Report
Steph Erasmus

Healthcare | The final Health Market Inquiry report, expected yet unsettling

Our outlook for Life Healthcare, Mediclinic and Netcare's (the healthcare providers) South African acute EBITDA margins has worsened. The Health Market Inquiry (HMI) commission's findings on the profitability of the healthcare providers suggest that the government will embark on further measures to reduce the profitability of the healthcare providers. The general tone of the HMI report is also of concern, with the HMI commission (the commission) not making mention of private-public partnerships. The commission, by its own admission said that there is no reliable source for health outcomes data other than the healthcare providers themselves. Yet the commission did not acknowledge the substantial capex which the healthcare providers have invested in developing their IT/IS healthcare systems. We expect the final Medical Scheme Amendment Bill to follow a similar tone which government will consolidate into the final NHI Bill. We believe the healthcare providers can provide infrastructure and expertise which the public healthcare system needs to successfully implement the NHI.
Underlyings
Life Healthcare Group Holdings

Life Healthcare Group is an investment holding company. Co. operates and has interests in private healthcare facilities and healthcare services companies in southern Africa, Poland and India. Co.'s segments are comprised of: hospital, which includes all the private hospitals in southern Africa; Co.'s healthcare services businesses, which includes Life Esidimeni that operates a network of care centers through a public-private partnership, Life Occupational Health that provides contracted on-site occupational and primary healthcare services, and Careways Wellness that provides occupational health and employee wellness; international, which includes Poland; and other, which includes Corporate.

Mediclinic International

Netcare

Netcare is engaged in provision of a range of general and other medical care services in South Africa and the U.K. Co operates its business within the following three segments: Hospital and Emergency Services, which include the operation of Co.'s private hospital network and emergency medical services; and Primary Care, which is engaged in the provision of primary healthcare services and managed care. Co.'s primary care segment provides medical and dental services through Medicross family medical and dental centers and Prime Cure clinics. Co.'s U.K. segment includes operation of private acute care hospitals in the U.K.

Provider
Avior Capital Markets
Avior Capital Markets

Avior is a globally recognised capital markets research and trading firm, with the broadest research coverage within the region, with 100+ SA and 20+ SSA companies under coverage. Avior services clients from offices in London, Cape Town and Johannesburg.

Our research quality is consistently recognised in local and global surveys, with 18 analysts currently rated in their respective sectors (FM 2017). Value add through in-depth, innovative, high quality and consistent research with comprehensive underlying fundamental modelling supported by regular analyst and roadshow interactions.

Avior has proven that by working closely with our clients we can mutually develop dominant positions in certain sectors, going from strength to strength. Avior has a dedicated ESG team, having been ranked #1 in Corporate Governance research since 2008.

Analysts
Steph Erasmus

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