Shares in National Medical Care (NMCC) have fallen 7.83 percent since Monday, when the Saudi private hospital operator announced a 58 percent year-on-year drop in third quarter (Q3) 2018 earnings.

NMCC reported a Q3 2018 net profit after zakat and tax of 11.4 million Saudi riyals ($3.04 million) versus 27 million Saudi riyals for the same period last year, missing Al Rajhi Capital’s estimate of 23 million Saudi riyals.

Q3 2018 sales amounted to 176.4 million Saudi riyals, compared to 208.3 million Saudi riyals a year ago.

“Going forward, we believe that Q4 will witness a small increase in number of inpatient and outpatient as there are no holidays (seasonally strong quarter),” Al Rajhi Capital said in a note.

The company is waiting for final approval from the Ministry of Health to begin operations to expand the number of beds at Riyadh Care Hospital (62 more beds) and National Care Hospital (170 more beds), which is expected to happen in Q4 2018, according to Al Rajhi Capital’s note.

“However, margins are unlikely to improve as the utilization of expansion needs time. In the medium term, the growth could pick up for NMCC on the back of better utilizations of new expansions, coupled with the company’s cost saving initiatives,” the note added.

“Post Q3 weak earnings, we revise our target price to SAR45.5/share with an Neutral rating on the stock,” the note concluded.

The company’s stock was last trading at 42.4 Saudi Riyals per share on Wednesday, dropping from 46 Saudi Riyals per share at Sunday’s close.

During Wednesday’s trading, NMCC's stock ended the day flat and Saudi Arabia’s index closed 0.25 percent lower.

NMCC’s stock price has dropped 3.21 percent so far this year, underperforming Saudi Arabia’s stock market index which has added 7.88 percent since the start of the year.

According to data from Eikon, two analysts rated NMCC’s stock as “Strong Buy”, while four analysts rated the stock as “Buy” and one analyst rated the stock as “Hold”.

Late in October, the company announced the resignation of Raed Abdullah Altamimi and the appointment of Abdulaziz Saleh Alobaid as CEO.

The company had also announced in October that it had signed an MoU with Hassana Investment Company that aims to form a joint venture. (Read more)

Elsewhere in the region, Dubai’s index added 0.48 percent on Wednesday, Abu Dhabi’s index gained 0.25 percent, Kuwait’s index gained 0.55 percent, Qatar’s index dropped 1.2 percent while Oman’s index closed 0.56 percent higher and Bahrain’s index edged up 0.18 percent.

By 16:16 GST, Egypt’s blue chip index was trading 1.4 percent higher.

(Reporting by Gerard Aoun; Editing by Shane McGinley)
(gerard.aoun@refinitiv.com)

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