Aljazira Cap remains ‘neutral’ on Saudi healthcare sector

Aljazira Capital has maintained its “neutral” outlook on the Saudi healthcare sector as most of the announced expansion plans that have been priced in at current valuations.

“Mouwasat is expected to outperform the sector, considering the growth in its margins, favorable receivable position and strong balance sheet,” the brokerage firm said in a recent report.

Key downside risks are higher labor costs due to Saudization, regulatory reform, utilization and pricing pressure. However, companies with a favorable client base, low leverage and revenue mix (in-patient/out-patient) would be long-term winners.

Meanwhile, the government support, privatization will give a major boost to sector growth.

Aljazira Capital recommended “neutral” rating on Al Hammadi Company for Development and Investment, Dallah Healthcare Co., National Medical Care Co., Mouwasat and Middle East Healthcare Co. (MEAHCO).

Receivables remain a concern for Al-Hammadi and MEAHCO.