NMC Health Plc Stock (NMC) - Growth Vs Competition-Driven Risks

  • Mar 01, 2019 GMT
  • Team Kalkine
NMC Health Plc Stock (NMC) - Growth Vs Competition-Driven Risks

Overview

NMC Health Plc was founded in the year 1975 and is headquartered in London, the United Kingdom. The company provides healthcare services internationally, U.A.E (United Arab Emirates) and Spain being the major markets. The company has two business operations being Healthcare & Distribution and Services. The company own and manage 135 (approximately) healthcare facilities which include hospitals, surgery centres, fertility centres and medical centres. The company is also involved in the distribution of medical equipment, pharmaceutical products, veterinary products, cosmetics, IT products and consumer products. NMC Health is listed on the London stock exchange and a part of FTSE 100 index. 

Key Management Team

  • Mr Prasanth Manghat: CEO & Executive Director
  • Mr Khalifa Butti Omeir Bin Yousef, Executive Vice Chairman
  • Mr Hani Buttikhi: Chief Investment Officer & Executive Director

Financial Results and Review - 1H FY2018 (US $, thousand)

(Source: Half Yearly Report, Company Website)

 

Financial Commentary – H1 FY2018

  • The company’s reported revenue of $931,970 thousand for the half year ending June 2018 as compared to $775,153 thousand in 2017 for the same period. There was an increase of 20.2 per cent in revenue of the company due to the introduction of mandatory health insurance policy in Dubai.
  • The company’s reported general and administrative expenses had also increased significantly in comparison with the last year. General and administrative expenses had been raised from $160,841 thousand in H1 FY2017 to 191,997 thousand in H1 FY2018.
  • The company’s reported Finance expenses had also increased significantly in comparison with the last year. Finance expenses had been raised from $27,872 thousand in H1 FY2017 to $51,554 thousand in H1 FY2018 due to the issue of convertible bonds to raise additional capital.
  • The company’s profit before tax was increased to $118,718 thousand in H1 FY2018 as compared to $99,306 thousand H1 FY2017.
  • The company’s profit attributable to shareholders was $116,494 thousand in H1 FY2018 as compared to $87,729 thousand in H1 FY2017. There was an increase of 32.8 per cent due to the increasing revenue of the company.

Ratios

(Source: Thomson Reuters)

Ratios Commentary

  • Gross margin reported was 40.5 per cent in the first half of the financial year 2018, reflecting an increase of 1.1 per cent when compared with last year data.
  • EBITDA margin of 25 per cent for the first half of the financial year 2018 stood considerably higher than the industry median of 14.3 per cent.
  • Return on equity stood at 10.3 per cent which was higher than the industry median of 3.10 per cent.
  • At liquidity front, NMC Health PLC current ratio was higher than the industry median of 1.12.
  • On leverage front, the debt-equity ratio was significantly higher as compared to the industry median, reflecting the company is more levered as compared to its peers.

Share Price Commentary   

 

  • On 28th February 2019, NMC Health PLC shares closed at GBp 2,704 up by 3.28 per cent against its previous day closing price.
  • Stock’s 52 weeks High and Low is GBp 4,376/GBp 2,508. At the closing price, the share was trading 38.21 per cent lower than its 52w High and 7.81 per cent higher than its 52w low.
  • From the previous three months, NMC Health PLC share price was down by 18.01 per cent, and in the last one year, the stock has delivered a negative 21.26 per cent returns.
  • Stock’s average traded volume for 5 days was 335,330.60; 30 days - 771,525.87 and 90 days - 535,294.12. The average traded volume for 5 days was down by 56.54 per cent as compared to 30 days average traded volume.
  • On the valuation front, the stock was trading at a trailing twelve months PE multiple of 25.5x as compared to the industry median of 13.2x.
  • The company’s stock beta was 0.57, reflecting relatively low volatility as compared to the benchmark index.
  • Total outstanding market capitalisation was around £5.65 billion and a dividend yield of 0.48 per cent.

Growth Prospects and Risks Assessments

  • The active management team and strategic positioning of the joint venture will provide growth opportunities.
  • The company through both organic and inorganic means can identify new potential markets.
  • The company due to some bad investment decisions may result in the inability to execute integration.
  • The company may face fierce competition due to high private & public investment.

Conclusion

While broad-based challenges can be seen ahead of the group, given the current trading levels which indicate the stock movement towards 52-week low with support coming from few drivers like increasing costs and due to high competition in main markets, the market should keep a cautious approach on NMC Health Plc stock.

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