Cleopatra Hospital Co.’s (CLHO) stock has appreciated by 28% ytd on the back of a stream of acquisitions announced. This was in line with management’s commitment to its organic and inorganic expansion plan. Favorable pricing schemes and case mix led to a double-digit growth in Q2 2019 revenues. Earnings, however, were affected by a non-cash expense. In view of Q2 2019 results, we updated our financial model for CLHO, adding to the group’s businesses Al-Nahda Hospital—its first expansion outside Greater Cairo. We are raising our 12M PT by 16% from EGP6.78/share to EGP7.86/share on the addition of a new hospital and using a lower discount rate (i.e. a lower WACC and hence a higher value). Hence, we are upgrading our rating from Neutral to Overweight.
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