MD Medical Group Investments Plc (LON: MDMG)

MD Medical Group Investments Plc is an FTSE listed investment holding company. The Company provides private healthcare for women and children. The Company's services include obstetrics and gynaecology, paediatrics, fertility and IVF treatment, and other services, including laboratory services, stem cell storage, trauma, rehabilitation, dental care, and surgery.. The Company also owns its laboratory, stem cell bank and ambulance service.

On 6 September 2021, the Company would have its IFRS results announcement and on 1 November 2021, the Company would release its Q3 FY21 operating results.  

Recent trend of dividend payments

(Data Source: LSE Website, Research done by Kalkine Group)

The chart above demonstrates the consistent dividend payment done by MDMG from FY15 to FY19. In FY20, MDMG paid a dividend of 19.00 RUB per GDR. The pay-out date was 25 May 2021.The management remains committed to paying dividends amounting to 50% of the net profit twice a year in the future.

Latest Achievements in Medical Field

MDMG successfully conducted an endovascular heart surgery on a premature newborn with low birth weight. It was the first such surgery in Russia and in the history of MDMG.

The Company also conducted its first open-heart surgery in the MDMG Lapino hospital. The operation was conducted using  a modern heart-lung machine.

Growth Prospects

• Strong network: The Company has the largest regional medical network in Russia, covering 27 cities and 25 regions, giving it leverage above other private healthcare providers to expand and capture market share. Recently, MDMG expanded the service range at Lapino-2 (such as dentistry and oncosurgery), completed the construction of Lapino-4, and designed the new Lapino-3 building. The Company also launched three outpatient clinics and two test collection laboratories in Moscow and the Moscow Region and three clinics in other Russian regions.
• Attractive market opportunity: The regional area of the country is still an underdeveloped market with solid potential for growth. The increased budget for healthcare post-Covid and favourable state support for healthcare companies, including a 0% income tax rate, perpetual medical licence, and participation in the Mandatory Health Insurance programme, provides decent growth opportunities to the Company.
• Diversification plans: MDMG initially focused on women and children's healthcare; however, with the opening of Lapino-2, the Company increased its surgical capabilities and made significant progress in treating oncology along with other treatments.
• Strong operational performance history: The Company performed exceptionally well throughout the years, with solid growth in H1 FY21

Key Risks 

• Medical risk: Medical risk is one of the main risks affecting the Company's reputation; if the patients are not satisfied with the services, it could lead to reputational loss.
• Regulatory and compliance risk: The healthcare services industry enjoys favourable reforms by the Russian government. However, any negative change in regulations could impact the operations and financials of the Company.
• Delay in project execution: Any delay in the completion of projects and hospitals could add burden on the financials of the Company.
  

Now we will analyse some key fundamental and shareholders statistics of MD Medical Group Investments PLC. 

Financial and Operational Highlights (for six months ending 30 June 2021 as of 29 July 2021)

(Source: LSE Website) 

• The total revenue increased by 51% on a YoY basis, driven by solid performance in the traditional areas of expertise.
• The volume of the deliveries improved by 10%, while the revenue from the deliveries jumped by 17% from H1 FY20.
• IVF cycles increased by 41% on a YoY basis, with revenue growth of 42% in the segment.
• The total in-patient treatments increased by 49%, and the total outpatient treatments increased by 23%, mainly due to its performance in oncology, internal medicine, trauma, and orthopaedics facilities.
• The Company expects to reach capacity utilization of Lapino-2 to 40% at the end of FY21 and Lapino-4 building is expected to reach 80% capacity by year-end.
• The Company reduced its net debt by almost 38% from December 2020 by its strong cash generation.

Financial Ratios (H2 FY2020)

Share Price Performance Analysis

 (Source: Refinitiv, Research done by Kalkine Group)

On 26 August 2021, at 7:00 AM GMT, MDMG’s GDRs traded at USD 11.20 and remained flat against the previous day closing price. 52-week High and Low were USD 13.40 and USD 5.50, respectively.

On a daily chart, the stock price is sustaining above the 200-day EMA at about USD 8.52 and 200-day SMA at about USD 8.04. Hence, there could be an uptick in the stock price in the near term. 

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)

Business Outlook Scenario

MDMG delivered an excellent performance in H1 FY21, with revenue growth of 51.00% against H1 FY20. The Company’s expansion plans and service diversification will be the critical drivers for the Company in the future. The Company benefits from the vast market reach. The untapped regional areas in Russia provide a huge opportunity for growth for MDMG. The Company maintains solid margins, and its low debt position indicated financial strength. MDMG made some serious inroads in heart transplant surgery, and the Lapino-2 and Lapino-4 provide the apt capacity to provide multiple services to its customers. The traditional services continue to dominate the market, and improved volumes reflect strength in revenues going forward. The group continues to work on developing multiple projects across Russia, and lower debt levels provide confidence to the management to expand and improve market share even further.

Considering the Company’s market leadership position, service diversification, solid financials, continued expansion strategy, and support from the valuation using the above method, we have given a “Speculative Buy” recommendation on MD Medical Group Investments PLC at the current price of USD 11.20 (as of 26 August 2021 at 7:00 AM GMT), with a lower-double digit upside potential based on 13.10x Price/NTM Earnings (approx.) on FY21E earnings per share (approx.).

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

*All forecasted figures and Peer information have been taken from Refinitiv.

*The dividend yield is subject to change as per the stock price movement.

*The reference data in this report has been partly sourced from Refinitiv.

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