Egypt healthcare 3Q20e results preview | Earnings confirm the rebound; Favour healthcare service providers
Healthcare coverage 3Q20e earnings set to rebound; Pharma players to lag. We look for a q-o-q rebound in revenues and earnings for our healthcare coverage, chiefly underpinned by a hike in traffic, following the ease of mobility restrictions, and a slowdown in COVID-19 cases in 3Q20. Pent-up demand is seen as coming more in favour of healthcare services providers, with earnings growing on average by 11% (excluding SPMD). Conversely, pharma players are seen delivering muted earnings growth (excluding Rameda), pressured by a feeble tender business, negatively affected by the restructuring of the Unified Procurement Authority (UPA).
Rebound in traffic underpins IDH, SPMD, CLHO earnings. The hype regarding COVID-19 testing, along with a pent-up demand in 3Q20, are major tailwinds to healthcare services providers’ earnings. IDH is forecasted to deliver 8% y-o-y earnings growth, with room for positive surprises, on the back of the increasing demand of COVID-19 testing in Egypt and Jordan. On the other hand, SPMD is poised to grow its earnings 5x, reflecting the full operation of Prime Speed’s nine Drive-Thru outlets, bolstering the company’s testing capabilities and profitability. CHG is set to benefit from the dwindling number of new COVID-19 cases, which we see underpinning the rise in traffic numbers, leading to 14% y-o-y earnings growth.
UPA caps pharma revenue growth; Export sales positively surprise. The Unified Procurement Authority (UPA) has a mandate to exclusively undertake the procurement of medical supplies for all governmental agencies. With UPA undergoing restructuring during 3Q20, new tenders issuance have been reportedly put on hold, hindering tender revenue growth for local drug makers. We expect AXPH to report a 6% y-o-y earnings growth, despite a drop in interest revenues, underpinned by 9% y-o-y growth in revenues, supported by a recovery in non-COVID-19 related drug sales. Rameda is seen reporting flattish top line growth, with the drop in tender business (c22% of total revenues) mitigated by c13% y-o-y improvement in the retail segment (outperforming the market by 10pp), leading to a bottom line of EGP30mn. EIPICO is estimated to deliver an 18% y-o-y drop in revenues, dragged by a 27% y-o-y decline in local sales, partially offset by a 23% surge in the export market, in tandem with the ease of restriction. Ibnsina is expected to witness a 17% y-o-y hike in revenues, on our figures, boosted by a further market share gain, yet failing to reach the bottom line level, on increasing interest expenses.
IDH ticks most of boxes ahead of 3Q20 results. IDH is seen delivering a low double-digit revenue growth, alongside improving margins and earnings. We look for 11% y-o-y revenue growth, coupled with an EBITDA margin of 43%, with further room for positive surprises. The stock trades at a c20% discount to peers, unwarranted, in our view, given the company’s growth profile and lucrative dividend yield.
Alexandria Co for Pharmaceutical and Chemical Industries SAE, an affiliated company of Drug Holding Company, is an Egypt-based company engaged in the manufacture, development and marketing of pharmaceutical, chemical, veterinary and nutritional food products, as well as medical appliances, such as adhesive plasters, dental cartridges, medicated adhesive tapes, sterile gauze dressing and surgical gloves. The Company produces syrups & suspensions products, ampoules products, drops products, tablets, capsules, creams & gels products and suppositories products, among others. The Company exports its products to African and Middle Eastern countries, as well as to Romania, Russia and Kazakhstan. The Company has two Factories, one factory for production of pharmaceutical products and the other for production of adhesive tapes, plasters and sterile surgical gloves. The Company's subsidiaries include, among others.
Cleopatra Hospital SAE is an Egypt-based hospital, which provides health and medical services, as well as the medical care of inpatients. The Company holds stakes in four hospitals in the Greater Cairo Area: Cleopatra Hospital, Cairo Specialized Hospital, Nile Badrawi Hospital and Al Shorouk Hospital, offering a full array of general and emergency healthcare services. Its service offerings include general surgery, emergency and ambulance services, cardiology, gynecology and obstetrics, oncology, orthopedics and a number of outpatient clinics, including dental, physiotherapy and primary care. The Company's facilities allow to conduct routine examinations, simple procedures and operations, and general services such as pharmacy, blood bank and diagnostic services.
Ibnsina Pharma Co is an Egypt-based pharmaceutical distribution company. The Company distributes a portfolio of pharmaceutical products from over 350 Egyptian and multinational companies to more than 35,000 customers including pharmacies, hospitals, retail outlets, and wholesalers. Ibnsina Pharma Co's nationwide distribution network with more than 50 operational sites, including distribution hubs and central warehouses, is supported by a fleet of approximately 600 vehicles. The Company's main services for suppliers include management of warehousing and logistics for pharmaceutical products as well as the development and execution of tailored marketing solutions targeting a nationwide database of customers.
Integrated Diagnostic Holding is a holding company fully integrated private sector provider of diagnostics services in Egypt, backed by an internationally accredited diagnostics service portfolio of over 1,000 diagnostic tests, a footprint spanning 354 branch labs as of Dec 31 2016. Co.'s core brands include Al Borg and Al Mokhtabar in Egypt, as well as Biolab in Jordan and Ultralab and Al Mokhtabar Sudan in Sudan. Co. also operates the Medical Genetics Centre brand in Egypt. Co. offers more than 1,000 diagnostic tests, ranging from basic tests (such as glucose testing for diabetes) to molecular tests for hepatitis and highly specialized DNA tests.
Speed Medical S.A.E. Speed Medical SAE is an Egypt-based medical laboratory operator. The Company is engaged in establishing, operating and managing diagnostic laboratories, clinics and hospitals. It operates four branches across Egypt.
CI Capital is a diversified financial services group and Egypt’s leading provider of leasing, microfinance, and investment banking products and services.
Through its headquarters in Cairo and presence in New York and Dubai, CI Capital offers a wide range of financial solutions to a diversified client base that include global and regional institutions and family offices, large corporates, SMEs, and high net worth and individual investors.
CI Capital leverages its full-fledged investment banking platform to provide market leading capital raising and M&A advisory, asset management, securities brokerage, custody and research. Through its subsidiary Corplease, CI Capital offers comprehensive leasing solutions, including finance and operating leases, and sale and leaseback, serving a wide range of corporate clients and SMEs. In addition, CI Capital offers microfinance lending through Egypt’s first licensed MFI, Reefy.
The Group has over 1,700 employees, led by a team of professionals who are among the most experienced in the industry, with complementary backgrounds and skill sets and a deep understanding of local market dynamics.
CI Capital has been recognized as the “Best Investment Bank in Egypt” by EMEA Finance for four years running from 2013-2016, and by Global Finance in 2014 and 2015.
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