Cameron: [00:00:00] Welcome back to QAV America, Tony, episode 23. We’re recording this on the 30th of September, Australian time, 2025. Been a couple of weeks since we’ve talked about the United States. Tony, uh, I know that you’re an avid follower of the Wall Street Journal. Anything going on?

Anything go happen in the United States in the last couple of weeks? I haven’t seen anything about the United States for a couple of weeks in the news. Nothing going on.

Tony Kynaston: The contractor to service the UN elevators or escalators is up for That’s a bad end. I think

Cameron: Well, the story there is that it was, uh, did you see that? Why the escalator stopped?

Tony Kynaston: number of reasons why the escalators stopped, including a photographer pressed the stop button.

Cameron: I read it was Trump’s photographer who was going backwards up at whose foot got caught in it and it jammed and stopped, and then the teleprompter was apparently run by the White House who screwed up the teleprompter. So it was, uh, [00:01:00] his own fails from his own team apparently, is what I read in the New York Times.

The failing New York Times. Well, Tony, I thought I would, uh, that’s what he calls it, doesn’t he? I dunno if they’re failing or not. Um, probably large media. I wanted to, before we get into my Paul Pork this week, I just wanted to do a quick recap of how our US portfolio is doing and talk about what’s going on with some of the other companies that.

We’ve covered over the last few months on this show how they’re doing. So let me bring up our US portfolio. As I’ve said many times before, it’s been an interesting year for our portfolio in the US It was. Doing three times the market by the end of last year, but then after Trump got elected, it has not had a good year.[00:02:00]

So all time, our portfolio in the US has been running for just over two years now. I started at 20th of September, 2023. Over that period of time, it’s up 65% versus the s and p 500, which is up slightly less than. 50%, so it’s doing reasonably better than the s and p 500, but not double like we’re doing in the US and certainly not like triple like.

By the end of 2024, a US portfolio was doing three times as good as the s and p 500. So it hasn’t had as good a year. 20, 25 year to date, it’s actually down 12% versus the s and p 500, up 13%. As we know, that’s how it goes. We go up, we go down, but generally we go up more than we go down over the long haul.

Tony Kynaston: Great. just.

Cameron: of the, uh.

Tony Kynaston: can I jump in here? There was a, um, I know the show was [00:03:00] released in the US last week, which was a discussion of the QAV Bible and it mentioned that, um, long-term returns were 19.5% cagr, and that’s certainly the case back when we started QAV, but uh, it’s not the case now. So I just wanted to highlight that for people don’t wanna mislead them. That’s why we use the term double market. ’cause my returns are the markets or roughly twice the market still. Um, but the market’s moved since then, so, um, it’s, I just don’t wanna mislead people by putting, posting a number out there. Um, it’s more instructive to look at the long term, um, and to expect to get something like twice the index if you, um, successfully according to what I’ve been doing for a long time.

Cameron: So I’m just, uh, looking up my list of Paul Porks that I’ve done over the last six months. Can’t remember who I did in episode 21. I. [00:04:00] Um, oh, MEOH. Yeah, right. I don’t have an update on MEOH, but for the rest, uh, like I was saying to you on our last Australian show, um, when I’m on the, some of the value investing forums in the us like the subreddits, that kinda stuff, a lot of people talking about how.

They can’t find anything to buy. Value investing is dead. Uh, I saw, we saw an article from some guy saying that, uh, people saying they can’t find anything, all the value’s gone. And I’m like. What is your problem? Because I did a buy list, a US buy list at the end of last week, and there was like a 200 companies that were on the buy list, which means that, you know, they’re, that’s what our, our buy list is showing us as being undervalued at the moment.

Well performing, well performing businesses that are undervalued, but just the list of companies that I’ve talked about on this show since March. Zim was the first one that I did on the 13th of March. It is [00:05:00] down 26% since I talked about it. Uh, but then in order of shows that we’ve done, so the next one was CX Chemex.

It’s up 68%. Dan Aos, DAC is up 16% since we talked about it. Canadian Imperial Bank is up 23%. Chile is down 10%. Ford Motor Company is up. Eight IHS is up 37. JXN is up 16. Oryx Corporation is up 27. Precision Drilling is up 18. Costco’s up five Zep. Corporation, Zep Health is up 1511% since we talked about it on the 11th of July.

Sasol is up 43%. Bausch Health Companies up 16 Seneca up 9% Gray media up 40%, and we talked about that on the 7th of August. There’s up 40% in less than eight weeks in seven weeks. An old television station, Titan [00:06:00] machinery’s up 11%. Kimball Electronics is up seven. Sno is down two since we talked about it at the beginning of this month.

And then, um, M-E-O-H-I, I’m, oh, I can have a quick look on Yahoo Finance. Let’s see, how’s MEOH doing?

Tony Kynaston: post out. to this Reddit sub value sub investors club, or whatever it’s

Cameron: I do, I do, I do. And every I get just get abused for being an idiot. Um, em, me, O-M-E-O-H, um.

Tony Kynaston: rich idiot, though, isn’t it A successful idiot.

Cameron: MEOH uh, is up a couple of points since we talked about it. Um, actually it’s about the same, it was about $39 when we talked about, it’s still about $39 Methodex Corporation Co. So anyway, so there’s, I, I dunno what people’s problem is. I dunno what kind of value investing they’re doing that where they can’t find [00:07:00] value when we are finding value all over the place.

So speaking of that, I thought I’d, um.

Tony Kynaston: to interrupt, is that, um, you’re not even picking the top stock in the buy list. You are just picking out stocks, which are interesting that we don’t have

Cameron: Yeah.

Tony Kynaston: or just look worthy of a bit of investigation. So it’s kind of a random selection from the buyers that you’re picking.

Cameron: Yeah. Yeah. I’m looking for something that’s, you know, different to what we, because as we keep saying every episode, there’s a lot of shipping companies, a lot of financial services companies, and I just don’t wanna talk about the same thing every week. Well. We’ve talked about a lot of dirty businesses, um, in this epi in this show over the last six months, Tony, and this time I’m gonna do dirty healthcare, not because I wanna highlight the company we’re talking about as dirty.

Although they have had a very long list of scandals and fines and things like that, but just because the healthcare system [00:08:00] in the US is just a mess. Now, you know, obviously we’re Australian and we have a very different healthcare system, but I would not want to be a patient in the US for for-profit healthcare system.

And that’s what I’m gonna talk about today is one of the companies over there, CY. H is the name of the company, community Health System. CHS. It’s known as, but the ticket code is CYH and I, you know, I often hear Americans in person and online. You know, I’m married to an American, spent quite a lot of time over there.

They think they have the best healthcare in the world for some reason. You often hear American politicians, particularly Republicans, stand up and say, we have the best healthcare in the world. And, and, and I’m hate to break it to Americans, but that is just not the case. Compared with other rich countries, the US has worse population health and the most expensive popu, uh, health care [00:09:00] system in the world.

Hold on. I just hit the wrong button here. Okay. Um, you know, just to give you an indication. Bottom line is despite far higher spending per capita, the US has worth, worth. Lemme start that again. Worse population health. In 2023, US life expend expectancy was 78.4 years versus 82.5. In peer nations, the lowest among the group, and every US state sits below the peer average.

Life expectancy gap is big and stubborn. The US rebounded post pandemic, but still trails by 4.1 years in 2023, that gap predates COVID and reflects higher premature deaths from overdoses, violence, and chronic disease. Infant deaths are higher, maternal mortality is higher. Avoidable deaths trend the wrong way.

Where the US does [00:10:00] shine, it ranks second on care process prevention, safety, coordination, patient engagement, a sign that it can deliver high quality clinical episodes, even if population outcomes lag. And for several cancers, for example, breast cancer, US five-year survival is among the best internationally.

So, but the cost context is the US spent $13,432 per person on healthcare in 2023, about double the comparable country average, and still posted the worst overall performance in the latest international scorecard. So that just gives you an indication of where it sits healthcare outcomes wise. So.

Wouldn’t wanna be a patient, but maybe it’s okay to be an investor. ’cause we’ve talked about a lot of dirty businesses, uh, over the years, Sasol, et cetera. We’ve talked about [00:11:00] some companies and industries with, uh, pretty bad track record, but the end of the day they, they could be good investments and this could be one of those.

I do wanna flag though, before I get into the details that. CYH from our perspective is currently, uh, a Josephine, meaning that its share price is not above the byline, but it’s, well, it was once sent away from the byline. When I was doing this analysis yesterday, it was at $3 18. The buy price was $3 19. I think overnight it dropped down to $3 14.

So it’s a little bit off its byline, but. Oh, the other thing I wanna flag is that it took a big hit a few months ago. It dropped like 28%, uh, a few months ago when it came out with some bad results. And the CEO longtime, CEO announced his resignation. He actually [00:12:00] leaves today, the 30th of September. It’s his departure date.

The CFO is gonna be the interim CEO, but they’ve been recovering since they had this big drop a few months ago, and, uh, they’re nearly above the byline Again, as I said, I’ll give you the high level though. The prop calf price to operating cash flow is 0.9, so that’s why we’re talking about them today.

They’re insanely cheap looking at ’em from a cashflow perspective. And these guys are huge. Their market cap is only 445 million, but the enterprise value is 11.39 billion in their revenue last year was 12.65 billion. They’re a Fortune 500 company based in Franklin, Tennessee. Community Health Systems, as I said, is the name of the company.

They were the largest provider of general hospital healthcare services in the United States in terms of care facilities. In 2014, they had around [00:13:00] 200 hospitals, but as of 2025, they have about 70 hospitals, or 71 maybe in 14 states with 10,000 plus beds and a thousand plus sites of care. So they’ve sold awful lot of their network over the last 10 years or so.

They run general acute care hospitals ERs, surgical imaging, physician practices, urgent care, cancer centers, and more think local hospital operator at national scale, but focused on mid-sized markets. They bought up a lot of stuff, sold off a lot too eventually, but they, they sort of did a big roll up of medical facilities around the country for years.

They were formed in 1985 by executives of an earlier [00:14:00] for-profit hospital chain or a number of hospital chains. The I they IPOed in 19 19 91, went private in 1996, then re-listed in 2000. Then they bought Triad Hospitals in 2007 for 6.8 billion, which doubled their footprint. Then they spun a bunch out into a company called Quorum Health in 2016, which later went bankrupt in sort of April, 2020 as COVID started to hit and got delisted.

They’ve had a bunch of scandals. These guys, a lot of billing slash false claims settlements and a 2014 cyber breach. They, they’ve, they’re reputationally, uh, they’ve got a lot of baggage, a lot of issues. I’m not sure if the CEO leaving is going to really. [00:15:00] Help with that, but I guess it’s a start. They’ve had a lot of pivots, a lot of crises, a lot of m and a, and you know, a lot of trying to get rid of debt, which might, you know, if the, if interest rates come down, that that might help them refinance some of their debt this year.

But it’s kind of a. A bit of a messy, messy business and a messy history bunch of scandals. As I said, they’ve had to pay multiple fines to the US DOJ due to their billing practices, allegations of defrauding the US government, something called the False Claims Act, basically claiming money from the government for stuff that they shouldn’t have been claiming money for.

Um. Allegations of, uh, breach of fiduciary duty by CHS executives, allegations of fraud with regards to financial projections. You know, I know in [00:16:00] we tend to have a governance red flag with a lot of the companies that we. Look at in Australia, these guys would, in the past, a lot of these things are over the last 10 years, so they’re, they’re not necessarily the last year or so talking about 20 14, 20 17 dates like that.

But yeah, not, you know, it’s like not a very clean bill of health in terms of, uh, at least the presentation of how they run the business. They, they’ve settled a lot of these things. So these were allegations that they ended up in lawsuits, either, um, from other hospitals or from governments or from patients.

They’ve also had lawsuits filed against them for alleged predatory liens. Practices where hospitals file for liens rather than bill individuals. Health insurances, insurers resulting in massive fees for patients. So they go and take a lien over your car if you have a [00:17:00] a bill, healthcare bill builders you haven’t paid,

Tony Kynaston: dear.

Cameron: but

Tony Kynaston: kidney, Which one Do I Yeah. Okay.

Cameron: Current reality though, is for this company is revenue in hospital services as paid by managed care, about 57%, Medicaid, 21%, Medicare, 21% self pay 1%, and their trailing 12 month revenue sits around 12.6 billion. It’s down a bit from where it was sort of. Peak COVID and it’s a complex business. Um, you know, I’ll get into sort of the breakup of the financials a little bit later on, but you know, the, the way that these guys make money is a mishmash of different things, that 28%.

Drop though in July. I just wanted to touch on a little [00:18:00] bit. So they trimmed their full year guidance down to 1.45 billion, down from 1.55 billion. Um. At the same time, they announced a CEO transition. So there was this double whack of lowering their outlook and leadership uncertainty dropped 25 to 32% in a day and finished about a quarter lower.

So that was a big whack for investors at the time. But it’s recovered since then.

Tony Kynaston: I think also too, cam, if I can interject, it’s um, it’s CEO Transitions can be a good thing. Um, I

Cameron: Yeah.

Tony Kynaston: to know what, uh, what will happen with this one, but it’s often a time when a new CEO comes in and they clear the deck, so to speak. So should go into this with their eyes open in that it’s possible that a new CEO will come in and try and take every possible, write down [00:19:00] possible restructure they can in their first year. so, you know, they may even lose money in their first year, so, uh, they can set themselves up to achieve their bonuses meaningfully in the following years. So just be aware of that, I guess if you’re looking at investing in this company.

Cameron: Although the caveat on that is I’d say that the incoming interim, CEO anyway is a lifer. He’s been there since 1997. He was the president and CFO, so it’s not like. He can’t play the three envelope strategy and blame all of their woes on the outgoing CEO Tim Hinge H. Hinge Gin, H-I-N-G-T-G-E-N. Your guess is as good as mine is how we provide, it’s like Trump trying to say acetaminophen a setter, a sitter.

A set of a set of, yeah, we just call it Tylenol. Yeah. So Tim Tylenol who’s retiring today. Um, yeah, so the, but the, you know, he’s the, [00:20:00] the incoming guy Hammonds, I dunno if he’s gonna be the long-term CEO, but he’s the interim CEO as of tomorrow.

Tony Kynaston: Yep.

Cameron: So if they get in a new guy, some fresh blood, he might make some big changes.

Um, what spooked investors last time, apart from the CEO transition was management pointed to weaker volumes in a softer acuity mix. Acuity mix. New term for me is acuity, is how sick or complex the patients are. So you have high complexity cases and low complexity cases, and high complexity ca.

Tony Kynaston: and they’re not coming back in.

Cameron: Or people aren’t sick enough, I think is the issue. You know? Well, you’re not really sick enough. You, we can’t make enough money out of you. ’cause you’ve just got, you know, I don’t know. You got a cold or you got, you broke your nose at kung fu like I did on the weekend. Yeah. My doctor went, eh, it’s fine.

It’ll heal. Go away. Leave me alone. [00:21:00] Versus, uh, long-term care. So they make more money out of higher acuity cases. But their acuity mix has been softening. Uh, apparently costs are sticky. Your labor, your equipment, your, you know, all, all the other costs that you have, power, et cetera, et cetera. Real estate costs, but margins compress when the price per case drops.

So that was one of the issues. Um, the CEO is officially leaving for personal reasons. Nothing to do with

Tony Kynaston: isn’t sick.

Cameron: bad numbers. No. To spend more time with his family and pursue personal dreams, he said like personal goals, personal objectives,

Tony Kynaston: people in a mass

Cameron: the $8 million he took home last year. Yeah. I dunno. Maybe once more.[00:22:00]

So what’s working and why it’s cheap? Um, yeah, look, it’s generating a lot of cash. As I said before, the price to operating cash flow is less than one, which is, we get a lot of those on this show. The prop caps that we see come through are insane, so. There’s a combination of things, isn’t some of the things that go into the mix of hospitals making money or healthcare businesses making money over there.

One is throughput, obviously. How many paying episodes you push through the system, ER visits, admissions, surgery, scans, births, the more bums in beds, more cash, higher volume. Then there’s the payer mix. Who’s paying the bill? Determines your margins. The rough rule of thumb for US hospitals apparently is that commercial insurance pays best.

Medicare 65. An up pays less Medicaid, [00:23:00] which is for low income people, pays even less, and then self-paid or uninsured often pay nothing. I think that’s emergency rooms and that kind of thing. There are some things you can get done in emergency where you don’t have to pay in the us so. You want to have more commercial work than Medicare, Medicaid works if it tilts towards Medicaid or self pay.

When people then don’t pay and you need to take a lien over their car, uh, your revenue per patient falls. Then there’s rate discipline. How hard you to go.

Tony Kynaston: Can you imagine a doctor in Australia taking a lien over someone’s calf and not paying their bill? that would just be front page used. They’d be drummed out of the business.

Cameron: Yeah, like it’s just, yeah, like it, like a lot of the stuff we see in the us, like it’s insanity, like gun laws, just insanity. You know? I was, I was [00:24:00] in, uh, the Mormon subreddit or the ex Mormon subreddit because of this guy that just, uh, attacked. Uh, um, sorry, what’s your question?

Tony Kynaston: what’s the question? The ex Mormon subreddit, were they for the pe? They’re the people who were shot on the weekend in the Mormon church.

Cameron: oh, oh. Dark Tony Dark. No, people talking about like the, the alleged shooter of Charlie Kirk came from a Mormon family in Utah. Now there was an attack on a Mormon church.

Tony Kynaston: on, The alleged shooter.

Cameron: Yeah. Well I don’t think he’s been found guilty yet by a court of law. So he is an alleged, the alleged shooter. Yeah. And then there was an attack on a Mormon church, uh, um, over the weekend.

So. I was reading some of the commentary on that and, uh, you know, people were defending the gun laws in the US and have taking away guns, doesn’t do anything. And I’m like, Australia here, uh, Australia would like to [00:25:00] weigh in on that. Took away our guns, uh, semi-automatic weapons anyway, in 1996. We have more guns now.

In the country than we had in pre 1996. Did you know that? More guns in now? Yeah, but not semi-automatic. And the ones that we do have now are usually organized crime, and they’re not getting into the hands of mass shooters. So we haven’t had a mass shooting really since 1996. So, uh, yes. Saying it, it just doesn’t work.

Might be a little bit simplistic. Anyway, back to, back to healthcare. Um, rate discipline, how hard you negotiate and defend prices with insurance, uh, with insurers, better contracts, those sorts of things comes into play. How you manage your working capital. Um, how you collect from people that owe you money, all of that kinda stuff.

Waste less run leaner supply rooms. Don’t overstock, don’t overpay or don’t pay your vendors [00:26:00] earlier than you have to. All of the usual sort of working capital things that you have to do. Uncompensated care, charity care, and, and bad debt. You wanna drive that down. Your Acuity case mix that I mentioned before, agency nurse spend, apparently they use a lot of temp nurses at very high hourly rates, so you wanna tame that as much as you can, keeping your length of stay or LOS efficient.

Get patients home as soon as possible. Get ’em out. Get sick of bums in beds.

Tony Kynaston: through the, the sort of third and fourth page of the Hippocratic Oath. The very, uh, the not, not so widely known

Cameron: print.

Tony Kynaston: your, get your charity. That will work down. Get the patient out quickly,

Cameron: Yeah, yeah. Yeah. Uh, and then there’s the competitive edge. I mentioned these guys do a lot of stuff in non-metro areas, so that’s kind of their moat. If they have a moat, they have, you know, big, a lot of [00:27:00] facilities in regional areas where you then have physician relationships, fewer direct competitors than you might get in big city clusters.

So some of their portfolio pruning over the last 10 years has been to, I think, focus their energies more in these areas where they can be more competitive than they might be in areas where there are more healthcare providers. So that’s sort of the mix up of the business. It’s quite complicated, uh, and some of the reasons why it’s cheap.

They’re carrying a lot of debt. They’ve got, um, you know, sort of, uh, I can’t remember, billions of, billions of dollars of debt, but potential interest rate cuts coming through in the us so they might be able to refinance some of that. They’re also selling off. Assets selling off hospitals. They’ve got some other deals on the table at the moment.

They’re trying to sell off more stuff and they can use that to pay down debt. [00:28:00] Some of the other issues, there’s this reimbursement risk in the US election cycle. So Washington and state capitals apparently set big chunks of hospital pricing, Medicare rules, medicaid rules, all this sort of stuff. So when you have elections, new state and federal governments can come in and you know.

Budge, the amount of money that the, these healthcare providers can get their hands on, pay less, pay differently, pay later. So they’re dealing with that sort of mix. And then the investors are a little bit scared of, apparently of the for profit boom bust optics in this sector, apparently it’s got a track record of, uh, you know, like, as I mentioned before, quorum going bankrupt during COVID.

One of the, the. They spun off a bunch of their businesses into this other listed company that then went bankrupt. So [00:29:00] investors are a little bit wary on this and possibly for a bunch of good reasons, but. You know, from our perspective, it’s very cheap and it’s generating a lot of cash still. And the numbers, which I’ll run through in a minute, look pretty good.

There are some red flags, but if the cash engine stays real and they’re able to divest or deleverage more, uh, it could look even better in the future. So the QAV score is 0.7, which is pretty good. Average daily trade is about 8 million. Pretty strong quality rank on stock. Edia is a 61. We score anything that’s 60 or above.

The stock rank doesn’t score, uh, ‘ cause we only score for a 90 and the stock rank is, uh, [00:30:00] 86, so it’s slightly below our cutoff there. But they do score for. For the F score, the petrovsky financial health score, which is pretty strong, they get a seven for their F score. We’ll, we’ll score anything that’s four and a half or above, they get a seven.

So despite all of that debt, their F score is actually pretty solid. They don’t score for price being less than IV number one or IV Number two, they don’t score for price being less than Book book value growth is not positive. They don’t score for p less than yield ’cause they don’t have a dividend, they don’t score for yield is greater than bank debt for the same reason. Uh, so it’s largely based around, uh, Pr/OpCaf.

Tony is the main score. They, they had 11 and uh, 11 numbers. Uh, that we could score for. And they got a [00:31:00] seven out of that. So quality score is 64%.

Tony Kynaston: I think one of the things I’ll just chip in here is that I don’t think they’re making a profit at the moment either at a net profit line.

Cameron: Well, that would be why.

Tony Kynaston: Yeah. So they’re losing money. although I think it’s, I think it’s forecast to get back, to break even half or next half. Um, so even though they’re throwing off lots of cash, it’s being spent and it looks like it’s being spent on CapEx. So that’s either equipment or I guess. Building hospitals, which, which don’t know what, what part of the cycle we’re at with their CapEx. It might be ending soon, or it might be, it might be a fairly average year this year. so we’re really basing our, our liking for the stock on its cashflow And then

Cameron: Yeah, if I.

Tony Kynaston: new management can, uh, can boost margins and reduce costs and get back to a, a net profit [00:32:00] basis.

Cameron: Yeah. If you look at their profit history 2019, they lost 675 million profitable in 2020. 20 21, 20 22 key COVID years, and then they started losing money again from 2023 onwards, but their loss in 2024 was 516 million. The estimate for this year is down to 36 million, and for 2026 it’s 17.8 million. So it’s like the forecasts are that it’s turning around.

Their book value is negative, um, because of the size of their debt, I guess. So that’s why the price to book is dodgy. But yeah, they’re, but they’re,

Tony Kynaston: but my

Cameron: yeah.

Tony Kynaston: if America spends twice as much on healthcare per person in comparable nations, why can’t a hospital make money? That just seems

Cameron: Yeah.

Tony Kynaston: in the system if it’s not the healthcare [00:33:00] provider.

Cameron: Well, the CEO took home an $8 million paycheck, so, uh, he is, yeah. Well, I think you, like we know that doctors over there make insane incomes, right. Compared to doctors in the rest of the developed world in. Doctors? Well, yeah, I think so. Like doctors in Australia aren’t making most, I mean, you might got some surgeons or plastic surgeons or people like that, that are making millions of dollars a year here, but you don’t expect your, your GP or most of your doctors here to be making a ton of money.

Right. They, they do Okay, but they’re not millionaires. You know, I think, I think doctors in the US make a lot of money and I think insurance companies make a lot of money. That’s probably where a lot of it goes. So, yeah, so I don’t know Tony, so that’s an interesting one. So they’re generating a lot of cash flow, but they’re not profitable ’cause they’re sinking a lot of money into CapEx and paying off their debt and [00:34:00] all that kind of stuff.

So, I dunno, how do you feel about a business like that?

Tony Kynaston: I like a business throwing off lots of cash and um, I’d be trusting and hoping the change in management, even though it’s a insider, sounds like he’s interim. So there might be a change in management to an outsider coming up, um, would clear up their problems. So they seem to be clearing up anyway from a profit point of view. we have seen cases of this in our Australian investing and it hasn’t worried me too much because. It’s my experience that, um, if a business is throwing off a ton of cash, it solves a lot of problems. Um, it pays down debt, it funds CapEx. It’s, it’s a, it’s a, you know, it’s a, a big pot to play with to solve a lot of problems.

And if they have had problems and maybe they were COVID related, I, I don’t know, then getting back to break even. And, uh, you know, the cash will help them get back to profit. I’m fairly sure.

Cameron: Yeah, so at the end of the [00:35:00] day, Pr/OpCaf is what we really care about.

Tony Kynaston: And as we’ve said, as I’ve said time and time again, I, I haven’t, I don’t know this company, I haven’t into it as much as you have. I don’t know why their profit is negative, but it could be. I. For accounting reasons, it could be for, um, you know, the fact that they’re over providing for certain things like bad debts or whatever.

So as, as we say, uh, profit is as much a management decision as it is an accounting decision. So, um, that’s another reason why I focus on cash flow. So, uh, it’s got heaps of cash. I’ve used strong cash flow as risk mitigation. We’re getting, getting, um. Paid back by the operating cash flow with in under a year. If we put our money into this co, into this company uh, that, that means, know, we, our exposure is quite low in terms of risk. Um, going forward, if this company was profitable again, it, it would trade [00:36:00] on a much higher multiple obviously. and, um, you’d see a material rise in the share price for it.

Cameron: so a lot of, a lot of the money’s going to debt servicing 2024, interest rate expense was 860 million. Operating income was 542 million on 12.6 billion of revenue. So their margins are low, sort of a 4.3% margin.

So interest alone wipes out operating profit even before taxes and things like that. Then they had in 20 24, 300, 1 million of impairment and loss on asset sales, plus 486 million depreciation and amortization. So that’s where a lot of, you know, the, the net loss is coming from.

Tony Kynaston: Well, the debt’s a worry, but they’re paying it down and I’ve got the cash to pay it down. The, the, um, impairment would be non-cash, so that’s once off and it doesn’t affect the cash flow. Um, [00:37:00] those things will. Just with time, go all the impairment will go away, be there next

Cameron: Yeah. But yeah, as you said, profit is an accounting decision, right?

Tony Kynaston: Uh, profit is a management decision. Cash flow is an

Cameron: Wow.

Tony Kynaston: there are

Cameron: Our accounting determines that is a management decision.

Tony Kynaston: Correct. you know, for, I mean, CapEx is a management decision. How much you spend on CapEx is decided by management. And could probably make the company more profitable or all profitable tomorrow by just with withholding a bit of CapEx. Um, so it’s always a trade off, um, which is, which is why I prefer cashflow as a, a metric to value a company rather than

Cameron: Yeah.

Tony Kynaston: Hmm.

Cameron: Alright. Well. That is all I’ve really got Tony on. These guys, [00:38:00] CYH, community health do your own research people, but it’s uh, it’s an interesting business I think, and good luck not having to get involved in hope. You don’t end up as a patient. As you know, my son Taylor lives over there, but.

Tony Kynaston: Us and it’s, it’s not cheap.

Cameron: Yeah. You know, Taylor, my son who’s been living in LA for six months has been trying to get health insurance over there and can’t get it. He, he’s, he’s like all of the hurdles that he needs to jump through as, uh, a foreign citizen, uh, who works for himself and runs his own business. Trying to get healthcare over there has been a nightmare.

He’s, um. Trying for months and just can’t get it. So if anything happens to him, he just needs to get on a plane and come back here to see a doctor. Really, I.

Tony Kynaston: [00:39:00] And they might not let him on if he’s, you know, coughing and sneezing and red and running a temperature.

 but look, I, I think, you know, the, the one risk I think that, that could be coming for this company is a capital raise. they want to clear their debt quickly, they may actually go to the market and ask for, or, uh, money from shareholders, which would dilute people. But it, um, if it puts the company on the profitable footing, it might be worth it. So just bear that in mind. If someone’s looking at buying the stock.

Cameron: Thank you, Tony.

Tony Kynaston: Thanks

Cameron: Talk to you next week.

Tony Kynaston: All.

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