Report
Steph Erasmus

Netcare | ESG analysis

We rank Netcare's (JSE: NTC) corporate governance as ‘good' with a score of 3.16. Based on our ESG risk framework, NTC's ESG risk exposure is moderate, with a residual risk rating of 3.2 out of 5. We commend the Group's willingness to engage in ESG topics. The Group's Board comprises eight non-executive members, of which three have served over nine years. NTC's board is 80% independent (Avior: 50%). We consider Board members with a tenure of over nine years to be non-independent.

We support variable compensation comprising 42% and 35% of NTC's CEO and CFO total FY '19 remuneration, respectively. We commend the NTC Board on the extensive disclosure of its STI targets. Ideally, we want to see variable remuneration contribute c.50% to total executive remuneration.

We recommend voting ‘FOR' all resolutions except ordinary resolution 2.5 which we recommend voting ‘AGAINST'. We estimate that NTC is trading at a 10.4x rolled forward PE (0.9x PE relative). We currently have an OUTPERFORM recommendation with an R23.10 target price.
Underlying
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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