Is Mediclinic getting its Health Back?

 

Market Scorecard


Some days the market just trundles along with no real direction. Yesterday was one of those days. As you can see below, neither the JSE All-share or the two US indexes moved with any conviction. As it stands, the trade truce is pencilled in for next month, and we won’t have any new Brexit news until after the UK election. Added to the lack of market moving news is the fact that US earnings season is mostly finished. Bloomberg used the headline this morning to say that markets are ‘Stuck in neutral’, sounds about right. Enjoy the calm before the next market moving event hits.

Yesterday the JSE All-share closed down 0.11%, the S&P 500 closed up 0.08%, and the Nasdaq closed down 0.04%.

Company Corner


 

Byron’s Beats

Yesterday morning Mediclinic released half year results. The stock popped on the news but after analysts had time to digest, it ended the day down by 0.7%. Still the stock is up 29% so far this year, here is what the CEO Dr Ronnie van der Merwe had to say.

“I am pleased with the progress we have made in adapting the business to current healthcare trends and changing regulatory environments, especially at Hirslanden in Switzerland.

At all three divisions, we continue to supplement our core acute care business through expansion across the healthcare continuum.

We operate in an industry sustained by the continued global demand for healthcare services and I am confident in our ability, as a market leader, to deliver innovative solutions, growth and consequently value to all our stakeholders.”

 

We certainly agree with that last sentence, that is one of the main reasons we invested in Mediclinic from the start.

Revenues increased by 9% to 1.5bn GBP. EBITDA increased 4% and earnings went from a loss to a 109m GBP profit. Per share this equated to 9.9 pence. 3.2 pence will be paid as a dividend.

Hirslanden

This is their Swiss brand. Revenues increased by 5% and earnings increased by 3%. Margins contracted from 14.3% to 13.9% but are starting to stabilise. Remember, margins took a big dive in this business because of regulatory pressures. They have basically brought in an entirely new team to fix this. The more efficient low cost model they are targeting is apparently making good progress.

South Africa

Revenues increased by 7% and profits increased by 2%. They are also doing a large investment drive in SA. Mediclinic Stellenbosch Day Case Clinic (pic below) was opened in the period with plans to open 6 more day clinics in the next 2 years. Again this targets lower cost, more efficient healthcare.

Middle East

Revenues were up 8% and profits were up 10%. This division is finally taking shape as they open up new hospitals and streamline the Al Noor assets.

The numbers were decent and are showing signs of recovery. Net debt sits at 1.7Bn GBP, which is high but this business is asset intensive. They also managed a 98% cash conversion. The leverage ratio of 3.5x seems sustainable, especially considering that they have a cash flush large shareholder in Remgro.

We suggest you hold onto Mediclinic as it hits recovery mode. Remgro is also a decent entry into the stock with less risk but also less recovery upside.

Our 10c Worth


 

Michael’s Musings

On Monday it was Alibaba’s singles day sales. The date was 11/11- all singles. The graph below shows how much they sold in the space of 24 hours. If you are like me, your initial reaction to $38 billion in sales in one day might have been one of indifference.

To help give you some perspective to the scale, David Shapiro on Twitter made the following observation: “To put Alibaba’s $38bn Single’s Day Sales in context – in Rand that equals R560bn sales in 24 hours. Shoprite’s annual sales R154bn, Spar R101bn, Pick n Pay R90bn, Massmart R91bn, Woolies R70, Foschini R37bn, Clicks R36bn, DisChem R25bn, Mr Price R23bn and Truworths R19bn = R646bn”.

Infographic: The Scale of Alibaba's Singles' Day Haul | Statista You will find more infographics at Statista

Think about all the logistics needed to ship all those goods. Think about how massive their computing power needed to be to handle all the traffic, all the payments and updating of stock lists. South Africa’s GDP is around $350 billion each year. Alibaba did 10% of our GDP in 24 hours.

The scale shows the power of the Chinese consumer. As an investor, you want to be positioned to take advantage of the growth in Chinese consumption. Starbucks and Nike are two US listed stocks, and Prosus (Naspers) is a local stock you can buy.


 

Bright’s Banter

A job interview should be similar to a match of tennis, where questions are lobbed back and forth. The interviewer asks a question, you respond. Then you ask a question, and they respond back. A smooth flow of “forehand, backhand, forehand”; not like the police interrogating you about your whereabouts this past weekend.

A lot of people in my cohort complain that they never know what to ask the interviewers during these encounters. Well, my favourite blog and podcast “The Art of Manliness” has put together some very important questions that one could potentially ask the interviewer during a job interview.

You can read them here. 8 Finance Questions to Ask When Considering a Job Offer.

Linkfest, Lap it up


Do you feel like you aren’t living up to your full potential? How about attending your own funeral to wake up the YOLO (you only live once) juices in you? – Dying for a better life: South Koreans fake their funerals for life lessons.

This new Starbucks store looks amazing. They are designed to be tourist destinations, where they charge lofty prices for a very premium coffee drinking experience – A look inside Starbucks’ newest Reserve Roastery in Chicago.

Vestact Out and About


This week on BlundersTesla Shorts Lose Their Shirts.

Signing off


The JSE All-share is higher this morning and the Rand is looking strong against the Dollar. Economic news out today is EU CPI and then US retail sales.

Sent to you by Team Vestact.

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