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Mediclinic News : Market turns on Mediclinic


Market turns on Mediclinic




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NEW AGE Massive operational losses in the Middle East, following its takeover of rival Al Noor last year, have trimmed its value even as it looks to taking over other rivals. Massive losses in the Middle East continue to undermine Mediclinic International Plc's market value that has lost 25% since the counter hit its all time high of R218 a share in June. Now trading at R165.75 a share, questions are being asked how long the plunge will last, with the United Arab Emirates accounting for a big part of the diversified group's profitability. 'Significant impact' "The UAE now accounts for about a third of group net profit since the Al Noor transaction struck last year. So, any earnings disappointment in the UAE now has a significant impact on group earnings," says Argon Asset Management head of equities Jun aid Bray. Even before that update, JP Morgan had downgraded Mediclinic's stock in London to "neutral". Investec and Deutsche Bank also cut their ratings. Last week, New York broker Jefferies Group reiterated it expected Mediclinic to keep falling. That is bad for its shareholders no less Remgro, which owns 42% of the hospital empire and has splurged billions in recent rights issues. Mediclinic reverselisted in London in February, after swallowing rival AlNoor. Last year the Stellenbosch firm acquired 29.9% of London-listed Spire through a £432 million deal. Within months, Mediclinic, under CEO Danie Meintjes, presented its investors with a steep R33billion bill for the two assets. At home, eight of 15 analysts polled by Bloomberg rated the healthcare play a "hold", while the remainder were split between "buy" and "sell". So Mediclinic is hardly a must buy. Its price: earnings (PE) ratio of 32, even as sellers hold sway, suggests the counter remains expensive compared to peers Life Healthcare and Netcare (both at about 20). Their stocks ended September flat, while their Stellenbosch rival crashed 14%. Judging by its PE, Bray is convinced Mediclinic's prospects are overstated. "While we feel that Mediclinic should trade at a premium to its South African peers, we feel the current substantial premium is unjustified," he says. As to why Mediclinic's losing streak was already in motion before the September 9 trading update, Sasfin senior equities analyst Alec Abraham cites the group's play for the rest of Spire a hefty 70.1% chunk. For some investors, he says, it could hail another rights issue that could be "value dilutive". But Meintjes' group remains a bellwether due to its foreign operations. "Netcare and Life have fewer rand hedge qualities and are seen as relatively less defensive shares due to having lower geographical diversification," says Bray. Life is great "Life has the most attractive margins and returns of the three groups. However, growth and further efficiency gains from this are expected to be lower. Netcare has faced several challenges with its UK operations," he says, citing the fact that BMI under industry veteran Jill Watts since 2014 is a laggard in Britain where its rivals include Spire and Ramsay.
Created at 2016/10/10 04:54 PM by Mediclinic
Last modified at 2016/10/10 04:54 PM by Mediclinic