For the year to date, Euromoney Institutional Investors (LSE:ERM), Mediclinic International (LSE:MDC), and QinetiQ (LSE:QQ) lead the way in share price performance. While the way the shares move is obviously important, I want to delve deeper to understand what the driving forces are behind these moves.

Euromoney

Euromoney was subject to a takeover offer from a couple of private equity firms and the current offer on the table is equivalent to 1,461p per share. At the time of writing, the shares are trading at 1,314p.

The private equity companies seem keen to complete the takeover of Euromoney, a financial publishing firm, given that they’ve made four previous offers.

For the six months to 31 March, the company reported that revenue had increased by 14% year on year. Furthermore, adjusted pre-tax profit grew by 16% to £38.6m over the same time period. 

However, it’s still unclear how the economic environment and the war in Ukraine may impact the business, and whether these factors will lead to a fall in demand for services, which means this is a risk.  

Mediclinic

Like Euromoney, Mediclinic has also been subject to an offer from a consortium. The approach, worth somewhere in the region of £3.4bn, was rejected last month. Despite this, the takeover deadline has been extended, meaning that talks are still under way.

The shares are currently trading at 474p.

For the year ended March — which included some months when the effects of the pandemic were still visible — operating profit at the business surged 34% to £280m and revenue was above pre-pandemic levels. Of course, these figures make sense, given that there were likely increased levels of client demand during the pandemic.

However, with the worst of the Covid crisis behind us, it’s possible that results will not be as impressive in the future.

QinetiQ

Finally, the QinetiQ share price has performed well this year. The company – a defence specialist – has a strong forward order book to supply governments around the world with weapons and equipment.

Indeed, there has been heightened interest from investors due to the ongoing war in Ukraine and the shares are currently trading at 380p. 

The business had a net cash balance of £225m at the end of March, while it estimates that it will derive £900m in revenue from contracts due in 2023. 

However, while the company is in a healthy financial position, much of the share price performance of late has come from the fallout from the war in Ukraine. That conflict won’t last forever, and I wonder if an end to hostilities might result in the shares falling.

Overall, these three firms top the index for share price performance in 2022. But while they’re all attractive propositions, there are too many unknowns for my liking. Yet I won’t rule out purchases in the future, when things are a bit clearer.

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The good

Sylvania Platinum (LSE:SLP) is a producer and developer of platinum group metals (PGMs), platinum, palladium and rhodium. It has enviable low-cost operations in the element-rich Bushveld Igneous Complex and stellar recent performance. It got back to full production rapidly after the severe initial lockdown in the first half of 2020. Its third-quarter results to 31 March 2021 boasted net profit of $41.3m, more than double the prior quarter’s $20.3m. Fantastic cash reserves also enabled a once-off windfall dividend of 3.75p per share in April.

Moreover, Sylvania interests me as a bet on commodity prices and a hedge against inflation for investors in UK shares. The likes of UBS reckon platinum undersupply will continue while demand grows for the metal in catalytic converters and jewellery. With chatter about global inflation, commodities are a good defence against losing value to rising consumer prices.

The evergreen caveat with commodities is that prices can dip for extended periods, and even the best producers won’t win when that happens.

The bad

My “bad” stock is Old Mutual (LSE: OMU). Established in Cape Town in 1845, the insurance and financial services giant is a pillar of South African commerce. That makes it less of a bet on the business itself than on prospects for “South Africa Inc.”.

South Africa’s output growth has declined steadily from just over 3% in 2011 to zero before the pandemic. The economy shrank 7% in 2020. Covid-19 responses have depleted an already creaky fiscus. And politicians aren’t helping.

A planned constitutional amendment to allow land reform, likely in the shape of confiscation of land without compensation, is a frightening reminder of Zimbabwe’s violent farm takeovers and ensuing economic collapse. If this goes ahead, my outlook for South Africa and businesses that rise and fall with it turns dour.

I retain some hope that political haggling will scrap at least the “without compensation” part of the plan.  

The ugly

Mediclinic (LSE:MDC) runs private hospitals in South Africa. It serves a small elite who pay for private medical insurance. The harsh truth is that an unfortunate majority of people in this unequal society have no choice but to use the poorly resourced public system. However, that already regrettable status quo could change disastrously.

The proposed National Health Insurance (NHI) Bill would establish nationalised universal healthcare. A single, taxpayer-financed NHI Fund would buy healthcare services for the entire population from both public and private providers.

We don’t need the minutiae of the plan to calculate its potential for calamity. This redistributive system would spread too few medical resources among too many people, just as the wealthy tax base is fleeing. Doctors and nurses are departing, too.  

Owners of Mediclinic International’s UK shares can take solace in the company’s operations in Switzerland and the United Arab Emirates. But I won’t be buying while nationalisation is on the cards.

The post Good, bad and ugly: 3 UK shares with South Africa exposure appeared first on The Motley Fool UK.

Today I’m looking at a couple of FTSE 250 shares that I have on my shortlist. First up is Mediclinic International (LSE: MDC), which released a Q3 trading update Friday. The private healthcare company, with operations in the Middle East and Southern Africa, reported a 2.5% rise in Q3 revenue.

Coping with Covid-19

CEO Dr Ronnie van der Merwe said: “Through the third quarter of our financial year, a more severe second wave of Covid-19 cases has placed greater demand on our acute care capacity.” So far, Mediclinic says it has cared for more than 30,000 Covid-19 patients. And it’s heavily into supporting vaccine rollout plans.

What’s the investment proposition? After a tough few years, I see Mediclinic as a recovery candidate. I won’t buy into a recovery stock until I see signs of the actual recovery. And I think that’s even more important with potentially more volatile FTSE 250 shares. But I think I’m seeing it in 2021.

The company looks to be in a strong liquidity position, with cash and available facilities of £660m at December 2020. It’s reducing debt too. Cash conversion currently stands at 59%, which is well below the target of 90%-100%, but is better than the 42% rate in the first half. Will Mediclinic be one of the FTSE 250 shares I buy in 2021? I’m going to wait for the full-year picture at least, and possibly until I see further cash conversion improvement.

Exciting FTSE 250 shares?

When we think of FTSE 250 shares, we often think of more exciting companies with rapid growth prospects. Well, that doesn’t exactly describe my second pick, Ibstock (LSE: IBST). It makes bricks. And concrete construction items. Dull and boring? Maybe. But they’re essential products with strong long-term demand.

I say long term, as Ibstock has suffered in the Covid-19 pandemic. As the construction industry was severely hampered, the Ibstock share price was hammered in early 2020. It’s not alone in that respect among FTSE 250 shares, many of which have experienced scary volatility. Ibstock has made one of the bigger recoveries since the November market uptick though. But it’s still down 28% over the past 12 months.

I’m seeing resilience

The firm’s 2020 trading update is showing signs of improvement. The release, on Thursday, said: “The strong recovery in market conditions through the second half enabled the group to achieve revenues of around £315m for the full year, down by 23% compared with 2019, with second-half performance down by approximately 10% year-on-year.”

That’s still a tough year, and the new quarter could be hit by the latest lockdown. But I think it underscores the long-term demand for building products. Ibstock expects 2020 EBITDA a little above its previous guidance of £50m, which I find reassuring. I’ll wait and see what the results say. But these two FTSE 250 shares are definitely on my Stocks and Shares ISA shortlist.

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The first is Mediclinic International (LSE: MDC), which released a first-half update Thursday, ahead of full results due on 12 November. The private hospital group, which has operations in South Africa, Namibia, Switzerland and the United Arab Emirates, spoke of a “robust first-half operating performance“, despite the Covid-19 impact.

Chief executive Dr Ronnie van der Merwe said “We have seen a good rebound in trading since May 2020, particularly in Switzerland and the United Arab Emirates, as the initial peak of the pandemic passed“.

Tough first half

Mediclinic has certainly had a tough year so far, along with so many in the FTSE 250. Reported total revenue is down 7%. Earnings per share, which came in at 9.9p for the first half last year, is set to come in just “marginally positive” this time. Mediclinic says it had £450m in cash and available facilities at 30 September, and that’s something I’d inspect carefully when we get the full-year results. The balance sheet is what matters most for companies under pandemic pressure this year.

Mediclini, which owns 29.9% of Spire Healthcare, has been through a bad patch with falling earnings over the past couple of years. But after the big fall forecast for the current year, analysts are predicting a serious rebound for the 2021–22 year. That would put the shares on a forward price-to-earnings multiple of 12. I think Mediclinic has long-term growth potential, and I’d buy.

FTSE 250 REIT

My second pick provides a very different aspect to healthcare investment. It’s one I’ve liked for some time, Primary Health Properties (LSE: PHP). Primary Health is a FTSE 250 real estate investment trust (REIT). It invests in healthcare properties, primarily GP surgeries, and lets them on long-term leases.

Earnings progress has been slow in recent years, but analysts see 20% growth this year with a modest extra next year. The Primary Health Properties share price is down 9% so far in 2020. But over the past two years we’re looking at a 30% gain.

Dividends

On top of that growth, Primary Health has been one of the FTSE 250’s steadiest dividend providers. And that’s where an investment trust has an advantage. A lot of companies will pay a fixed proportion of earnings as dividends each year. But trusts will typically hold some back in good years to even things out in poorer years. Of course, individual investors can do that themselves with the dividend cash they earn. But a less erratic dividend stream can help keep sentiment sweeter and reduce share price volatility.

I’ve long been a fan of investment trusts, REITs or otherwise. And if you’re investing for FTSE 250 income, I’d suggest you consider Primary Health Properties for your buy list.

The post Want to invest in healthcare in 2020? I’d buy these FTSE 250 stocks today appeared first on The Motley Fool UK.

Food ingredients and additives

Tate & Lyle (LSE: TATE), the food ingredients and additives manufacturer and supplier, delivered decent adjusted half-year results at the beginning of November. Sales, earnings and the interim dividend all rose by small, single-digit percentages.

Chief executive Nick Hampton said in the report that in the firm’s Food & Beverage Solutions division, an increased focus on pricing and mix management delivered “strong” growth.  Meanwhile, the profit from the Primary Products division came in lower because of “challenging” market conditions. But both divisions achieved productivity gains and good discipline on costs led to higher cash generation.

The company is on a drive to simplify its business, which is “driving momentum across the organisation and supporting performance.” However, the directors expect a flat outcome with earnings for the full year.

Meanwhile, with the share price close to 734p, the forward-looking earnings multiple for the trading year to March 2021 is just under 13 and the anticipated dividend yield is 4.25%. I think that looks like decent value.

Precision engineering

IMI (LSE: IMI) designs, manufactures and services “highly engineered” products that control the precise movement of fluids, such as actuators and valves.

In the third-quarter update released in November, the company said it is making “good” progress with its business-improvement and cost-reduction initiatives, and in the face of weak markets, has been working hard to reduce costs and improve margins. Sales came in a little lower in the quarter, but margins were up.

Looking ahead, the directors think that revenue in the entire second half of the year will show another small decline when compared to the 2018 equivalent period. But profits should come in flat. Meanwhile, the firm has finished its structural review and has a plan to drive the business forward in the coming years.

With the share price close to 1,135p, the forward-looking earnings multiple for 2020 is just over 15 and the anticipated dividend yield is around 3.8%. I think the stock is attractive.

Healthcare

Mediclinic International (LSE: MDC) delivers private healthcare in Southern Africa, Switzerland and the Middle East. The half-year results report released in mid-November showed revenue up 9% compared to the equivalent period the year before and flat earnings.

Chief executive Dr Ronnie van der Merwe said in the report that all three divisions grew revenue, EBITDA and patient volumes in the period. And the firm is making progress adapting the business to current healthcare trends and changing regulatory environments, “especially at Hirslanden in Switzerland.”

The company has a growth agenda and aims to expand by offering more services in the healthcare field such as day clinics, primary care facilities, sub-acute hospitals, radiology, precision medicine, IVF and digital healthcare solutions.   

Meanwhile, with the share price near 399p, the forward-looking earnings multiple for the trading year to March 2021 is just under 14 and the anticipated dividend yield is 2.1%, with the payment set to be covered a generous 3.5 times by predicted earnings. I’m tempted to buy some of the shares.

Overall, I reckon all three of these businesses are improving and the valuations remain modest.  

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Steady trading

Today’s half-year results report from the private healthcare provider is tolerable. Revenue rose 9% compared to the equivalent period the prior year and adjusted earnings per share came in flat. The directors held the interim dividend flat too, suggesting a cautious outlook.

Not a disaster then, but nothing to get the pulse raising either. As compensation, we investors are faced with an undemanding valuation. With the share price close to 382p, the forward-looking earnings multiple for the trading year to March 2021 is just over 13, and the anticipated dividend yield is just over 2%. City analysts following the firm expect a rapid rebuilding of earnings during this year and next, which should cover the dividend payment around 3.5 times.

Chief executive Dr Ronnie van der Merwe said in the report the performance in the period was “solid” with all three divisions growing revenue, EBITDA and patient volumes. The company earned around 52% of its operating profit from operations in Southern Africa, 37% from Switzerland, and 11% from the Middle East. Van der Merwe is “pleased” with progress adapting the business to healthcare trends and changing regulatory environments, “especially at Hirslanden in Switzerland.”

A plan for growth

Part of the firm’s plan for growth involves broadening the scope of operations to embrace areas beyond the core acute care business. Growth initiatives and collaborations include striking out into things such as daycare clinics, primary care facilities, sub-acute hospitals, radiology, precision medicine, IVF and digital healthcare solutions.   

There are some robust tailwinds in the sector and Mediclinic reckons the global demand for quality healthcare services “remains unwavering.”  To illustrate, the report mentions factors such as an ageing population, the growing disease burden and digitalisation of healthcare. All those things are “creating further opportunities for expansion and evolution across the healthcare continuum.” 

I’m pretty sold on the idea of investing in the sector and I like the fact that Mediclinic has had the stuffing knocked out of it. Indeed, the shares were trading higher than 1,100p in August 2016, so today’s price represents a more than 65% decline. But reading the tea leaves (and the share-price chart), I reckon the stock has been consolidating and creeping up for most of 2019, which I find to be encouraging.

It seems to me operations have stabilised and it could be a good time to revisit the shares. I’m tempted to pick up a few, with a holding period of at least five years in mind.

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In poor health

It was briefly a constituent of the FTSE 100, but with its share price down 60% in the last three years, it now languishes in the FTSE 250 with a market-cap of £2.7bn.

The Mediclinic share price is up 2% today after markets smiled on its 2020 half-year trading update. Group CEO Dr Ronnie van der Merwe reported an encouraging performance with trading in line with expectations, as it expands across all three of its divisions.

He also highlighted good revenue growth, broadly stable margins in Switzerland, patient volumes in line with expectations at Mediclinic Southern Africa, and “continued gradual improvement” in the Abu Dhabi business.

Road to recovery

The group’s problems were down to impairment charges totalling £262m on its UK and Swiss businesses, which struggled with government regulation and increased competition, even as its South African and Middle East operations reported steady revenue growth. Yet private healthcare is a relatively defensive market and investors have been looking for an opportunity to buy back into the growth story.

Given its troubles, I would have expected the Mediclinic share price to be trading at a wider discount and just 13.5 times forecast earnings. The forecast yield is just 2.1%, although nicely covered 3.4 times, giving scope for growth. Earnings are predicted to fall 4% this year, but the future looks brighter as City analysts reckon they could climb 11% next year.

It is well worth keeping an eye on Mediclinic, but I wouldn’t rush to buy it today. Especially when there are so many exciting stocks on the FTSE 250 at the moment, including this little gem picked it by my fellow Fool writer Alan Oscroft, which also operates in the healthcare sector.

In rude health

Earlier this month, Alan wrote that Primary Health Properties (LSE: PHP) offers a tempting combination of strong share price growth and high dividends. The growth has been eye-popping, up 30% in the last year, and almost 70% over years.

The £1.67bn company invests in healthcare real estate in the UK and Ireland, which it lets out on long-term leases backed by a secure underlying covenant, with the majority of rental income funded either directly or indirectly by a government body.

The primary healthcare real estate sector is typically less cyclical than other parts of the property market, which makes Primary Health Properties surprisingly low risk, given recent soaraway growth. I can see why Alan admires it.

Low risk, high price

Last month, it launched a share placing to raise £75m to fund further expansion, as it sees attractive investment opportunities in building larger GP primary care centres. This is on top of the £60m it has already committed to fund the acquisition and development of eight medical centres, and £70m on other medical centres as it looks to boost the number of assets in its portfolio.

Today, it offers an attractive forward yield of 4%. Earnings growth looks steady at a forecast 10% this year, and 7% next. There is one downside, though. Alan isn’t the first to spot an opportunity here. The stock is a little pricey at 23.7 times earnings. Sometimes you have to pay for quality…

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It is easy to see why. The bank is significantly exposed to the UK economy, and it has barely recovered from the financial crisis, but management is already getting ready for another downturn. In October, the company warned that it has put £100m aside for bad debts due to the “uncertain economic outlook,” and trebled the amount it has set aside to help SMEs navigate Brexit to £3bn.

Preparing for the worst? 

These preparations seem to indicate that RBS’s management team is preparing for the worst. But as of yet, we don’t know how Brexit will unfold, and if it will be as bad as some analysts are expecting. 

If it isn’t, and economic growth suddenly recovers, I think shares in RBS could quickly bounce back. After all, the stock is trading at a significant discount to the bank’s tangible asset value per share, which was 288p at the end of September. 

This discount would be understandable if RBS were still loss-making, but with the company on track to report a net profit of nearly £2bn for 2018, I don’t think the discount is warranted. That being said, there are other factors to consider here, such as the government’s substantial stake in the bank, which is acting as an overhang on the shares because sooner or later, it will have to be sold. 

Still, when compared to its peers both here in the UK, and across Europe, shares in RBS undeniably look cheap. However, this is not a bet for the faint-hearted. Only time will tell how the UK economy will react to Brexit and if RBS’s £100m provision for bad loans will be enough. 

So, while the stock could jump substantially from current levels, most investors might not be comfortable with this level of uncertainty. If you fall into this bracket, you might be more interested in FTSE 250 turnaround situation Mediclinic International (LSE: MDC). 

FTSE 250 turnaround 

Mediclinic is an internationally diversified healthcare facilities provider. Unfortunately, the group has fallen out of favour with investors recently after booking a series of impairment charges on its UK and Swiss businesses for a total of £262m. 

These two businesses are struggling amid government regulation and increased competition. Mediclinic’s other markets are performing well. The group’s South African and Middle East operations reported revenue growth of 5% for the first six months of the company’s financial year.

Because the company operates in a relatively defensive market, I think it should be able to overcome its problems over the medium term. Analysts are already expecting a recovery for fiscal 2020. They are forecasting earnings per share of 31p, up from a loss in fiscal 2018. This estimate puts the stock on a forward PE of 11.4, which in my opinion gives a healthy margin of safety for investors buying at this level. There’s also a dividend yield of 2.3% on offer.

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For existing holders, these declines are disappointing. But for buyers, the fall is fantastic news as the stock is now 20% cheaper than it was just a few weeks ago.

On sale?

It seems the main reason why the market has soured on the company over the past two months is because the City has downgraded its growth expectations. 

At the beginning of August, analysts were expecting the company to report earnings per share (EPS) of $1.47 for 2018. Two months on, and this target has been revised lower to $1.41.

Earnings downgrades are always disappointing, but in this case, it seems as if the market has overreacted. The full-year target might have been revised lower by approximately 5%, but year-on-year growth is still expected to come in at 47%, giving a P/E of 29.7.

Beyond 2018, the growth outlook for the company is equally impressive. Analysts are expecting EPS growth of just under 30% in 2019 and, in the years after, I’m confident that the group can continue to print double-digit growth rates.

Base for growth 

NMC has built itself a strong base in its UAE home market, and the company can use this to expand around the globe. As demand for healthcare services is only set to grow, NMC shouldn’t have any trouble expanding its presence, in my view.

With this being the case, NMC’s rapid near-term expansion, the potential for long-term growth, and resilience through the economic cycle all lead me to rate the stock a ‘buy.’

I’m not so positive on the outlook for NMC’s peer Mediclinic International (LSE: MDC). As NMC has prospered, Mediclinic has struggled to produce positive returns for investors. After peaking at 1,100 towards the end of 2016, the stock has since lost more than 60% of its value.

A profit warning from the firm today has wiped another 15% off the value of the company. In sharp contrast to NMC’s rapid expansion, FTSE 250-listed Mediclinic’s revenue dipped 1% in the first half of the financial year. Adjusted earnings before interest, taxes, depreciation and amortisation, on a reported basis, were down by 8%.

This performance doesn’t inspire confidence. It’s just the latest in a string of disappointing growth updates from the group, which has seen EPS slide from 40p in 2013, to an expected 30p for 2019.

With no improvement in the company’s fortunes in sight, I’m in no rush to buy the shares. A valuation of 15.7 times forward earnings seems too rich, especially for a business that has consistently disappointed investors. NMC is the stock for me.

The post Why I think it’s time to buy this FTSE 100 stock, down 25% in two months appeared first on The Motley Fool UK.

Today I’m looking at whether or not this medical giant deserves a place in your portfolio. 

Struggling for growth 

As the demand for healthcare services around the world is only expanding, Mediclinic should be one of the FTSE 100’s most predictable growth stocks. Unfortunately, that is not the case. It has been struggling to grow within its home market of South Africa due to a weak economy, while regulatory headwinds in Switzerland have also weighed on growth. 

To try and grow itself out of these issues, two years ago the company spent $2bn acquiring Al Noor Hospital, the Middle East-focused group. And it’s this business that helped the firm chalk up a 3% rise in core annual profit for the year to the end of March. Revenue for the period grew 3% in constant currency terms. Commenting on the performance, CEO Danie Meintjes said: “A key achievement was the strong second half performance in Abu Dhabi which, combined with the continued strong delivery in Dubai and the exciting expansion opportunities ahead, is laying the foundations for further growth across the Middle East division.“

The company reported an overall loss of £492m thanks to non-cash impairment charges on its holding in UK private hospital provider Spire, as well as Hirslanden, Mediclinic’s Swiss hospital business. 

Growing headwinds 

As my Foolish colleague, Edward Sheldon highlighted a few weeks ago, Mediclinic’s long-term story is appealing, and after several years of floundering it finally appears as if the firm is moving in the right direction. That said, the business does have a lot to prove to the market. Earnings per share have hardly budged over the past six years, even though revenue has increased tenfold.

Management is trying to reduce costs to improve margins, but there’s lots of work to be done. The group’s operating margin fell from nearly 20% in 2012 to 13% for 2017 and it’s negative for the year ending 31 March 2018. What’s more, today’s release contains a warning that despite the opportunities for growth in the healthcare industry around the world, rising demand is “juxtaposed by lower economic growth in some regions and greater competition” as well as “an increased focus on the affordability of delivering health care which is resulting in changing care delivery models and greater regulatory oversight.” In other words, is seems Mediclinic’s outlook is cloudy, and with this being the case, I’m not convinced that the shares offer value today. 

At the time of writing, the stock trades at a forward P/E of 21.4, based on City estimates for 2019 and the shares yield 1.2%. For a business that has a patchy record of growth, and an uncertain outlook, this multiple looks too rich to me. 

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