reports
- 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 ...
- Steph Erasmus
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...
- Steph Erasmus
Omnia | More questions than answers?
Despite an improved financial position, Omnia is not creating positive economic value added in its divisions. Omnia experienced complications in the ramp-up of its new nitrophosphate plant. Due to the delays, we expect the guided cost savings (c.ZAR 100m) from the new nitrophosphate plant to materialise 12 months later than initially guided. Disappointingly, Omnia management could not guide how much of the nitrophosphate cost savings were in the base in H1 '20, making forecasting challenging....
- Steph Erasmus
Life Healthcare | Scanning the horizon for opportunities
Life Healthcare's offshore expansion has been poor in India (sold out to KKR at a ZAR 1bn profit) and Poland (we estimate ZAR 1.5bn write-down of fair value). Alliance Medical operates in the UK and derives the majority of its income from NHS contracts which expire in c.2025 to 2027. LHC is trying to transition its Alliance Medical business model to SA by expanding into the SA radiology market. However, we have reservations looking at the experience set of Mediclinic (MEI) when they applied to t...
- Steph Erasmus
Netcare | All about execution
Netcare delivered a credible set of results given persistent pressures from medical funders and affordability. In our view, Netcare is the purest play on the SA hospital industry, given the location of its beds (good), ability to drive occupancies and unguarded balance sheet. Netcare has recently been added as one of two anchor providers for the Government Employee Medical Scheme EVO plan in 2020, a key step to increasing occupancies.
- Steph Erasmus
Mediclinic | Aim high, miss low?
Over the past two years, Mediclinic (MEI) has been negatively affected by rising regulation in Switzerland, which has hampered profitability, and poorly executed diversification into the Middle-East. MEI's H1'20 results indicate no reprieve from these pressures. MEI needs to optimise their business in Switzerland to cater for out-patient treatment and more effective tie-ups with university hospitals. However, the Zurich canton accounts for c.70% of the Swiss unit's revenues where regulation is p...
- Steph Erasmus
Healthcare | Rising off a low base
Our views around Mediclinic Switzerland (MEISW) have evolved guided by evidence that MEISW is delivering on its turnaround strategy by generating c.14% EBITDA margin for H1 20f. In our view, MEI's current share price is not reflective of the green shoots guided for in Switzerland. While Life Healthcare (LHC) has withdrawn from its Max India investment, we remain concerned about the longevity of their Alliance Medical (LHCAM) business. Since Jan ‘19 LHC has benefited from the inclusion c.470...
- Steph Erasmus
Healthcare | The final Health Market Inquiry report, expected yet unse...
Our outlook for Life Healthcare, Mediclinic and Netcare's (the healthcare providers) South African acute EBITDA margins has worsened. The Health Market Inquiry (HMI) commission's findings on the profitability of the healthcare providers suggest that the government will embark on further measures to reduce the profitability of the healthcare providers. The general tone of the HMI report is also of concern, with the HMI commission (the commission) not making mention of private-public partnership...
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