Saudi German's Q3 missed estimates on lower revenue: Aljazira Capital

Middle East Healthcare Co.’s (Saudi German Hospital) net profit of SAR 20.2 million for Q3 2018 fell short of Aljazira Capital's estimates of SAR 40.5 million, as well as consensus forecasts of SAR 41.2 million.

“The disappointing set of results came mainly from considerably lower than estimated top-line, due to lower utilization rate, followed by margin contraction on all income lines,” the report said.

Revenues dropped to SAR 338.8 million for Q3 versus SAR 353 million a year earlier due to lower utilization rate at established hospitals, along with slower ramp-up at the new capacity additions.

The new outpatient’s facilities of SGH Aseer clinic tower (40 clinics) and Beverly clinics (21 clinics) represent a 17 percent increase to total clinic capacity.

Top-line figures are seen to stand at SAR1.44 billion for fiscal year 2018, declining 7.5 year-on-year (YoY).

Gross profit margins contracted in Q3 to 33 percent, compared to 33.8 percent in Q2 and 37.8 percent a year earlier.

Operating expenses rose 16.7 percent YoY on higher employee and maintenance costs.

Operating income stood at SAR 21.3 million, a decline of 61.7 percent YoY and 32.8 percent QoQ.

The firm recently revealed that Dammam hospital was 38 percent completed. It also posted updates on the expansion projects in Riyadh Hospital and the new Makkah Hospital, adding a total capacity of 590 beds and more than 200 clinics by the end of 2021.

“The upcoming quarterly earnings are expected to exhibit a similar margin contraction to the current level. The inability to control operating expenses is a key concern going forward.

Downside risk to valuation rest on lower gross profit margins versus our estimates,” the report said.

Dividend per share (DPS) for 2018 is estimated at SAR 2 at a yield of 6.2 percent at current prices.  Earnings per share (EPS) are likely to stand at SAR 2.07, a 36.5 percent YoY drop.