SMC IPO 64.7x covered at $32.4B

Hani Charani, CFO for the Specialized Medical Company (SMC)

Hani Charani, CFO for the Specialized Medical Company (SMC), said that the initial public offering (IPO) was priced at the top end of the range at SAR 25.0 per share. The offering attracted strong demand across all investor classes, with total demand of USD 32.4 billion, representing a coverage of 64.7x.
 

In a statement to Argaam, Charani said that the retail subscription period will commence on June 15. SMC looks forward to maintaining this strong momentum through the retail tranche and to deliver a successful listing. Listing is expected to take place by the end of June.
 

On operating performance, the company experienced record volumes of outpatient visits year to date (YTD as at May end) with the ramp up of SMC 2 and 20 new clinics coming online. As of May-end YTD, outpatient volumes saw an impressive increase of 13% year-on-year (YoY), he added.
 

Over half of the planned 60 new outpatient clinics are operational as of today (June 2025), with the other half expected to come online throughout the course of this year.
 

Commenting on the Q1 2025 results, Charani said that the first-quarter results reflect strong performance during a pivotal period, as we executed a strategic shift aimed at positioning the company for long-term growth.
 

Q1 2025 marked continued progress in executing our strategy to transition toward high-performing acute specialties and expand our outpatient footprint.
 

SMC recorded revenues of SAR 368.9 million, representing a 1.6% YoY increase and offsetting a SAR 22 million impact from the ongoing strategic repurposing of 150+ beds in the LTC segment.
 

Growth was recorded across the board, as inpatient revenue increased by approximately 1% YoY, supported by over 30% growth from high-performing acute specialties, offsetting the impact from the strategic and planned reduction of 150+ LTC beds.
 

Additionally, as of Q1 2025, inpatient volumes excluding long term care rose by approximately 29%, supported by the continued ramp-up of SMC 2, which realized inpatient visits growth of over 70% YoY.
 

Meanwhile, outpatient revenues also showed strong performance, increasing by ~7% YoY. Growth was delivered across all outpatient segments, including clinics, pharmacy, and emergency services, reinforcing the strong underlying demand, though the majority of newly developed outpatient clinics were not operational during Q1 2025, and therefore, have had a minimal impact on outpatient revenues.
 

As mentioned, over half of the planned 60 new outpatient clinics are operational as of today (June 2025), with the other half expected to come online throughout the course of this year.
 

The CFO added that while Q1 2025 performance was encouraging, it also reflected the seasonal impact of the full month of Ramadan and Eid occurring during the quarter, which typically results in a temporary slowdown in patient activity across both inpatient and outpatient services. As a reference, the Ramadan and related Eid holiday impacted Q2 performance in 2024.
 

Despite the seasonal headwinds and ongoing repurposing of capacity, we delivered revenue growth in Q1 2025. However, while the headline figure shows decline in our net profit by SAR 19.6 million compared to Q1 2024, it is important to note that this was affected by SAR 18-20 million of IPO and expansion related pre-operating fixed costs (rent, salaries for non-revenue generating doctors and nurses, etc.), which account for this drop.
 

These costs were anticipated in our outlook, and we expect to take full advantage of this operational leverage in the coming quarters to deliver on our full year guidance.
 

In anticipation of the growth in SMC 1 and SMC 2 following the transition of the LTC floors to outpatient clinics and to ensure operational readiness for the ramp up of the new outpatient clinics, we decided to retain the LTC segment’s staff (doctors, nurses, etc.) in addition to the aggressive onboarding of new doctors since late 2024.  These fixed pre-operating expenses contributed to higher costs in the quarter, while related revenue were yet to materialize. These expenses, comprising of labor costs, equipment depreciation and rent, amounted to almost SAR 10 -11 mn for the Q1 2025 period.
 

In addition, Q1 2025 results included one-off IPO-related expenses totaling approximately SAR 5 -7 million. These comprised a full corporate rebranding campaign, legal and governance-related advisory costs.
 

Separately, the Group also incurred approximately SAR 2 mn in recurring expenses related to the formation and operation of board committees, which represent a structural addition to its cost base as it transitions to a listed entity.
 

“We remain on track and are progressing in line with our full year guidance previously communicated during the IPO process,” Charani affirmed.