Shares in Saudi's Bupa Arabia rally as first quarter earnings rise

Bupa's shares were trading 4.75% higher on Sunday, outperforming all shares on Tadawul

  
A Saudi trader observes the stock market on monitors at Falcom stock exchange agency in Riyadh, Saudi Arabia February 7, 2018.

A Saudi trader observes the stock market on monitors at Falcom stock exchange agency in Riyadh, Saudi Arabia February 7, 2018.

REUTERS/Faisal Al Nasser

Saudi’s Bupa Arabia for Cooperative Insurance Company (Bupa), announced a rise in first quarter earnings for the year 2019, triggering a surge in the company’s shares on Sunday.

Bupa’s Q1 2019 net profit attributable to the company’s shareholders amounted to 23.14 million Saudi riyals ($6.17 million), compared to 20.79 million riyals in Q1 2018, an 11.30 percent increase.

Yazeed Alsaqaaby, research analyst at Al Rajhi Capital, told Zawya by email that the “main reasons behind the bottom-line increase” was an increase in investment and other income and a decrease in provisions for doubtful receivables.

The company’s investment and other income increased by 45.2 percent compared to Q1 2018, while the provision for doubtful receivables dropped 201.8 percent to 21.89 million riyals compared to the same quarter last year, the company told the Saudi exchange.

Bupa’s gross written premiums (GWP) stood at 2.91 billion riyals in Q1 2019, compared to 2.49 billion riyals in Q1 2018, a 16.87 percent increase.

Alsaqaaby said that the increase in GWP is mainly on the back of an increase in prices that started in the second half of 2018 “due to the change of (the) health insurance table of coverage” by the Council of Cooperative Health Insurance (CCHI).

The CCHI started applying a new Saudi health insurance scheme on July 1 last year, including comprehensive dental and gum treatment among other medical treatments.

“For (the) short term, the increase in policy prices will keep leading the GWP jump y/y (year-on-year) till the end of H1 (first half) 2019,” Alsaqaaby said.

He added that on the longer term, the company will benefit from the rise in Saudisation, an improved macroeconomic environment, mandatory insurance for Saudis working in the private sector, a higher participation expected from the private sector in the economy, the government’s focus on increasing religious tourism, and the “dwindling” effect of an exodus of insured expats.

The company also announced on Sunday that a contract to provide health insurance to employees of Saudi Basic Industries (SABIC) has been renewed for another 12 months. The contract makes up more than 5 percent of the company's total gross written premiums.

Bupa Arabia's shares ended the day 4.75 percent higher and it was the top performer on the Saudi market. The company’s shares have added 14.2 percent so far since the start of 2019.

Al Rajhi Capital set a target price of 93 riyals per share for Bupa, in the context of an approximately 7 percent increase in the company’s net income CAGR (compound annual growth rate) expected in 2018-2023, and a “leadership position in (the) less fragmented health segment with stable clientele,” Alsaqaaby said.

(Reporting by Gerard Aoun; Editing by Michael Fahy)

(gerard.aoun@refinitiv.com)

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