ii view: NMC Health grows profits and targets expansion

Emirates hospital operator NMC pursues 30 million Saudi Arabian population for future growth.

First-half results to 30 June 2019  

• Revenue up 33% to $1.24 billion
• Profit (EBITDA) up 23% to $323.5 million
• Earnings per share up 29% to 66 US cents
• No interim dividend payment announced
• Full-year guidance maintained

Chief executive Prasanth Manghat said:

"NMC Health again achieved strong performance in the first six months of the year, as we continue to deliver on our growth strategy in our attractive target markets. Our ability to perform strongly in a challenging environment testament to NMC's strategy of developing niche, differentiated verticals in our core markets that provide the best possible care for our patients.

We are also particularly pleased to have closed our strategically important partnership with GOSI/Hassana Investment Company which ranks as one of the defining events in the history of NMC. This partnership will provide us with the ideal platform to establish a dominant position in the attractive Saudi Arabia healthcare market."

ii round-up:

With a history dating back over 40 years, NMC Health (LSE:NMC) owns and manages over 200 healthcare facilities that include hospitals, medical centres, long term care facilities, day surgery centres, fertility clinics and home health services. 

In 2018, over 7 million patients were treated by its team of over 2,000 doctors and 20,000 paramedical and support personnel across 19 countries. 

Its key market is the United Arab Emirates where it is the largest private healthcare company. 

The group operates through the two divisions of Healthcare and Distribution of healthcare related products. 

The company ranks as one of the top two in-vitro fertilisation ("IVF") operators globally.

For a round-up of these first-half results, please click here. 

ii view:

Founded by billionaire Bavaguthu Raghuram Shetty, the company has grown from a small clinic and pharmacy in Abu Dhabi under the name New Medical Centre to the leading private healthcare operator in the Gulf Cooperation Council (GCC). 

Management is currently focused on efficiency improvements, integrating previously acquired outlets and growing its footprint in Saudi Arabia via a partnership. Saudi Arabia has a population of over 30 million, only about a third of which is currently covered by mandatory insurance. 

For investors, a forward price/earnings (PE) ratio below the three-year average offers encouragement, while the recently announced $200 million share buy-back programme might usually provide some support. However, NMC shares failed to bounce back with the wider market following last year's Q4 slump, and rumours both around stakebuilding and accounting practices have made the shares far more volatile. There is also some scepticism about expansion in Saudi Arabia.  

Positives: 

• Rumours of competing offers for a 40% stake in the company
• Pursing an international expansion programme since 2016

Negatives:

• The Middle East region generates 85% of revenues
• Press rumour regarding accounting policies

The average rating of stock market analysts:

Strong buy