SGH shares drop 8% after proposing plan to withhold dividends

The share price of Saudi German Hospital fell almost 8 percent within the first hour of trading on Tadawul on Thursday following the board’s proposal to withhold cash dividend for the fiscal year 2018.

The stock was trading at SAR 28.45, with over 1.5 million shares, worth SAR 43 million, being exchanged during the first 60 minutes of trading.

Earlier, the board of directors of Middle East Healthcare Co. (MEAHCO), which owns and runs Saudi German Hospitals, recommended to hold off on issuing a cash dividend in order to support the expansion of projects and renovation of the hospital buildings. 

“Despite aggressive expansion plans, we think that in the near term the company will likely face margin pressure on account of greenfield Dammam opening and could negatively disappoint on the earnings front,” Nitin Garg, Vice President, Research, at SICO Bank, told Argaam.

“MEAHCO remains our least preferred name from the healthcare space despite cheap valuations. Trading at a 40 percent discount to sector median, perhaps with justification, as its scores less than its peers on most key metrics,” he said, highlighting key risks such as dividend cut, higher funding needs, receivable impairment, longer payment cycle and flat earnings in the medium term.  

In a recent interview with Argaam, company vice chairman and deputy president Makarem Batterjee said the company is focusing on organic growth across the Gulf Cooperation Council, Egypt, and even Asia.

Read: Saudi German Hospital eyes ‘organic’ growth across the GCC, Egypt

MEAHCO reported a net profit after zakat and tax of SAR 172.2 million for the fiscal year 2018, a 46 percent year-on-year drop on lower revenue.

Write to Parag Deulgaonkar at parag.d@argaamplus.com