Aljazira Cap remains ‘neutral’ on Saudi German Hospital, raises TP to SAR 31.86

Aljazira Capital maintained its “Neutral” recommendation on Middle East Healthcare Co. (Saudi German Hospital), revising the target price higher to SAR 31.86 from SAR 23.20, it said in a report on Sunday.

The brokerage firm expects margins to remain under pressure in FY20 due to the upfront costs associated with commencement of operations at Dammam hospital, which is set to go on stream on February 1, 2020. Gross profit margin is therefore seen to drop to 28.5% this year compared to 30.1% expected in 2019.

Earnings per share (EPS) estimates for FY20 and FY21 stand at SAR 0.78 and SAR 1.19, respectively.

Earlier in January, Saudi German signed a cooperation agreement with Mayo Clinic to provide medical services to patients.

“While this deal has a positive outlook from a long-term perspective, we do not expect it to have a material impact on the company’s financials. Hence, we believe it would be moderately positive overall for the company,” the brokerage firm added.