Al Noor Hospitals Group Plc Pre Results Update – 18 March 2015

Company Overview:

Al Noor Hospitals was established in 1985 as a private healthcare provider in Abu Dhabi. In this time, the company has grown to become one of the leading providers of private health care services in the UAE.

In 2013 the group listed on the London Stock Exchange and was admitted to trading on the FTSE 250. As of March 2014, the company operated three full service hospitals and a number of medical centres across Abu Dhabi, servicing nearly 50,000 inpatients and a total of 1.6 million outpatients.

Core areas of focus for the group include: Cardiovascular treatment and surgery, Bariatric (weight loss) treatment and surgery, Cancer treatment and surgery, Neurosurgery – Urology – Orthopaedic – Paediatric – Ophthalmology (Eye Surgery).

Index FTSE 250 Ticker ANHA.L Latest Close 1,008.00
52 Week High 1,269.00 52 Week Low 893.00 P/E (F) 20.48
Dividend Yield % 1.1% Dividend Cover 4.45 CEO: Ronald Lavater
CFO/Group FD: Mr Pramod Balakrishnan Price Target 1180.00


Al Noor Hospitals shares continue to trade aimlessly through Q1

Since our last update, Al Noor Hospitals have continued to trade aimlessly as market volatility in Q4 and the prospect of further share sales from senior management appear to have blunted the appeal of the group to investors.

However, with the release of full year results just around the corner (end March) we write briefly today to reaffirm our positive outlook for earnings as well as the shares over the near, medium and longer term.

Al Noor Hospitals Group Plc Share Price / 8 Hour Intervals



Long term fundamentals remain sound for Al Noor, while strong performance from nearest competitor bodes well for 2014 results

While we do not yet know the full extent of progress at Al Noor in 2014 it is worthy of note that the group’s nearest competitor, NMC Health Plc, announced another year of strong growth in February with revenues and net profits up by 18% and 12% respectively.

When taken together with the positive Q3 update in October the latest news bodes well for Al Noor’s full year financial numbers. In this regard, we also note that over the three months since our last update the consensus forecast for EPS has been revised moderately higher from 45.36 pence per share, to 46.31 pence.

However, even with this revision taken into account, we still view Al Noor as likely to have topped consensus for the period which means that our own projection for EPS in 2014 remains at 49.20 pence.

This expectation is the result of group progress in adding new medical centres (+3) and new revenue generating doctors (+101) to the payroll during the period, which now place the group on track to exceed $400 million in revenue according to management estimates.

When combined with the outlook for margins, which are expected to remain stable at 23%, we have our revised figures for post tax earnings and therefore, EPS for the period.

Looking past the pending release of results, we continue to see the long term fundamentals supporting the Al Noor investment case as remaining sound. These fundamentals are both demographics and industry related.

On the one hand, the Arab Emirates feature in the top ten for countries when it comes to the prevalence of obesity and the number of Diabetes sufferers as a portion of the population. According to recent estimates, 0.4% of the UAE population is clinically obese, and 18.9% of the population suffers from one form of diabetes or another. Furthermore, the portion of the population which is over the age of 65, and thus likely to need greater levels of medical care in the future, is expected to reach double digit figures within the coming years.

This is while, on the other hand, there remains only one other emirate focused company that can really rival Al Noor in scale and financial resources. This is the London listed NMC Health Plc which, although being an established organisation itself with unbounded potential, does not threaten Al Noor Hospitals Group’s prospects for growth.

While the emirates are big enough for both, each company holds uniquely different specialisms while from an investment perspective, Al Noor remains a preferable play on UAE health due to its stronger balance sheet and specialism in non communicative diseases such as diabetes, respiratory defects, cardiovascular disease and cancer.


The takeaway – no change to our expectations or price target

In short, we continue to believe that there is a strong investment case for Al Noor both over the near – medium term, as well as the longer term.

This is as demographic and industry fundamentals in the UAE remain sound, while the group itself still maintains a strong net cash position on its balance sheet, including a $100 million merger and acquisition reserve.

As an unlevered, or debt free, company we also see Al Noor as having attractive funding prospects would be positive if the group were to really become busy with acquisitions.

In terms of full year financial numbers, we still expect a strong earnings performance from the group, with EPS for the period likely to be in the order of 49.20 pence.

This supports our price target of 1,180.00 pence, which remains in place and unchanged, while implying a forward earnings multiple of 24X 2014 EPS. This still leaves the group at a very minor discount to the wider industry (25.4X – Reuters).

Full year results for 2014 will be released on 30 March 2015, which we expect to be supportive of further gains for the shares. As always, we shall endeavour to keep all of our members up to date with the developments as they occur as well as at the time of release.



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