Mediclinic boosted by reduced restrictions

The share price of Mediclinic International (MDC) got a double-digit boost midway through October when the private healthcare group revealed revenues were running ahead of pre-pandemic levels and the underlying cash margin had recovered significantly. Half year numbers brought confirmation that numbers are heading in the right direction with the margin up 370 basis points to 15.8 per cent.

Management said the group’s ability to rapidly adapt to changing market circumstances has been at the core of the revival, especially given differing infection and recovery rates from the pandemic across international locales. Naturally, financial performance has benefitted from reduced restrictions on elective and non-urgent care, leading to notable increases in patient volumes in both Hirslanden (Switzerland) and Mediclinic Middle East.

There are signs the pandemic may have forced a rethink from a clinical angle, specifically in relation to remote patient monitoring (RPM) and home care services. The group has therefore initiated a RPM pilot scheme with the Abu Dhabi government and invested in DomoSafety, a Swiss monitoring business. These measures reflect Mediclinic’s ambition to provide a fully integrated healthcare offering for its patients.   

Historically, private healthcare providers have occasionally had issues with accounts receivable. So beyond the ongoing recovery in patient numbers the most reassuring aspect of the results is the cash conversion rate, up from 42 to 104 per cent. Admittedly, comparisons with the previous half-year figures provide limited insight given circumstances, but the group now expects to deliver full-year revenue growth ahead of previous guidance across all three divisions. We think a forward rating of 16 times adjusted earnings adequately reflects prospects. Hold.

Last IC view: Hold, 277p, 2 Jun 2020