Regis Healthcare's Funding Shock Leaves Managers Weighing Policy Risk Against Asset Value

A below-inflation care funding increase has sent the aged care operator sharply lower, but some managers argue private equity has already shown what quality aged care assets are worth.

· 4 min read

A policy shock and a valuation puzzle

Regis Healthcare sits at the centre of a stark disagreement about how to value Australian aged care. In September, the government announced that AN-ACC care funding would rise 2.55 per cent from 1 October, below the sector's cost inflation, and the stock fell around 27 per cent in a single session, according to Datt Capital. Bell Asset Management said the increase falls well short of underlying cost growth and resulted in earnings downgrades, and that the stock de-rated substantially as the government's commitment to adequately funding the sector came into question.

Paradice Investment Management, which had made Regis a top-five holding only months earlier, exited during the September quarter. Datt went the other way, increasing its position to take advantage of what it called a value dislocation.

What private equity says aged care is worth

Datt's October article makes the most detailed case for the bulls. In May 2026, Stonepeak paid $2.5 billion for Estia Health, Australia's second largest aged care operator, at $270,000 per bed and 14.2 times EBITDA, according to Datt. By contrast, Regis, which Datt describes as equal in revenue, 100 per cent freehold owned, debt free with $170 million of net cash and profitable with $55.7 million of NPAT, trades at about $144,000 per bed, a 47 per cent discount.

Datt argues the disconnect stems from a misunderstanding of aged care balance sheets. Regis carries $2.28 billion of refundable accommodation deposits as a liability, but these are interest-free, government-guaranteed and perpetual at the portfolio level. “They function economically as zero-cost permanent capital,” Datt said, adding that on an adjusted basis Regis trades at 0.88 times book value against an average since listing of 1.10 times.

They function economically as zero-cost permanent capital.

— Datt Capital, Article, October 2026

Wilson Asset Management made a related point in May, describing a company with no debt, around $200 million of cash and about $400 million of incoming refundable deposits, effectively a $600 million war chest for acquisitions at a time when competitors are indebted. Wilson called it “one of the best long-term stories around the ageing population in the country.”

One of the best long-term stories around the ageing population in the country.

— Wilson Asset Management, Article, May 2026

Demand is not the question

Few managers dispute the structural demand. Datt said Australia needs to deliver 10,600 new aged care beds a year for the next twenty years, while the sector is delivering just 800, and noted Regis has ten greenfield sites underway and $362 million of undrawn debt capacity. Paradice described the thesis earlier in the year as a favourable regulatory environment, structural demand growth, industry consolidation and strong refundable deposit inflows supporting an under-geared balance sheet. Pengana Capital Group argued in late 2025 that over time the government will need to commit more money to ensure a sufficient supply of beds for an ageing population.

The funding risk managers cannot ignore

The problem is that funding decisions have repeatedly disappointed. Regis fell sharply in September 2025 after a lower-than-expected funding decision, recovered as managers including Milford Asset Management and Contact Asset Management added or re-established positions, and has now been hit again. Milford said Regis sank in September 2026 on another weak sector funding update. Paradice had flagged in June that government funding may not keep up with inflation in the short term, and Endeavor Asset Management had entered in April expecting an Accommodation Review to pave the way for a potential $3 billion funding package.

Leadership is another thread. Chief executive Linda Mellors resigned in December 2025, which Firetrail Investments called unexpected and disappointing given her track record, though it said the strength of the broader executive team left its conviction unchanged. Wilson reduced its position at the time given the uncertainty.

What managers are watching next

Datt has set out three scenarios: Regis executes and re-rates toward adjusted book value, a private equity bidder approaches as sector consolidation continues, or neither occurs and investors collect a fully franked dividend of around 4 per cent while earnings compound. The firm also noted insiders bought stock at levels 35 per cent above current prices. Managers will watch whether the government revisits care funding, whether accommodation pricing reforms progress, and whether the gap between listed and private aged care valuations attracts a bid.