Al Noor Hospitals Plc Quick Note – 15 May 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 848.18
52 Week High 1,191.20 52 Week Low 870.70 P/E (F) 18.3
Dividend Yield % 1.1% Dividend Cover 4.45 CEO: Ronald Lavater
CFO/Group FD: Mr Pramod Balakrishnan Price Target 1180.00


Al Noor shares fall on news of institutional exit

Al Noor shares have fallen sharply in the second quarter from earlier highs of 1,080.00 pence to a 14 month low of 812.00 pence at the beginning of May.

The core driver behind the sell off has been an announcement by Ithmar Capital that it would be exiting its remaining 23% stake in the group via a bloc share sale to be carried out by Deutsche Bank. Ithmar Capital, a Gulf based private equity firm, is the former (Pre-IPO) owner of Al Noor Hospitals Group Plc.

The sale has been on the cards since the IPO in 2013 and represents the final leg in a long journey for the private equity company. It also follows a number of similar sales last year which were the result of the founders of the business seeking to exit their holdings ahead of retirement.

While news of a mass exit from institutional investors and founding managers of a business is never welcome news for most ordinary shareholders, Al Noor has attempted to put a brighter spin on the recent transactions by citing the consequent improvement in liquidity that is expected after 23% of the group’s share capital hits the market.  

Al Noor Hospitals Group Plc share price / 8 Hour Intervals



Maintaining our positive outlook for Al Noor Hospitals

While the recent fall in the price of Al Noor shares may have been enough to unnerve some investors, we remain attracted to the group as we see no adverse change in the underlying fundamentals for the group.

This is as the exit of Ithmar Capital and one of the founding directors, Kassem Alom, comes as no real surprise as both had previously alluded to their plans for achieving an eventual exit at various points in the group’s post – IPO life.

Ithmar Capital had made no secret of its intentions before and after the IPO while the group’s former Chief Executive Kassem Alom also alluded to the possibility of a further sale back in September of 2014.

Furthermore, Al Noor’s first quarter trading statement which was released earlier on in May highlighted what appears to be a continuation of the strong growth seen at the group in 2014.

This was as revenue is reported to have increased by 11.9% to $124.9 million during the opening months of the year, while the volume of patients receiving medical care has increased proportionally with the opening of new facilities.

The group also reported that it remained debt free during the period, while maintaining a near $100 million cash reserve on its balance sheet in order to finance suitable acquisitions as and when opportunities arise.

In terms of organic growth, management reaffirmed their commitment to taking up more space at one of Abu Dhabi’s largest hospital buildings, while the construction of a number of its own new hospital buildings is also reported as “remaining on track”.


The takeaway

Despite what has been a turbulent second quarter and a sharp drop in the shares we remain upbeat in our outlook for Al Noor Hospitals Group.

We see not material change in the underlying fundamentals of the business and are thus, undeterred by the recent private equity and former management stake sales.

In this regard, we note that all of the incoming data relating to the group’s performance in the first quarter continues to indicate that the robust growth experienced during the 2013 & 2014 years has continued into 2015.

For this reason we see no reason to alter our price target or downgrade our outlook for the shares and as a result, we prefer to view the current price weakness as an opportunity as opposed to a development to be concerned over.



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