Japara Healthcare (JHC), a provider of aged care services that we recently initiated a position in, suffered a regulatory setback during June and the stock...

Japara Healthcare (JHC), a provider of aged care services that we recently initiated a position in, suffered a regulatory setback during June and the stock fell 13%. It was announced that a dementia supplement of $16 per day paid by the federal government to assist with the costs of providing care to residents with dementia, and other severe behavioural disorders, would be discontinued from August 2014. Pleasingly, however, the company announced several operational measures which ought to largely mitigate the earnings impact of this reduction in government funding. We have met with the management team of JHC several times in the past month, including a site visit to the Central Park aged care facility, and have been impressed by their ability to articulate a strategy to build shareholder value. We used the share price weakness during the month as an opportunity to build our position in the company.