on: August 09, 2017, 05:08:50 PM »
I'll just give you my view. Valuation-wise, if we are selling below 10X FCF and DVA continues to buy back 10% of their stock each year with their FCF - then 5 yrs from now, we are at 112M shares outstanding, doing maybe $1600M+ in operating income without
trying to grow, which DVA still does. So I get $14/share at that point. Does the stock still remain at $60?

DVA is still growing around 5% organically and rolling up other clinics too.  Growth is not even factored in.

You have to be fearful of re-imbursement rates - since this stuff is expensive. But we don't let people die in this country, and unless
we want many thousands more dying every year or flooding the emergency rooms - someone needs to perform this service.
I see no alternative to DaVita or Fresenius, who now control 70% of the business. The demand is predictable, the uncertainty of the future pricing keeps lots away.  DVA gets high marks for quality of care - and that is crucial to their success.

If someone can come up with reasonable alternatives about how this ESRD is going away - I might see it differently.

I guess my biggest concern is the HCP acquisition - and if this turns sharply positive, which Thiry says it does next year.
Then things look even better.

I don't understand this logic. If government programs and the major insurers decide to reimburse 10% less than the current rate will people just stop coming and die?! Of course not, Davita would adjust to the new market dynamics and eat the lower profit margins because it still makes good profits, just less than before. and THAT'S the bear case.

I said the risk is in the re-imbursement rates. No kidding that's the bear case.
But of course, you likely see many clinics close and that creates chaos until the market adjustments are made.