Life Healthcare | ESG analysis
We rank Life Healthcare's (JSE: LHC) corporate governance as ‘adequate' with a score of 2.44. Based on our ESG risk framework, LHC's ESG risk exposure is moderate to high, with a residual risk rating of 3.7 out of 5. LHC's below-average ESG ratings stem from governance concerns we have. We engaged with LHC management regarding our concerns and include the feedback in our report. We commend management's willingness to engage with us. The Group's board comprises of nine non-executive members, of which five have served over nine years. LHC's board is 82% independent (Avior: 36%), we consider Board members with a tenure of over nine years to be non-independent.This morning the Group announced that its CEO, Dr Shrey Viranna will step down as Group CEO and as an executive director of the Board with immediate effect. Viranna is emigrating to Australia for personal and family reasons. Pieter van der Westhuizen, the current Group CFO will act as CEO with immediate effect. Despite Viranna remaining with the Group as a special advisor until 29 Feb 20, his resignation may have a detrimental impact on implementing the Group's strategy.
We recommend voting “FOR†all resolutions except ordinary resolutions 3.2 and 4.2 which we recommend voting “AGAINSTâ€. We estimate that LHC is trading at a 16.4x rolled forward PE (1.4x PE relative). We currently have a MARKET PERFORM recommendation and a R28.26 target price.
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.
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