NCB Capital initiates coverage on Saudi German, Mouwasat, Al Hammadi

NCB Capital on Sunday said it has initiated coverage on Saudi German Hospitals (Middle East Healthcare Co.) with an Overweight rating and a target price of SAR 95.3.

The brokerage firm also started coverage on Mouwasat Medical Services Co. (Mouwasat) and Al Hammadi Company for Development and Investment (Al Hammadi) with Neutral ratings, and target price of SAR 149.2 and SAR 40, respectively.

With healthcare being a key defensive sector in Saudi Arabia, the three companies are set to benefit from robust demand fundamentals and growth prospects, NCB Capital said in a report.

The sector is set to witness major structural changes driven by Vision 2030, which is focused on increasing private sector participation – leading to new opportunities for private healthcare providers.

Growing population and the prevalence of non-communicable diseases are expected to drive demand for healthcare, the brokerage said.

Saudi German Hospitals’ geographical coverage, expansion plans and attractive valuation are the key advantages for the company, NCB Capital said.

Saudi German’s earnings are expected to grow 5 year-on-year (YoY) in 2017 to SAR 376 million, with a CAGR of 11.9 percent between 2016 and 2021.

NCB Capital said Mouwasat’s expansion plans and diverse client mix are the stock’s key positives. However, these positives are already priced-in, the brokerage added.

Mouwasat is forecast to report a net income of SAR 322 million in 2017, growing 25.7 percent YoY (CAGR of 14.3 percent between 2016 and 2021).

For Al Hammadi, NCB Capital said that the start of operations at Al Nuzha Hospital is a positive catalyst, but it is believed to be already reflected in the current share price.

Al Hammadi is estimated to report a net income of SAR 120 million in 2017, with a growth of 61 percent YoY (CAGR of 37.8 percent between 2016 and 2021).