The market initially welcomed Abu Dhabi providers NMC Health (NMC) and Al Noor Hospitals (AHN), who went public in 2012 and 2013 respectively. Recently, these companies have been in a three way tussle with South African Healthcare provider Mediclinic International (MDC), although the latter just completed a merger with Al Noor.
Another recent medical newcomer has just announced its first set of full-year results since joining the LSE in November. Welcome Georgia Healthcare Group (GHG), an arm of London listed Bank of Georgia (BGEO), and the largest single healthcare operator in Georgia.
A little background
In 2009, Georgia Healthcare Group was a small healthcare provider in the former soviet state with a market share of less than a 1 per cent. It has grown through acquisitions and now has 35 hospitals with 2,670 hospital beds, representing a substantially higher market share of 27 per cent.
The group operates under two divisions: healthcare services and medical insurance. The former contributed 80 per cent of group revenues in 2015.
Its decision to list in London has been largely due to the proposed increase in healthcare spending in its home market. Chief executive Nikoloz Gamkrelidze says raising money at the IPO will help the group “take advantage of the significant market growth prospects of the Georgian healthcare sector”.
A mixed market reaction
The November IPO raised $100m (£69m) and attracted interest from a diverse investor base, with over 100 new investors buying in. However it failed to meet pricing expectations: the offering price was 170p a share, substantially below the original range of 215p to 315p set just a couple of weeks earlier.
Why the fall? It has obviously been a tough few months for emerging markets. Furthermore, while the group’s business is pretty self-explanatory, it is operating in a marketplace which will be unfamiliar to many London investors. Georgia itself has had a decade of political and market volatility, with challenges ranging from economic slowdowns to the Russian invasion in 2008. This volatility is one of the main reasons we put the healthcare group's parent on a sell tip in February 2014. Since then, its shares have fallen 15 per cent.
But analysts at Numis Securities think the market has underpriced the company's growth potential. Their investment argument is that Georgia Healthcare's cost control and higher margin referral hospital revenues should push up margins, against a positive backdrop of improving access to healthcare.
