MedLife: Still growing, but fully valued post rerating (downgraded to HOLD)
Following the company’s announcement of a 5 for 1 distribution of bonus shares, a stellar set 3Q20 results – and a c.40% multiples rerating – we have downgraded the stock to HOLD, from Buy, with upside of 14% to our price target (PT) of RON 12.1/share (from RON 7.03/share). While fundamentally neutral, in Romania, bonus shares have a track record as catnip for retail investors; this time was no different and was, moreover, timed shrewdly. Pandemic-related fixed cost cuts, the synergies from the 2018-19 deals and a strong backlog of higher-value medical procedures drove margins higher in 2H20, and a large part of these gains are sustainable, we believe. Compared with previous years, in 2021-23E, we expect a growth dynamic more balanced between volumes and pricing, and a subtle shift towards inpatient vs. outpatient care, with margins somewhat above management’s historical guidance. Together with improved cash flows and gearing, this provides a solid basis for further expansion. This said, the stock trades currently at a c.4% premium vs. its peers on 2021-22E EV/EBITDAs, leaving it fully valued, for the moment, in our view.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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