Mouwasat Q1 in line with estimates: Al Rajhi Cap

Mouwasat Medical Services Co.’s net profit of SAR 107 million for Q1 2019 came in line with Al Rajhi Capital's estimates, the research firm said in an earnings review.

“The ramp up at Khobar Hospital seems to be the main growth driver for the top-line with support from seasonality factors,” the report said.

Revenue increased 10 percent YoY to SAR 463 million.

Operating revenue stood at SAR 397 million, up 10 percent YoY, representing 86 percent of total revenue.

Pharmaceutical revenue was at SAR 66 million.

Gross and operating margins improved in Q1 to 46 percent and 26 percent, respectively due to better patient inflows related to Khobar Hospital.

Shareholders approved a 17.5 cash dividend for fiscal year 2018 at SAR 1.75 per share. The firm will likely increase its dividends to SAR 2 per share in 2019 as a result of improved earnings.

“We expect top-line growth to slow down in the coming two quarters due to seasonality factors such as Ramadan, Eid and summer vacations. On the other hand, utilization rate at Khobar hospital (280 beds, 100 clinics) will keep improving, following its contract with Aramco which is expected to start in Q2 2019,” the brokerage said.

Mouwasat is believed to see higher profits in the long term, on the back of further utilization ramp-up at Riyadh Hospital and Jubail as well as opening of Madinah hospital expansion (Q4 2020), Dammam hospital expansion (Q2 2020) and the new hospital in Yanbu, despite the fierce competition in the Eastern Province.

Al Rajhi Capital maintains a “Neutral” rating on the stock with a target price of SAR 83 per share.