After another bruising year, the healthcare equipment and services market ended 2019 on an especially sour note: Middle East hospital operator NMC (NMC) stands accused of dodgy accounting. The company fiercely denies Muddy Waters’ allegations that it overstated its investment in various assets and understated its 2018 debt by $320m (£245m), but the damage has been done. The share price is almost 50 per cent lower than it was before the report was published and looks set for a prolonged period of weakness – few companies recover from a Muddy Waters attack.
But there are bright spots emerging after a difficult few years for the sector. A strong Conservative majority has released the pressure on NHS outsourcing, which means the private sector should once again benefit. British private hospital group Spire (SPI) and medical imaging specialist Medica (MGP) both enjoyed strong share price growth on the day after the election. Medical technology is expected to be an especially hot topic of investment in 2020 after health secretary Matt Hancock promised greater use of digital expertise to improve the efficiency and productivity of the National Health Service.
Efforts to improve efficiency in the global health sector are also playing out well for medical device companies. Smith & Nephew (SN.) has attempted to capitalise on the industry’s growth by making big acquisitions. The sudden departure of the company’s chief executive – the pioneer of the buying plan – spooked investors in 2019, but the new boss seems committed to the strategy, which should help it compete with its large US peers.
ConvaTec (CTEC) also has a new chief executive who brings with him great hope of a turnaround following his success at animal health specialist Genus. But Karim Bitar has a big job on his hands as ConvaTec continues to struggle to find the cash needed for investment in new products.
| NAME | Price (p) | Market cap (£m) | 12-month (%) | Fwd PE | Yield (%) | Last IC View |
| Convatec | 209 | 4,130 | 47.10% | 22 | 2.20% | Sell, 185p, 01 Aug 2019 |
| Mediclinic International | 405 | 2,988 | 24.10% | 15 | 1.90% | Hold, 381p, 15 Nov 2019 |
| NMC Health | 1,407 | 2,936 | -48.00% | 11 | 1.30% | Sell, 1,537p, 17 Jan 2020 |
| Smith & Nephew | 1,897 | 16,563 | 32.30% | 23 | 1.50% | Buy, 1,684p, 21 Oct 2019 |
| UDG Healthcare | 832 | 2,082 | 41.50% | 21 | 1.60% | Hold, 750p, 26 Nov 2019 |
