Portfolio

Berenberg slashes NMC Health target but still sees considerable upside potential

By Alexander Bueso

Date: Thursday 30 May 2019

Berenberg slashes NMC Health target but still sees considerable upside potential

(Sharecast News) - Berenberg slashed its target price for shares of NMC Health after rebasing its model and transferring coverage to analyst Michael Ruzic-Gaithier, but continued to see significant upside.
Although the German broker slashed its target price from 4700p to 3600p, it decided to keep its recommendation at 'buy', even without accounting for the possibility of inorganic growth or the potential from its joint venture with the General Organization for Social Insurance (GOSI) - the largest pension fund in Saudi.

The stock's valuation, with the shares trading on about 16.0 times' estimated earnings for 2020, was "unwarranted", they said.

Combined, the healthcare supplier's competitive positioning and multi-year growth which lay ahead should result in a compound annual growth rate of about 30%, which in their opinion justified a P/E multiple closer to 21 times.

NMC's Royal Hospital in the UAE alone was capable of pushing the company's operating profits 30% higher by 2023 once mature, the broker said.

And now NMC was intent on pushing into the Saudi market and Berenberg judged it was "well-positioned" to do so.

"We also note there is material upside to our forecasts, given that we do not model for inorganic growth and have opted not to speculate on the financial effects of the Saudi JV."



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