Healthscope positioned for continued momentum

TPG and The Carlyle Group have sold A$810m, or 53% of their A$1.8bn stake in HSO (will retain a 17.8% holding). Our Investment view is the company has a solid track record of strong earnings growth of 13% over the last 4 years, along with stable, high CF generation and high cash conversion (98.5% over the last 4 years) on effective working capital management. We view the company as a core holding and well positioned for continued momentum, targeting mid double-digit earnings growth through FY18, operating margin uplift of 200bp on efficiency gains, continued strong cash conversion and a dividend payout ratio c70% (equating to a 2.5-3% yield). Healthscope (HSO, Add, Price Target A$3.22)