Dr. Sulaiman Al Habib Group’s valuation ranges between SAR 68- SAR 72/ share: Riyad Cap

Dr. Sulaiman Al Habib Medical Group’s (HMG) valuation ranges between SAR 68 and SAR 72 per share, Riyad Capital said in a recent report.

The valuation implies a dividend yield between 2.8-3.0% for 2020. At IPO price, the stock is expected to offer a dividend yield of 4.1% for 2020.

HMG is well placed to capitalize on private healthcare sector growth, as macro and sector dynamics for healthcare in KSA are fundamentally favorable, Riyad Capital added.

Revenues are likely to grow at a CAGR of 9.3% to SAR 7.2 billion by 2023 while gross margin expansion will continue on the back of efficiencies and better revenue mix.

Net income is expected to rise at a CAGR of 10.4% to SAR 1.3 billion through 2023.

The three new hospitals coming online (1 in Riyadh, 2 in Jeddah) between 2023 and 2024 would raise bed capacity by 62% to 3,093 beds and clinics capacity by 59% to 2,186 clinics; ability to ramp up new hospitals is well established.

Accordingly, continued growth is expected beyond this, thanks to the company’s track record.

Technology, location, physicians and patient loyalty are key HMG’s strengths. HMG’s premier market brand is driven by a cutting edge technology infrastructure across all areas. Attracting and retaining top quality physicians (almost half with Western qualifications) has provided the pull.

In addition, prime location within cities and in neighborhoods helps with patient visits.

Key downsides include delay in new projects and any extraordinary rise in provisioning. Our valuation takes into account three new announced projects (2 in Jeddah, 1 in Riyadh).