Mediclinic International Plc

Mediclinic International Plc (MDC) is an international private healthcare services group. The company was founded in the year 1983 and is headquartered in Stellenbosch, South Africa. The company operates internationally with Switzerland, Namibia, South Africa and the United Arab Emirates are the main markets. Acute-care, specialist-orientated, multi-disciplinary healthcare services are the major service offerings of the company. The company's total outstanding market capitalisation stood at £2.29 bn and dividend yield stood at 2.60 (as on March-25-2019).

Financial Overview – H1 FY2019

(Source: Interim Report, Annual Result)

The company reported revenue of £1,387 million for the first half of the financial year 2019 as compared to £1,405 million in H1 2018. There was a decrease of 1 per cent in revenue, due to the weak revenue growth in Hirslanden. The company’s reported EBITDA was decreased to 213 million pounds in H1 FY2019 as compared to 232 million pounds in H1 FY 2018. There was a decrease of 8 per cent in EBITDA, due to an increase in adjusted depreciation and amortisation. The company’s reported adjusted operating profit was decreased to 137 million pounds in H1 FY2019 as compared to 161 million pounds in H1 FY2018. There was a decrease of 15 per cent in adjusted operating profit, due to the regulatory changes in the Swiss healthcare market which lead to poor Hirslanden contribution. The company’s adjusted net finance costs were reduced by 31 per cent due to benefit from the successful refinancing in Switzerland as well as the capitalisation of borrowing costs on capital projects. The company reported loss of £168 million for H1 FY2019 (H1 FY2018: negative £50 million). The company’s adjusted earnings decreased by 9 per cent to 76 million pounds in H1 FY2019 in comparison with 84 million pounds in H1 FY2018.

Financial Ratios
Gross margin reported was 37.1 per cent in the H1 of the financial year 2019, reflecting a marginal increase of 0.1 per cent when compared with last year data. EBITDA margin of 15.4 per cent for the first half of the financial year 2018 stood considerably higher than the industry median of 13.9 per cent. At liquidity front, Mediclinic International Plc’s current ratio was higher than the industry median of 1.20, reflecting sufficient current assets to pay its short-term obligations. On the leverage front, the debt-equity ratio was lower as compared to the industry median, reflecting that the company is less leveraged as compared to its peers.

Share Price Performance

Daily Chart as at Mar-15-19, before the market close (Source: Thomson Reuters)

On 15th March 2019, at the time of writing (before market close, GMT 9:06 AM), Mediclinic International Plc shares were trading at GBX 309.80, down by 0.065 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 712.40/GBX 293.10. At the time of writing, the share was trading 56.51 per cent lower than its 52w High and 5.70 per cent higher than its 52w low. Stock’s average traded volume for 5 days was 846,747.60; 30 days - 991,875.00 and 90 days - 1,757,588.88. The average traded volume for 5 days was down by 14.63 per cent as compared to 30 days average traded volume. The company’s stock beta was 1.33, reflecting more volatility as compared to the benchmark index. The outstanding market capitalisation was around £2.29 billion.

Growth Prospects and Risks Assessments
The company is changing its management team to increase the performance of the business. The company is giving more attention to its low performing business, i.e. Hirslanden and expect a good revenue for the financial year 2019. Due to regulatory changes in Switzerland, the Group’s financial performance was impacted in H1 FY19.

Valuation Methodology

Note: All forecasted figures and peers have been taken from Thomson Reuters.

Conclusion
Due to the effect of regulatory changes in Switzerland, there has been a decline in the financial performance of the business. The current trading level indicates the stock movement towards 52-week low and the effect of weaker financial performance in H1 FY19 with decreased revenue and depressed underline earnings. Based on the valuation done using the above method and risks highlighted, we recommend investors should keep a watch on Mediclinic International Plc stock at the closing price of GBX 310 (as on Mar 14, 2019) based on 13x NTM Industry Median Price/Earnings per share on FY19E earnings per share.
 

UDG Healthcare PLC

UDG Healthcare Plc was founded in the year 1948 and is headquartered in Dublin, the Republic of Ireland. The company provides clinical, communication, packaging, advisory, and commercial services in the United Kingdom, North America, the Republic of Ireland, and internationally. The company has two business operations being Ashfield and Sharp. The company own and manage (approximately) 8,700 people in 26 countries. The company is also involved in the healthcare advisory, manufacturing and technology services. UDG Healthcare Plc is listed on the London stock exchange and a part of the FTSE 100 index. The company's total outstanding market capitalisation stood at £1.40 bn and dividend yield stood at 2.15% (as on March-25-2019).

Financial Overview

(Source: Annual Report, Company Website)

The company reported revenue of $1,315,186 thousand for the year ending September 2018 as compared to $1,219,755 thousand in 2017 for the same period. There was an increase of 7.8 per cent in revenue of the company due to the increase in Ashfield and Sharp revenue segment by 12% and 3% respectively. The company’s reported other operating expenses had also increased significantly in comparison with the last year. The company’s reported Finance expenses had also decreased significantly in comparison with the last year. Finance expenses had gone down from $29,257 thousand in FY2017 to $13,926 thousand in FY2018 due to the issue of convertible bonds to raise additional capital. The company’s profit before tax was decreased to $8,386 thousand in FY2018 as compared to $92,834 thousand FY2017. The company’s profit attributable to shareholders was $3,795 thousand in FY2018 as compared to $71,858 thousand in FY2017. There was a decrease of 94.2 per cent due to the increasing operating expenses of the company.

Financial Ratios
Gross margin reported was 29.4 per cent in the financial year 2018, reflecting an increase of 0.9 per cent when compared with last year data. EBITDA margin of 13.5 per cent for the financial year 2018 stood considerably lower than the industry median of 15.5 per cent. Return on equity was lower than the industry median.  At liquidity front, UDG Healthcare PLC’s current ratio was higher than the industry median of 1.29. On leverage front, the debt-equity ratio was lower as compared to the industry median, reflecting the company is less leveraged as compared to its peers.

Share Price Performance

Daily Chart as at Mar-15-19, before the market close (Source: Thomson Reuters)

On 15th March 2019, at the time of writing (before market close, GMT 9:33AM), UDG Healthcare Plc shares were trading at GBX 564.50, up by 0.445 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 950.50/GBX 548.00. At the time of writing, the share was trading 40.61 per cent lower than its 52w High and 3.01 per cent higher than its 52w low. Stock’s average traded volume for 5 days was 532,284.60; 30 days - 957,366.27 and 90 days - 827,497.72. The average traded volume for 5 days was down by 44.40 per cent as compared to 30 days average traded volume. The company’s stock beta was 0.86, reflecting less volatility as compared to the benchmark index. The outstanding market capitalisation was around £1.40 billion.

Growth Perspective and Risk Assessments
The efficient management team and strategic positioning of the joint venture will provide growth opportunities in the coming future. The company through both Ashfield and Sharp segments, can identify strong growth potential in both the markets. It may face fierce competition due to high private & public investment.

Valuation Methodology

Note: All forecasted figures and peers have been taken from Thomson Reuters.

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 strong growth in revenue, the market should keep a cautious watch approach on UDG Healthcare Plc stock. Based on the valuation done using the above method and given the risks and competitive issues, we recommend investors should keep a watch on UDG Healthcare Plc stock at the closing price of GBX 562 (as on Mar 14, 2019) based on 15.11x NTM Industry Median Price/Cash flow on FY19E cash flow per share.

Note- GBp or GBX are interchangeably used for Pence Sterling.

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