Following a damning royal comission report released this month, nearly half a billion dollars will be flowing into the aged care sector – and several ASX small caps could benefit.

The Morrison government has pledged a $452.2 million funding package to improve residential aged care safety, quality and oversight.

“In terms of the industry there should be additional relief from the government,” Morgans healthcare expert Scott Power told Stockhead recently.

Aged care operators should see about a one per cent uplift in their revenue for this year, he said.

But there’s questions about whether the funding mechanism for aged care providers will be revised. The government subsidises something called a Refundable Accommodation Deposit (RAD), a lump sum payment, for residents.

“So that creates uncertainty, from an operator’s point of view,” he said. “While there’s funding uncertainty, it’s unlikely you’re going to continue to invest in new products. I think that’s going to be a bit of an issue over the next six months.”

The government will address these questions when Treasurer Josh Frydenberg releases the 2021 Federal Budget, likely in May.

With some of the results of the report already flagged, there have been gains in the share price of the ASX’s three listed aged care operators this year after a dismal 2020.

Regis Healthcare (ASX:REG) shares were trading at $2 on Thursday afternoon, up 9.2 per cent this month and 6.9 per cent for the year.

Estia Health (ASX:EHE) securities were changing hands at $1.99, down 1.5 per cent for the month but up 27.6 per cent for the year.

Japara Healthcare (ASX:JHC) shares were at 75c, down 3.9 per cent for the month but up 21.0 per cent year to date.
 

PainChek and Swift Media lead ASX aged care cohort

More funding for the sector would also no doubt benefit companies that sell to aged care operators, which a couple of ASX-listed companies do.

PainChek (ASX:PCK) has a clinically validated smartphone app that can measure and detect pain in people who have trouble verbalising it, such as those with dementia.

At the end of last year it had issued licenses covering 71,318 beds to 884 aged care clients, which will result in an estimated $3 million annualised recurring revenue under PainChek’s software-as-a-service business model.

Swift Media (ASX:SW1) is a “closed-loop” entertainment company that began by delivering content like Hollywood blockbusters to remote mining camps. It started selling into the aged care sector last year, winning contracts for 4,300 rooms that brought in $900,000 in revenue for the six months to December 31.

With 85 per cent of aged care rooms not serviced by anything other than free-to-air television, there’s not much competition.

Swift’s content for aged care providers includes TV noticeboards, premium content specifically curated for aged care, and mobile apps for residents to stay connected with loved ones.
 

HSC Technology and InteliCare

HSC Technology Group (ASX:HSC) and InteliCare (ASX:ICR) are both technology companies with products for letting older Australians remain in their homes – which will be one of the five pillars of the government’s grant package.

HSC has wearable devices and sensors (not cameras) to monitor seniors in their home and alert emergency services in the event of a fall or something similar. It also sells to the aged care sector directly

HSC company had 3,424 subscribers as of the half-year ended last June, resulting in $1.66 million in revenue.

Intelicare’s offering consists of discreet sensors placed around the home that gather information on movement, activity levels and temperature, which monitor seniors and let loved ones check up on them.

The company got a shout-out in the royal commission report and says its technology can be a part of the aged care solution.

“For InteliCare, this is now a real opportunity to genuinely improve the health outcomes of older Australians and help them stay at home for longer,” says chief executive and managing director Jason Waller.

“Our technology has grown leaps and bounds since inception and has shown positive benefits for patients, consumers, their families, and the sector.”

Intelicare had $235,518 in sales in the half-year ended December 31 and last month signed a supply agreement with Optus.

At Stockhead we tell it like it is. While InteliCare is a Stockhead advertiser, they did not sponsor this article.

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