Saudi German Hospital’s Q2 misses forecasts: Aljazira Cap

Middle East Healthcare Co. (Saudi German Hospital) reported a weak set of Q2 2018 earnings, significantly below Aljazira Capital’s estimates and consensus, the brokerage said in a report.

The company’s net income came at SAR 34.27 million, versus Aljazira Capital estimates and consensus of SAR 66.5 million and SAR 73.9 million respectively.

The disappointing set of results came mainly from considerably higher than estimated cost of goods sold (COGS) and higher staff expenses.

“We note that upcoming quarterly earnings are expected to exhibit similar margin contraction to H1 2018 earnings”, Aljazira Cap said.

Aljazira Capital cautiously recommended an “Overweight” on the stock and set its target price at SAR 47.5.

“We expect revised FY17 and FY18 revenues to stand at SAR 1.5 billion and SAR 1.5 billion respectively”, the brokerage added.

The company recently announced a series of expansions, adding that Dammam hospital was 38 percent complete. These include an expansion of the Riyadh Hospital as well as the construction of a new hospital in Makkah; totaling an additional capacity of around 590 beds and more than 200 clinics by the end of FY 2021. “Despite the level of execution risk involved, upcoming expansions don’t appear to be fully priced-in”, Aljazira Capital noted.