Saudi German Hospital
Middle East Healthcare Co. (MEAHCO), which owns and operates Saudi German Hospital (SGH) chain, posted a net profit of SAR 28.5 million for the fourth quarter of 2020, which came below AlJazira Capital’s and analysts’ estimates of SAR 39.2 million and SAR 38.1 million, respectively.
The brokerage firm attributed the deviation in Q4 earnings to a lower-than-expected gross profit margin and higher operating costs.
AlJazira Capital expects margins to remain under pressure in the near-term due to the commencement of operations at Dammam hospital. However, it will revisit the FY2021 estimates, once the detailed financials are available.
The healthcare provider’s average receivable days increased steadily from 156 days in FY2014 to 254 days in FY2019. AlJazira Capital believes this to be a major cause for concern, leading to an unfavorable working capital cycle and adversely impacting liquidity.
“It is imperative that the company addresses issue to avoid liquidity issues in the long-term,” it noted.
SGH is expected to achieve a net profit of SAR 105.1 million in FY2021, an increase of 4% year-on-year (YoY).
The brokerage firm maintained ‘Neutral’ recommendation on SGH with a target price (TP) of SAR 31.9 per share.
Comments
{{DisplayName}}
{{ElapsedTime}}