The FTSE 100’s NMC Health (LSE: NMC) was a darling growth stock rising at a steady two-o’clock trajectory for around two and a half years — until it wasn’t.
In August 2018, the share turned around and began to dive, almost as gracefully as it had previously risen. The recent share price around 2,792p is more than 30% below the peak achieved last summer – ouch!
More barnstorming results
But today, the private healthcare services provider released another set of barnstorming results, proving that, operationally, nothing is different. Revenue and adjusted earnings per share both shot up more than 28% during 2018 – I wish some of my small-cap investments put in growth numbers like that, never mind this ‘lumbering’ big-cap elephant. The directors seem relentlessly positive and pushed up the final dividend for the year by more than 39% as if to prove it.
My view is the key to the firm’s success is it serves oil-rich nations and wealthy individuals in the Gulf Cooperation Council (GCC) and owns hospitals in 19 countries in the region. On top of that, NMC claims to be “one of the top 3 in-vitro fertilisation (IVF) operators globally.” The firm said in the report organic growth ran at the rate of around 15% in the period, with the rest achieved via acquisitions. During 2018, the firm spent around $553m taking over other businesses and just over $225m purchasing “outstanding minority stakes in Fakih IVF and As Salama Hospital.”
The company has been pursuing an “aggressive” international expansion programme since 2016 and sees the Kingdom of Saudi Arabia as a key growth market. A big chunk of operations are sited in the firm’s home market of the United Arab Emirates (UAE) right now, so the geography is convenient. In 2018, NMC pushed further into Saudi Arabia and expanded its IVF platform into the USA and Africa. It also enhanced its capabilities in the area of cosmetics with the acquisition of a company called CosmeSurge.
A bullish outlook
Trading in 2019 is off to a good start and chief executive Prasanth Manghat said in the report the firm’s strategy revolves around building capacity and capability along with geographic expansion. The company is riding a wave of “sustained economic expansion” in its core markets. Manghat cites the Institute of International Finance forecast for 3.1% GDP growth in the UAE for 2019, as an example.
He also explained the healthcare sector is “a key focus” for governments in the firm’s operating regions. Promotion of private participation in healthcare is “a common theme across all these countries.” NMC aims to target segments where governments are “most keen to find private sector partners.”
The outlook is bullish. Yet you can pick up a few NMC shares on a forward-looking price-to-earnings ratio of around 16 for 2020. Meanwhile, City analysts’ projections for annual earnings increases above 20% seem to keep on coming. I’m bullish on the shares.
