Bottom Line: Healthy-looking prospectus

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The Independent Online
HELPED by the launch of community care, interest in Westminster Health Care, the latest company to join the stock market, has been huge. The whole print run of 45,000 prospectuses has been sent out and all that remains is for applications to roll in by tomorrow morning.

The company, which has an excellent five-year record, is being sold on a multiple of 16.7 times forecast earnings for the year to May 1993. This is less than the multiple accorded to Takare, its main competitor in the nursing homes business. Both should benefit in the growth of elderly people needing care.

Before getting carried way, investors should consider two points. There has been a cash outflow in each of the past four years, with pounds 26.2m leaving the group last year, after it had paid pounds 30.6m for new homes. This outflow is bound to continue, given the company's plans to build homes with 1,400 beds - to add to its existing 3,000 - within the next two years.

The pounds 63m raised through the placing and offer will reduce borrowings, which have until now been guaranteed by Westminster's US parent. But Westminster may well have to ask shareholders for more money in two years' time.

Second, Westminster, like its competitors, is operating in a new environment with the arrival of community care. While it should be good for the private sector, there is some uncertainty about how the new arrangements will work out. Even so, the shares at 260p should go to a premium.

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