WOOD Flash – MedLife: management sees wage pressure abating from 4Q18E

During the conference call, management directly addressed one of its biggest challenges – high wage growth, driven by pressure from the public healthcare sector – saying that it expects public sector wages to reach the government’s 2022E target in 4Q18E, which would relieve the pressure on MedLife’s costs for the next four years, allowing its margin to expand. Also, while we are unlikely to see significant relief in the coming quarters, looking at the solid revenues growth from the current business and the pro forma contribution from Polisano, we believe that MedLife is fully on track to meet our FY18E revenues target of RON 797m, or +26% yoy. MedLife’s 1Q18 EBITDA margin of 12.2% was a touch weaker than we had expected but, judging by the pro forma consolidation with Polisano (EBITDA margin: 12.3%), there may be less dilution than we have pencilled for later this year, so we remain comfortable with our FY18E EBITDA target of RON 98.7m (25% yoy growth and a margin of 12.4%). Comments regarding price increases suggest that there may be more upside than we capture currently in our forecasts for the Clinics and Dentistry segments.