|24 March, 2019

Middle East Healthcare Company's shares retreat following earnings drop

Middle East Healthcare Company’s shares dropped 4% so far since the start of the year 2019

A Saudi trader works at the Saudi Investment Bank in Riyadh. Image used for illustrative purpose.

A Saudi trader works at the Saudi Investment Bank in Riyadh. Image used for illustrative purpose.

REUTERS/Fahad Shadeed

Shares in Saudi Arabia’s Middle East Healthcare Company (MEAHCO) fell in early trading on Sunday, after the company reported a drop in net profit for the year 2018.

MEAHCO is a healthcare provider in Saudi Arabia that owns and operates the Saudi German Hospitals. The company reported a net profit after zakat and tax of 172.3 million Saudi riyals ($45.95 million) for 2018, compared to 319.5 million riyals for 2017, translating into a 46 percent drop.

Moreover, Asim Bukhtiar, head of capital markets research at Saudi Fransi Capital, said that it expects profits to fall further this year.

“We are sanguine on earnings recovery prospects for MEAHCO and see a further -13% Y/Y (year-on-year) contraction,” Bukhtiar said in a note published on Sunday.

“Our view stems from low visibility on topline recovery, particularly given rising competition, and escalating costs as new capacity is added at Dammam,” Bukhtiar added.

The company said in February this year that the Saudi German Hospital project in Dammam’s completion rate was at 66 percent on December 31, 2018 and that the project’s expected completion date is by June 6, 2019. Work on the project started on December 7, 2016.

“Further, we believe pricing power is low which could continue impacting margins through 2019,” Saudi Fransi Capital’s Bukhtiar said.

MEAHCO’s shares were trading 0.95 percent lower by 12:44 GST on Sunday at 31.15 riyals, and have dropped 4.01 percent so far this year.

(Reporting by Gerard Aoun; Editing by Michael Fahy)

(gerard.aoun@refinitiv.com)

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