Shares digital

Directors in care homes operator Southern Cross Healthcare (SCHE) have swooped for almost £3.7 million worth of shares after the stock’s recent decline. The shares have slumped by over a third since the middle of December thanks in part to £36 million worth of stock being sold at 550p a share by various board members (Shares 19 Dec ‘07).

However, directors now appear to have had their heads turned by the prospect of picking up sizeable stakes at the current lower price, including previous large seller Bill Colvin, the chairman, suggesting that the stock could be trading at bargain levels.

Aside from December’s boardroom selling, the shares have also been hit lately by the recent resignations of chief executive Phillip Scott, last month, and finance director Graham Sizer, just last week. Sizer will be succeeded by Jason Lock, the current financial controller

Despite these changes, brokers remain optimistic about the outlook for the shares. Investec, an independent broker, believes that the group should be capable of enjoying ‘in excess of 20% EPS growth per annum’ helped by demographics. That and the growing consolidation in the care home market means that the company’s fundamentals are encouraging.

The broker believes that ‘as the business currently stands fair value is around 680p’. However, Investec believes that the company will succeed in acquiring additional beds which is the rationale for a target price of 760p. UBS is forecasting EPS of 26.8p, rising to 31.2p next year, placing the shares on a PE just shy of 14, falling below 12 next year.

With the firm’s AGM due next Tuesday (5 February), it would appear that the management team could be set to unveil a pretty upbeat report on trading and prospects.

Shares says: Positioned in a fast growing market, this spate of boardroom buying is encouraging.