Ramsay Health Care's Australian margin recovery splits fund managers on valuation

Firetrail, Paradice and Alliance Bernstein detail the bull and bear case as the Ramsay Sante spin-off progresses

30 Jun 2026 · 8 min read

Ramsay Health Care has turned a bruising FY25 result into what several fund managers now describe as a genuine inflection point, as margin recovery in its core Australian hospitals collides with a plan to spin off its troubled European operations.

Perpetual Asset Management said in an Article in June 2026 that Ramsay Health Care presents compelling upside, arguing the negatives, such as labour inflation and changes to private health insurance rebates that may impact industry participation, are now well understood. Beyond the demerger of the Ramsay Santé assets, the manager said it's clear the focus of the company is the core Australian business, where there is significant opportunity to improve operating performance and asset productivity, with further capital repatriation from offshore not out of the question given Ramsay's large balance of surplus franking credits.

The Australian margin recovery driving the re-rate

The turnaround narrative traces back to a stronger-than-expected trading update in late 2025. Firetrail Investments said in a Monthly Report in November 2025 that Ramsay has significantly underperformed the market, falling almost 70% relative since 2016, with core Australian EBIT margins slipping from 15% at their peak to below 10%, and sentiment deeply negative, with 13 of 15 brokers sitting at Hold, which the manager said is often French for Sell. Yet the manager argued new management applying a laser focus on returns, favourable demographic tailwinds, and a potential exit from the lower-returning European business could deliver a positive surprise.

In our view, Ramsay is a classic example of a company the market has given up on, and one that could deliver a positive surprise.

— Firetrail Investments, Monthly Report, November 2025

That update materialised in November 2025, when Firetrail said the stock jumped 16% in five days after Ramsay's Australian hospital division delivered around 6% earnings growth in the September quarter, a meaningful surprise given the market had been expecting minus 2% EBIT growth for the December half, calling it the first genuinely positive update from Ramsay in years.

Tyndall Asset Management gave more detail in a Monthly Report the same month, saying private hospital revenue grew 8.6% adjusted for the Peel and Joondalup contracts, supported by improved indexation, higher acuity and better theatre utilisation, with management also highlighting encouraging labour cost control resulting in underlying EBIT margin expansion in Australia despite the Joondalup drag.

The Ramsay Santé spin-off

Alongside the Australian recovery, the company's plan to exit its loss-making European operations has become a central plank of the thesis. Spheria Asset Management said in a Monthly Report in February 2026 that Ramsay shares rose 18% after 1H26 results were released alongside plans to spin off its roughly 52.8% stake in Ramsay Santé via an in-specie distribution to shareholders, with the proposed spin-off simplifying the group's structure, retaining 100% of the Australian operations and 100% of a profitable but leasehold UK network.

The manager said the spin-off would see $3 billion of debt deconsolidated from the balance sheet, improving group leverage metrics, while also providing shareholders a cheap option on a potential recovery in what it called Ramsay Santé's dire financial performance.

Blackwattle Investment Partners said in a Monthly Report the same month that Ramsay's 1H result beat expectations with revenue 2% ahead, EBIT 4% ahead and NPAT 15% ahead, driven by improvements in Australian revenue and margin trends, and that the 4.5% EBIT beat in the Santé division is a good lead indicator for implementation of the demerger strategy.

A split verdict on the 28-times multiple

As the stock re-rated, two managers gave opposing calls on the same Article in May 2026. Paradice Investment Management called it a buy, saying Ramsay is at that inflection point where the Australian portfolio, about 80% of profits, is starting to show real signs of improvement, driven by a new management team taking a more scientific and methodical approach to hospital design and cost structure, alongside a more favourable political and government backdrop as health insurers pass on a greater share of benefits.

We think Ramsay is by far the best private hospital operator in Australia, and we think that's where the bulk of the profit sits. We see an inflection point in both revenue growth and operating leverage.

— Paradice Investment Management, Article, May 2026

Alliance Bernstein disagreed, calling it a sell, saying it agreed with a lot of the substantive points about the quality of the assets and management, but argued that at a 28-times forward multiple, a lot has to go right, pointing to a structural shift where funding to private hospitals moved from GDP-plus growth before 2019 to GDP-minus growth after, and a broader trend of treatments shifting out of hospitals and into the home, which is shrinking demand.

Positioning through the sell-off and recovery

Not every manager stayed the course through the volatility. Ten Cap said in a Monthly Report in April 2026 that it reduced its position following strong share price performance and growing concerns around margin pressure from rising consumable costs, before reversing course in a Monthly Report in June 2026, saying it added to Ramsay into the broader healthcare sell-off, where a quality hospital franchise with durable demand now trades at a materially more attractive valuation relative to its long-term earnings power.

Ellerston Capital said in a Monthly Report in April 2026 that it reintroduced Ramsay Health Care, a company it has previously owned and knows well, describing it alongside other new additions as a good business that has historically been badly run or executed poorly, but manageable and fixable over the medium term, trading at significant deep discounts to the manager's valuations.

What managers are watching next

With the Ramsay Santé distribution still expected to complete in the fourth quarter of 2026 subject to approvals, and the Australian division's margin recovery now confirmed across three consecutive quarters, the managers still positioned in Ramsay say the next tests are the outcome of the Fair Work Commission's ruling on nurse wages, which will determine how much of the cost inflation the company can pass through to private health insurers, and whether speculation about a UK divestment, which would complete a full retreat to Australia, eventuates.