Third Age Health Services: A Contrarian Gem in a Troubled Healthcare Sector

In a world where tech stocks soar and materials giants falter, one overlooked sector is quietly defying the odds: healthcare. Amidst sector-wide headwinds, Third Age Health Services (NZSE: TAH) stands out as a contrarian investment opportunity. With a 21% YoY EPS growth in FY2025, the company has thrived while peers like Infratil (1H loss) and SKY Network (underperforming) struggle. Here's why TAH could be a high-growth, defensive alternative to volatile markets—and why now is the time to consider it.

A Fortress of Resilience in a Crumbling Healthcare Landscape

The healthcare sector faces mounting pressures: regulatory uncertainty, supply chain disruptions, and cost inflation. Yet TAH has delivered 26% revenue growth to NZ$19.08 million and a 70% net income surge to NZ$2.39 million, with margins expanding to 12.5%—a stark contrast to its peers.

Why the resilience?
- Operational Efficiency: TAH's margin expansion reflects disciplined cost management and revenue diversification.
- Dividend Sustainability: A 3.1% dividend yield with a 59% payout ratio by 2026 suggests stability, even as peers slash payouts.
- Defensive Business Model: Aging demographics are a guaranteed tailwind. By 2034, the global population aged 65+ will hit 1.3 billion, and TAH's focus on eldercare services is perfectly timed.

Contrast with Volatile Sectors: TAH vs. Materials & Tech

While investors chase AI-driven tech stocks or commodity giants like VALE and FCX, TAH offers a low-risk, high-reward alternative:

TAH's 1.6% weekly gain contrasts with Infratil's decline and SKY's stagnation.

TAH trades at a 31% discount to peers, despite superior EPS growth.

Materials stocks like VALE or FCX face commodity price swings and geopolitical risks, while AI plays like NVIDIA or AMD rely on speculative demand. TAH, however, benefits from a secular trend—aging populations—that's impervious to macro cycles.

The Silver Tsunami: A Tailwind, Not a Headwind

The “Silver Tsunami” is the defining demographic shift of our time. By 2050, 22% of the global population will be over 60, driving demand for eldercare, chronic disease management, and home health services. TAH is already capitalizing:

• Service Expansion: Growth in telehealth, memory care, and home-based programs aligns with seniors' preference for aging in place.
• Workforce Innovation: PRN staffing models and technology-driven efficiency (e.g., AI for care coordination) mitigate labor shortages.

This isn't just a niche play—it's a structural growth story. As governments worldwide grapple with rising healthcare costs, providers like TAH that blend affordability with quality will thrive.

The Contrarian Case: Buy the Undervalued, Sell the Overhyped

For contrarians, TAH ticks all the boxes:
1. Undervalued Valuation: At a 12x P/E, it's cheap relative to its 71% EPS growth rate and peers.
2. Stable Cashflows: A 13.4% free cash flow yield (FY2024) underpins dividends and reinvestment.
3. Low Beta: Healthcare's defensive nature shields investors from tech/commodity volatility.

TAH's 27% annual dividend growth since 2021 outpaces peers' erratic payouts.

Risks and Why They're Manageable

• Regulatory Risks: New policies could impact reimbursements, but TAH's diversified service model and cost discipline provide buffers.
• Geographic Concentration: Focused on New Zealand, but the “silver tsunami” is a global phenomenon—expansion into Asia/Europe is a logical next step.
• Dividend Volatility: While past cuts occurred, current payout ratios suggest sustainability.

Investment Thesis: A 2025+ Play

TAH is a contrarian's dream: a high-growth, undervalued stock in a resilient sector. With a 3.1% yield, a 12x P/E, and secular tailwinds, it offers both income and capital appreciation. Compare this to AI stocks trading at 50x+ P/Es or materials stocks at the mercy of commodity cycles.

Actionable advice:
- Buy now if you're seeking stability in volatility.
- Hold for the long term to capture the demographic dividend.
- Avoid if you're chasing short-term tech moonshots—this is a marathon, not a sprint.

In a market obsessed with the next AI breakthrough or lithium mine, TAH reminds us that human needs never go out of style.

Disclaimer: Past performance does not guarantee future results. Always conduct your own research before investing.