Aged care providers' stocks struggle as investors' COVID fears come true
Australia's sharemarket-listed aged care operators are bracing for tighter safety restrictions as the embattled sector tries to get on top of the rising number of coronavirus cases in its homes.
Estia Health saw its share price drop 7 per cent to $1.46 on Monday after the company confirmed it had been issued with so-called "notices to agree" from the aged care watchdog, putting strict requirements on its operations as it battles a surge in virus cases at its Victorian facilities.
Publicly-traded aged care homes have lost between 40 and 50 per cent of their sharemarket valuations since December 31 in the face of tough competition and the aged care royal commission into the quality and safety of aged care in Australia, which has hurt confidence in the sector.
Victoria's Chief Health Officer Brett Sutton has warned the aged care sector outbreaks could lead to further deaths. Credit:Jason South
Estia Health's market cap has dropped from $637 million to $381 million across this period, while Regis Healthcare has gone from $739 million to $422 million and Japara Healthcare's market value dropped from $263 million to $133 million.
Estia's shares recouped some of their losses on Tuesday morning, opening 2.4 per cent higher at $1.50 as the ASX rose across the board, yet this was still 6.8 per cent below their price a week ago.
Estia is among operators with some of the highest number of COVID-19 cases in Victoria, with 82 cases linked to its Ardeer facility and 50 cases linked to its Heidelberg facility as of Monday.
The Aged Care Quality and Safety Commission's "notices to agree" issued to the company require the company to stop accepting new residents and report daily on how it manages the critical situation at its homes. Failure to comply could see the business lose its government subsidies.
"At this stage it is not possible to quantify the full financial impact on the company arising from the rapidly evolving COVID-19 situation," its management said on Tuesday.
Japara Healthcare flagged a non-cash writedown back in May - long before the current escalation of infections rocking Victoria - of at least $270 million due to "business and industry operating performance" in the face of the virus. A spokeswoman for the company said this week it was continuing to work with the Department of Health and Human Services and would consider imposing stricter safety measures over coming weeks as it monitors the second wave of cases.
The firm has restricted all visitor access to compassionate cases only, and "all staff and visitors continue to undergo stringent health screening when entering our homes", she said.
JP Morgan healthcare analyst David Low said that while the first months of the pandemic had seen the listed aged care sector navigate the COVID-19 crisis very well, the second wave had delivered a brutal reality check.
"This situation has turned from a mild positive as initially there were no case in the listed providers' homes. However now it would seem our fears have been realised. It's not going to boost anyone's confidence," he said.
Despite that lost confidence, the longer-term impact on the stocks may be milder than expected, Mr Low said.
"In the medium term — the need for aged care doesn’t diminish, it rises with an aging population. This is primarily a short-term issue."
Regis Healthcare did not respond to requests for comment on its handling and financial implications of the coronavirus cases at its facilities prior to deadline. On Sunday, Victoria's Department of Health and Human Services confirmed 25 cases had been linked to Regis Aged Care in Brighton.