Mediclinic shares down nearly 30% as the private hospital group still has to heal
Mediclinic’s share price fell nearly 30% in the financial year to March, though some analysts say the worst may be over for the private hospital group.
The group, with the largest hospital portfolio on the JSE, said that although it had grown in southern Africa, it underperformed in the Middle East. This dragged down its overall performance.
Mediclinic began 2017 on a high when the shares rallied in January after it acquired a majority stake in Life Path Health, a company with nearly 10 mental-health facilities in SA and the rest of Africa.
The share price fell in February after the company issued its second profit warning in five months, citing problems in the Middle East. The government of the UAE required that country’s state medical aid users to pay 20% of private hospital bills. This resulted in net profit from the Middle East plunging 62.5% to £21m from £56m.
Subsequently, the stock fell for five days running, the longest streak since October
The share recovered in April, however, when the crown prince of Abu Dhabi, Sheikh Mohammed bin Zayed al-Nahyan, scrapped copayment on private healthcare.
Mediclinic’s shares were 0.66% higher on the day at R131.28 at the close on Tuesday.
A recent JP Morgan report by analysts Alex Comer and Ross Krige offered comfort, saying the longer-term structural outlook and ultimate earnings recovery were good, but they suspected weak guidance would temper near-term enthusiasm.
"We suspect we are through the worst for Mediclinic, though the trajectory and scale of earnings recovery are debatable," the analysts said.
Portfolio manager at Gryphon Asset Management Casparus Treurnicht said it looked as if operations at Abu Dhabi’s Al Noor Hospitals Group would be the first to recover, but he would wait for the economic environment to improve in Europe and SA.
He said also that more clarity on Brexit was needed.
"The share is probably trading at its cheapest levels in a long time, but unfortunately political events are present in each and every market where Mediclinic is active and this … is unpredictable" said Treurnicht.